When the market is going straight up like it has the last couple of months, there isn't much choice but to try to keep pace the best you can. Strategic choices are limited other than trying to maintain a high level of market exposure in the best stocks.
Some traders deal with the lack of strategic alternatives by becoming increasingly anticipatory but if their timing is off that carries very high opportunity cost. They finally breathe a sigh of relief when there is a pullback but in many cases they are still not back to even.
For more reactive traders, this weak action is welcome because it allows for some fresh strategic thinking. Rather than just chase strength or blindly buy every dip, we now can use more complex strategies that take into account the potential for more market weakness as well as the potential for some unusual moves into the end of the year. We don't know what the market will do next but we do know that there is increased volatility and greater movement in both directions and that allows for a variety of strategies.
The first step in developing a strategic plan is to identify some trading vehicles. Are you going to trade indices or individual stocks and which ones do you choose?
I tend to focus more on individual stocks and my job right now is to develop a list of names that I want to follow more closely as this action develops. I've already mentioned gold miners and SSR Mining (SSRM) . I believe this will be a theme that will gain some traction and I'll be looking for more individual stocks in the group.
Enphase Energy (ENPH) was a new buy today and I'll be looking to add to that further. It is bucking the trend and that is always a good sign. Solar energy may be another theme worth watching.
Some of the biotechnology names have been holding up well. Aimmune Therapeutics (AIMT) and Aurinia Pharmaceuticals (AUPH) for example. NeoPhotonics (NPTN) and Luna Innovations (LUNA) are low-priced names I'm watching. Personalis (PSNL) looks like death but this is an interesting potential January effect trade. BRP Group (BRP) is a recent IPO and took a big hit on no news today. I'll be looking at that more closely.
For stock pickers, this poor action is creating a whole new crop of opportunities. Start working on finding some names to follow and then develop a strategy for trading them.
