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Directional Trading Is Dead. It’s a Stock Picker’s Market Now

by | Aug 12, 2022

The market has, for the most part, been trending up since June. As I mentioned in Friday’s stock market recap, with the S&P 500 locking in its fourth positive week in a row.

The Consumer Price Index and Producer Price Index both came in lower than expected, giving investors hope that inflation has peaked.

While things look rosy for the market, its recent upward trend could be too much too soon, and we could be in store for a major pullback.

That’s why I sat down Friday with investors Jack Carter and Don Yocham for the most recent episode of Ask the Pros. We discussed some warning signs hinting at a pullback, and our favorite strategies for trading it.

I even gave away some of the stocks on my watchlist, and their price targets!

My No. 1 Strategy for Trading During a Pullback   

This is the type of market that can sucker in retail investors with a false rally… right before pulling the rug out from beneath them. It makes traditional, directional trading difficult.

It’s a stock picker’s market. And whether we’re in a bear or a bull market, focusing on individual stocks allows us to control our risk and avoid some of the dangers present in the broader market.

Don’t get me wrong… I still trade ETFs, but I do so using hedges. I’m rarely “just long” a large index without some downside protection. But it’s much easier to find individual stocks that are bucking the trend than it is with an index. Because the larger the basket of stocks you hold, the more it’ll correlate with the market in general.

That’s why my favorite strategy focuses on identifying stocks that are marching to the beat of their own drum, stocks that can make moves higher regardless of what the overall market is doing.

I call these stocks “frontrunners.”

They’re capable of moving up in short bursts, often with no outside catalyst.

My system for pinpointing these stocks focuses on 10 factors, such as market sentiment, relative strength and volume.

It pinpointed companies flying under the radar like ZIM Integrated Shipping Services Ltd. (NYSE: ZIM). The company is coming off of its recent lows, recently breaking above its 50-day moving average. I have a 12-week price target of $63 on ZIM.

It also alerted me to First Trust NASDAQ Cybersecurity ETF (Nasdaq: CIBR). It’s been making higher highs and higher lows for the past two months. I have a 12-week price target of $53 on the stock.

Now more than ever, it’s time to focus on choosing the stocks with the strongest potential over directional trading.

That’s why I’ve put together a special three-day seminar showing you how I identify frontrunners, and how you can use them to put together your own portfolio.

I’m holding my first class on Monday, and remember, this isn’t just me highlighting a ticker symbol or providing a trade idea… This is me showing you how I trade, and giving you the data and tools you need so you can learn how to find these trades for yourself!

Sign Up for the Seminar Here 

WRITTEN BY<br>Roger Scott

Roger Scott

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