It was a week of big earnings announcements in the markets with technology giants like GOOGL, FB, and AMZN reporting quarterly results. Safe to say, it was not dull.
We saw FB sink by more than 25% the morning after the Q4 announcement, while both GOOGL and AMZN exploded to the upside. With such strength in a heavily-weighted name like AMZN, one would think the indexes would react positively, but that wasn’t quite the case.
Outside of a select few spots in the market, most names are looking increasingly bearish as structure continues to break across major time frames. As kids, some of you may have played a game called “follow the leader.” In the current market that mindset is going to be important, as we are no longer in an environment where everything has the wind of the market at its back.
Examples of leadership in this market are energy and oil stocks, such as XLE, XOP, LNG, EOG, DVN, and many others. Unlike technology, semiconductors, and most other sectors, energy has a bullish trend, structure, and momentum (the BIG 3). So long as that’s the case, this will be one of the few spots we are looking to add bullish trades, while patiently waiting for better short entries on the indexes.
This week we were able to nail a nice move during the Compounding Growth Mastery session in DVN. This energy stock fired a handful of lower time frame squeezes for a solid move into our target of $56. Though a short-lived trade, it was good for a quick 45%+ return on risk. A nice trade, but we’re looking for more leaders like this one.
Heading into next week, so long as the bullish structure remains intact, we’ll be looking to buy dips on DVN, EOG, and a few other energy/oil names. Another interesting spot right now is XLP (consumer staples) which is home to solid setups in PG, KO, and PEP.
When you compare the current market to the environment we saw for most of 2020 into 2021, following the leaders – wherever they may be – is crucial to your success. No longer is the path of least resistance to the upside for the entire market, so our focus must shift to the select spots still showing bullish structure and momentum.
Follow the money, follow the leaders, and there are profits to take home consistently even in this wild market.
Stay Focused!