Marketgems Earnings Trader- Trading Strong or Weak Earnings Growth

[jenna]

How frequently are the sector rotations turning lately, is it an overnight, weekly, few days, or midday reversal?


MAMA seems to have a consistent mid-day reversal but other than the odd upgrade intraday, I would look for an overnight rotation to confirm itself the next day like the big ship tankers sector have been with high relative strength for a number of weeks, the retailers (JWN, MIK etc) a number of weeks while the building sector has been with low technical strength for months. You can check the technical ranking and relative strength of sectors in Investor's Business Daily which is good for that. I check the sector leaders which you can also do with http://www.investors.com but its paid service which I think is $225 a year but saves me that almost a day. I do like to read, but not the overflow of information available here on messageboards, definitely not the trading rooms, but my favorite sources of information. That's where the newsletter plays come from and not from the 'momo' stock of the hour. Believe me I'm not knocking the momo stock of the hour, I would like to get in myself but the way we 'milk' our own plays leaves little room for 'intraday scanning' and following 'most up lists'. Yesterday I caught the move in MAMA and today so busy with our others, I just missed it. I'm losing potential gains because MAMA and MAGS have no options (on paper I would have made quite a bundle with puts in these two since their breakdowns)

I won't risk holding these volatile plays overnight again. I got away 'unscathed' the first time with MAGS and was lucky especially as we were in CDCY swing also just 2 days before the first breakdown. Now I'm more careful and don't really expect much from the home security stocks (except TASR, that's a great short)

Also when a number of companies reporting earnings from a sector do well, the entire sector stays in high relative strength for a quite a while. It will take an actual downgrade on valuation to rotate money out of the sector.

Another interesting point is that in the same sector (i.e. retail) a stock like FRED which has been under pressure will enjoy renewed money flow and high relative strength the same as JWN which is consistently making new high after new high)

Both JWN and have strong relative strength although poor FRED has yet to take out more than the 20 ma.

Something I've researched lately is that EARNINGS PLAYS that do well, outperform its own sector consistently and pullbacks are not sold (I used to sell after a few days but now I just sell incrementally and wait for the continuation of uptrend) Invariably EVEN TECHS that had good earnings are outperforming their peers.



And secondly, don't you always find some segment rising even when the entire maket is falling because

today the better biotechs were weak (IMCL, OSIP, BIIB), while the weaker biotechs (AMGN)Biotechs can always be influenced by outside influences but if you want to play the biotechs as a whole unit, the BBH is consistently the best way. That is the same for the internets. The HHH is the best way to play upside in that strong sector. At this point because the sector is overbought, I've been closing the second tier 'nets like INSP and ASKJ stopped me out today while I'd like to stay to 45, I'm not going to risk eroding gains when I can always reenter at a bounce.