Pursuing ‘Outperformers’ Within Volatile Market

2021-07-13

Traders banking on banks this week likely took an account hit.

Despite strong bank earnings reports, the markets dipped into the red after the White House proclaimed inflation is here for longer than previously announced.

The Dow closed at 34,888.79 points to fall .31% (slipping 107.39 points on the day). The Nasdaq dropped to 14,677.65 points for a .38% drop while the S&P 500 couldn’t hold in the positive as it lost .35% to 4,369.21 points.

News once again influenced market sentiment while Simpler’s traders pursued opportunities beyond mainstream talking points.

One area is “relative outperformers” — corners within the markets trading in a higher probability uptrend. The key to these areas are exponential moving averages — including the 8, 13, 21, and 34. These “weight” recent price action heavier to indicate an “outperformer” environment.

Bullish “outperformer” uptrends in these corners tend to be more predictable than the overall market. These uptrends can fall within indexes, sectors, and stocks and can present watchlist targets. Assets can also include energy, financials, metals, Big Tech, and currency.

A busy economic calendar — earnings reports, Fed meetings, economic news, options expirations — can be challenging and it requires traders to stay prepared for what the market is brewing. 

Pullbacks may be more frequent than traders would like, and Simpler’s team is tightening up stops.

Cash, long-term holdings, and a caution game plan keep Simpler’s traders focused on what the market gives while waiting for stronger potential setups. We’ll take the “outperformers” as the market presents them.

We Saw: News - “Hey, so yeah, inflation is here for awhile” —

  • Child tax credit checks to hit households this week
  • Inflation hits staples hardest — food, fuel, vehicles
  • Politicians playing the “blame game” for economic woes

We’re Watching: Strength of cash against any volatility —

  • Targeting high-probability setups others aren’t watching
  • For a pullback that could be a real account stinger
  • Setups that don’t negatively affect “cash” position