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Why you don't hear about "sector-picking", while you hear a lot about stock-picking?
- Thread starter crgarcia
- Start date
Im picking the banking sector to short. Long term and inch my way in. Using puts three months to a year out to start my leg in.
I expect that many banks will give back 30% if not 50% of their highes by 2008/2009. Do your research and see what banks have the liquidity crunch with low reserves. Those banks in that situation are good canidates. See who is dealing in High End Junk Bonds and bundling Home Mortage Loans that are risky, not just SUB PRIMES.
This is a long term play and not for all you supa star day traders.
I expect that many banks will give back 30% if not 50% of their highes by 2008/2009. Do your research and see what banks have the liquidity crunch with low reserves. Those banks in that situation are good canidates. See who is dealing in High End Junk Bonds and bundling Home Mortage Loans that are risky, not just SUB PRIMES.
This is a long term play and not for all you supa star day traders.
I could go on on this subject forever, as I started out in sector mutual funds ages ago, and my second largest account still does nothing but make sector bets.
I have a model with a trading time horizon measured in years for this which breaks things down into five phases for either a bull or a bear:
Phase 1 - Extremely quiet price action, very low volatility (when measured over long intervals, not talking here about daily price movements, which can still be very violent).
Phase 2 - Momentum makes new 52 week highs (I have ways of measuring this), but no new 52 week highs in price. Volatility stays low.
Phase 3 - New 52 week highs in price coupled with new 52 week highs in momentum. Volatility measures start to rise.
Phase 4 - New 52 week highs in price but not in momentum. Volatility continues rising.
Phase 5 - Divergence: new highs in price, coupled with declining momentum. Volatility peaks. This is when it's time to sell. This is also phase 1 of a bear market. Bears then go through phases 2 through 4, except that for the word "highs" substitute "lows", and for rising volatility, substitute declining volatility, until you finally wind up back at phase 1, with little price movement and very low volatility.
According to what I'm seeing, the market in general and most sectors are in phases 3 or 4. A couple of sectors moved into phase 5 and I wound up selling, the most recent here being the utilities.
Note that the above is the ideal pattern, but frequently there are plenty of variations. Real life doesn't conform to a set pattern.
For instance, gold stocks, but not gold itself, is in the position of moving into that first phase from a bull market rather than a bear, having gone to phase 3 of a bull in its last upmove. But its consolidation after that has lasted so long that according to my model its right back in the first phase, as if it had just ended a bear and was preparing for takeoff. This only happens if something is in the midst of a true secular rather than cyclical bull market. (Gold itself is moving through phase 4 of a bear and into phase 5, which would put it back in phase 1 of a bull. This is normal, since gold stocks lead the gold price. But it's doing so without making new 52 week lows in price, which is, again, a sign that this sector is in the middle of a secular, instead of a cyclical, bull market.)
Interestingly, the S&P looked like it was in phase 4 and was getting into phase 5, although volatility did look too low for that to be true at the time. It's since abruptly stopped just before giving a sell signal, and now is looking like it might want to rewind itself to that same phase 1 that gold is now in. I'm watching this with a lot of interest. I don't think I've ever seen gold stocks and the S&P sync up their cycles, but there's a first time for everything.
I have a model with a trading time horizon measured in years for this which breaks things down into five phases for either a bull or a bear:
Phase 1 - Extremely quiet price action, very low volatility (when measured over long intervals, not talking here about daily price movements, which can still be very violent).
Phase 2 - Momentum makes new 52 week highs (I have ways of measuring this), but no new 52 week highs in price. Volatility stays low.
Phase 3 - New 52 week highs in price coupled with new 52 week highs in momentum. Volatility measures start to rise.
Phase 4 - New 52 week highs in price but not in momentum. Volatility continues rising.
Phase 5 - Divergence: new highs in price, coupled with declining momentum. Volatility peaks. This is when it's time to sell. This is also phase 1 of a bear market. Bears then go through phases 2 through 4, except that for the word "highs" substitute "lows", and for rising volatility, substitute declining volatility, until you finally wind up back at phase 1, with little price movement and very low volatility.
According to what I'm seeing, the market in general and most sectors are in phases 3 or 4. A couple of sectors moved into phase 5 and I wound up selling, the most recent here being the utilities.
Note that the above is the ideal pattern, but frequently there are plenty of variations. Real life doesn't conform to a set pattern.
For instance, gold stocks, but not gold itself, is in the position of moving into that first phase from a bull market rather than a bear, having gone to phase 3 of a bull in its last upmove. But its consolidation after that has lasted so long that according to my model its right back in the first phase, as if it had just ended a bear and was preparing for takeoff. This only happens if something is in the midst of a true secular rather than cyclical bull market. (Gold itself is moving through phase 4 of a bear and into phase 5, which would put it back in phase 1 of a bull. This is normal, since gold stocks lead the gold price. But it's doing so without making new 52 week lows in price, which is, again, a sign that this sector is in the middle of a secular, instead of a cyclical, bull market.)
Interestingly, the S&P looked like it was in phase 4 and was getting into phase 5, although volatility did look too low for that to be true at the time. It's since abruptly stopped just before giving a sell signal, and now is looking like it might want to rewind itself to that same phase 1 that gold is now in. I'm watching this with a lot of interest. I don't think I've ever seen gold stocks and the S&P sync up their cycles, but there's a first time for everything.
https://flagship.vanguard.com/VGApp/hnw/funds/etf/bytype#1
I use the following screen to get a snapshot of the market.
I use the following screen to get a snapshot of the market.
Sector focus is not a dying art, at least not among pikers like me. Two excerpts, first my own from last Monday followed by today's CNNMoney.com bit on gaming:
Thus far, from two Tuesdays ago, I have legged in short positions in these equity spaces: mining, gaming (Vegas exposure versus other), and pharma. Last puzzle pieces to be added this week, in financial services. No retail, auto, energy, or transportation.
Iâd be interested to hear from anyone else who is taking short positions in equities, particularly the reasons for the positions. Iâll give you mine.
_____________________
NEW YORK (CNNMoney.com) -- Wall Street is rolling the dice on casino stocks as they hope for more casino mergers. But investors may increasingly find that these bets are losing propositions.
A flurry of deals has lifted the shares of many gaming companies. Harrah's Entertainment is in the process of being taken private by buyout firms Texas Pacific and Apollo. Station Casinos is also being taken private. And last month, a group led by Fortress Group announced it was purchasing Penn National Gaming for a 31 percent premium.
Shares of several casino owners have surged this year as private equity deals have led to more buyout speculation.
Merger chatter has helped boost shares of Boyd Gaming (Charts) nearly 10 percent this year. Shares of Ameristar Casinos (Charts) have gained almost 15 percent in 2007. And MGM Mirage's (Charts, Fortune 500) stock has surged 44 percent.
Thus far, from two Tuesdays ago, I have legged in short positions in these equity spaces: mining, gaming (Vegas exposure versus other), and pharma. Last puzzle pieces to be added this week, in financial services. No retail, auto, energy, or transportation.
Iâd be interested to hear from anyone else who is taking short positions in equities, particularly the reasons for the positions. Iâll give you mine.
_____________________
NEW YORK (CNNMoney.com) -- Wall Street is rolling the dice on casino stocks as they hope for more casino mergers. But investors may increasingly find that these bets are losing propositions.
A flurry of deals has lifted the shares of many gaming companies. Harrah's Entertainment is in the process of being taken private by buyout firms Texas Pacific and Apollo. Station Casinos is also being taken private. And last month, a group led by Fortress Group announced it was purchasing Penn National Gaming for a 31 percent premium.
Shares of several casino owners have surged this year as private equity deals have led to more buyout speculation.
Merger chatter has helped boost shares of Boyd Gaming (Charts) nearly 10 percent this year. Shares of Ameristar Casinos (Charts) have gained almost 15 percent in 2007. And MGM Mirage's (Charts, Fortune 500) stock has surged 44 percent.
Quote from EMRGLOBAL:
Im picking the banking sector to short. Long term and inch my way in. Using puts three months to a year out to start my leg in.
I expect that many banks will give back 30% if not 50% of their highes by 2008/2009. Do your research and see what banks have the liquidity crunch with low reserves. Those banks in that situation are good canidates. See who is dealing in High End Junk Bonds and bundling Home Mortage Loans that are risky, not just SUB PRIMES.
This is a long term play and not for all you supa star day traders.
exactly what i'm doing bro already got my fill on housing shorts and looking to add my mort/fin shorts so far got:
1000 RYL
500 LEN
500 KBH
1000 DSL
right now i'm +15k or 10%ish, i've narrowed my decision now to BSC and CFC
Quote from EMRGLOBAL:
Im picking the banking sector to short. Long term and inch my way in. Using puts three months to a year out to start my leg in.
I expect that many banks will give back 30% if not 50% of their highes by 2008/2009. Do your research and see what banks have the liquidity crunch with low reserves. Those banks in that situation are good canidates. See who is dealing in High End Junk Bonds and bundling Home Mortage Loans that are risky, not just SUB PRIMES.
This is a long term play and not for all you supa star day traders.
exactly what i'm doing bro already got my fill on housing shorts and looking to add my mort/fin shorts so far got:
1000 RYL
500 LEN
500 KBH
1000 DSL
right now i'm +15k or 10%ish, i've narrowed my decision now to BSC and CFC
Quote from otcstockfund:
exactly what i'm doing bro already got my fill on housing shorts and looking to add my mort/fin shorts so far got:
1000 RYL
500 LEN
500 KBH
1000 DSL
right now i'm +15k or 10%ish, i've narrowed my decision now to BSC and CFC
UPDATE:
1000 RYL
500 LEN
500 KBH
500 DSL (Covered 500 at 50.1)
1000 CFC (Shorted at 25.9)
200 SHLD(shorted today 140.70)
shld was pushed up on lamperts genius of the value of the realestate that kmrt held with commercial lagging residential by a few quarters and dismal performance department stores during recessions, this should be another profitable position
If you want to buy sectors you buy an ETF