Narrowing Your Focus | Podcast Episode #391

0:07
Hey, I’m Ryan Mallory and this is my Swing Trading the Stock Market podcast. I’m here to teach you how to trade in a complex, ever changing world of finance.

0:16
Learn what it means to trade profitably and consistently, managing risk, avoiding the pitfalls of trading, and most importantly, to let those winners run wild.

0:25
You can succeed at the stock market, and I’m ready to show you how. Hey, everybody, this is Ryan Mallory with SharePlanners, Swing Trading the Stock Market and today’s episode we’re gonna talk about nearing your focus on a select set of companies. I got an e-mail today from a guy not gonna use his real name because I never do that in these podcasts, as many of you listeners have been listening for a long time. Know that by now.

0:51
I try to protect your identities. We’re gonna call this guy. Give him a good Florida redneck name of Willie. I had a friend named Willie that grew up next door to me.

0:59
So Willie it is. Willie writes.

1:03
Hi, Ryan. I’ve been listening to your podcast for the past years or so and have learned a great deal.

1:07
Thank you. I’m trying to switch from periodic trading to being a more active trader.

1:11
I feel that I have a decent understanding of the markets and the various macro forces impacting them.

1:15
I also feel relatively competent in my technical analysis, but I am struggling with how to narrow the broad stock market into a manageable subset of stocks to focus on.

1:27
I’ve recently tried scanning for certain setups and then reviewing the resulting list, but I find that many good setups come from outside my scan.

1:35
Also, that list by definition will change daily. I’ve also tried looking at trending sectors to narrow down my list to hot sectors, but I didn’t find that to be very helpful.

1:45
With the market constantly rotating between sectors, it just seems that the top down approach has the potential to always be behind the curve.

1:52
I have no problem going through a few 100 charts at night, but which few hundred?

2:00
I feel like I should have a relatively stable list so that I can get to know these stocks over time, but I have no idea how to create that list or how to best prune it or add it over time.

2:11
Any help on creating a core watch list is greatly appreciated. Sincerely, Willie.

2:18
OK, so First off, the top down strategy or the top down focus of where you’re following different sectors and their movements is not dead because by and large stocks are not moving if their sectors are not moving. There’s very rare exception to that. You had an exception to that last week where you had meta earnings just ripping through the roof, blasting off whatever you want to coin it with. What the popular phrases in that group of stocks that make up the communication sector. On the ETF XL C, you only have five out of the 22 stocks rallying that day.

2:50
So it was a very narrow focus and and it was one where if you were probably following the sector communications, you were getting burned because a lot of your other ones like Verizon and T-Mobile and AT&T and others were struggling. So there’s always exceptions to the rule.

3:06
There’s also time periods that you’ll go through where you’re like a holy cow. We’re doing a lot of rotating back and forth like in the current market environment that we’re in right now. It’s not so much that we’re having sector rotations.

3:17
That’s not the theme. It’s more so it’s a theme constantly going back and forth of small caps to large cap. You’ll get like a four or five day rally in the large caps, particularly with your big tech place. And then you will see like the next day the big tech go down and all the money flow into the small caps.

3:34
That’s really the more dominant theme. It’s not really so much where you got staples, utilities and healthcare rally in one day and then all of a sudden it’s rotating into discretionary tech and industrials the next day.

3:47
Now it’s more your mega cap stocks or everything else. And I say that because you only have 4 sectors that are even in the green on the year and it was 3 up until last week and there’s 11 sectors. So the large majority of sectors are actually trading lower on the year where essentially all of your gains in this market are coming from technology and healthcare, that’s IT technology and healthcare.

4:13
Your big tech stocks, Eli Lilly and ABBB, when those aren’t rallying, then you’re seeing everything else rallying.

4:21
But what the sector analysis is going to help you to do is figure out what is that rotation looking like when you’re seeing only tech and communications and to a lesser extent discretionary rallying. That’s your clue that that it may be only big tech stocks that are rallying. That’s your meta, your Amazon, your Apple, your Netflix, your Google, your Microsoft, your Tesla, your NVIDIA.

4:45
And I think I even saw today where like NVIDIA is about 42% of the entire S&P gains on the year. It makes up that much of its gains. And right now only about 38% of stocks are even trading above their forty day moving average, which is pretty wild. That means over the past couple of months it’s been a real struggle for most stocks.

5:05
But the sector analysis used correctly is going to tell you how the money’s flowing and with the theme of where money keeps going back and forth between large caps and small caps and mainly staying in large caps, but when it’s not, it’s flowing right back into small caps. You don’t really see broad based selling or broad based rallying.

5:19
The sector analysis is going to help you to see that just by, you know, figuring out which sectors are actually rallying.

5:25
And when you’re seeing stocks and sectors like communications from last week where only five of the 22 stocks are rallying and yet the communication sector’s up like 4% on the day, that’s going to tell you and provide you with a big clue that that rally is due to a major, major stock rally. And in this case, it was meta.

5:43
And one of the things about top down trading and what it’s going to keep you from doing is getting long on a trade set up in a bad market or in a bad sector or in a bad industry.

5:52
Because the market, the sector and the industry is going to make up about 90% of a stocks move or the reasoning for the stocks move.

6:00
You don’t have those all lining up. It’s going to be very difficult for you to have a breakout work or a bounce off of a rise in trend line work if the sector’s plummeting for instance. Right now.

6:10
The other big story is regional banks, you got NYCB falling apart, you have a number of other regional banks that are people are scared of right now.

6:18
But let’s say you have this great set up in a regional bank. OK, I’m gonna jump into this one. Testing the rising trend line looks like it might try to bounce. And then it starts to bounce early on.

6:27
So you get long on it and then KRE keeps dropping and then XLF keeps dropping and Spy’s dropping because of the influence that the financials might be having on the market that day.

6:37
Well, you could have avoided that altogether by just avoiding the financials. You’re not gonna see me.

6:42
I don’t care what the setup is right now. You’re not gonna see me trading a regional bank at this moment in time because the top down trading strategy would tell you that it’s not working.

6:50
One thing that does work, swingtradeinthestockmarket.com swingtradeinthestockmarket.com is going to give you all my stock market research each and every day. From daily watch list to watch list reviews to big tech updates to updates on the market.

7:06
Lots of really good videos that I’m doing all throughout the day. Charts that I’m posting Really good stuff.

7:12
I highly recommend you check it out swingtradeinthestockmarket.com.

7:15
SO going into more of what Willie has to say because I got a little bit sidetracked on the comment about top down trading being a little bit behind the curve. It’s not, it does keep you out a lot of the trades.

7:26
Now sometimes too, it’s very difficult in certain market conditions to be able to capitalize on it. In the past few days, I’ve been 100% cash, haven’t made any new trades.

7:38
And it’s not that I don’t want to. It’s just that my analysis is coming back saying maybe not the best thing to be getting along at this point in time.

7:44
But one of the things that you can do is focus on the different ETFs that represent the sectors. So the holdings are readily available for each of these. And there’s 11 sectors.

7:55
So each one, each symbol I guess for the ETF starts with AX and AL and then it has a different letter at the end.

8:01
So for materials, that’s AB, Communications, that’s AC, and I’m just gonna read them out so that if you’re listening to this, you can write that down.

8:07
Energy’s an E Financials is an FI is for Industrials, K for Technology. Staples is AP, Real Estate is RE.

8:15
It’s the only one with two letters, U for Utilities, V for Healthcare and Y for Discretionary. So you can create separate watch lists for each one of these sectors.

8:23
So that when you see that a certain sector is showing the strength that you can see which one of those stocks inside of those ETS and all of them are gonna be large caps, which ones are causing the rally, which ones are setting up for a potential rally and you can jump on it that way and that’s one way to screen it.

8:41
I also keep a must watch watch list and this must watch watch list. It’s like 100 stocks or so.

8:45
And I go through it probably on a daily basis and on this must watch watch list the stocks that I regardless of what sectors rallying or not, I wanna know what that stocks doing.

8:55
And so that’s one of the reasons why I check it all the time. And so there’s about 100 stocks like I said and I’ll give you like the 1st 10 or 15 of them that are on there.

9:03
But everyone’s gonna have a different must watch watch list.

9:07
If that’s something you decide to do, it’s gonna be stocks that are important to you that you think is worth watching.

9:12
So for me, Snap, SNAPPLTRRBLXWTAICMG, Spotify Baba, Ford, which is FLLY, Uber, CHGG or Chegg, Disney, DIS, Crowd Strike, CRWD, Pinterest, PINS, Wynn Casinos, Wynn, PayPal, PYPL.

9:36
Meta, Shopify, NVIDIA MCD for McDonald’s Tesla ARM. So that might have been more than 15, I might have been like 20 something.

9:46
But in any case, those are stocks that are on my most watch watch list, right? These are stocks that are important to me to know.

9:51
I think Walmart’s on there. I just added that one the other day.

9:54
I was like I probably should be adding that one to the list. I haven’t been tracking that on a daily basis, so I added it.

9:59
There’s no scientific methodology to it. It’s just stocks that I want to know that that are of interest to me.

10:04
And it may be stocks that I’ve traded a lot in the past and I don’t want to lose sight of them. There’s one stock that’s not on there.

10:10
I actually have a don’t trade list of stocks that I won’t trade and there’s not many stocks on there.

10:16
One of them is Boeing BAI hate that stock, I really do. And it goes back to a long time ago when they actually had planes that were crashing.

10:24
It felt like every time I was jumping into that stock, I was being hit with overnight news events of of a plane crashing to the ground.

10:31
And it’s like how how do you manage that? How do you know that that’s gonna happen.

10:36
And so it became a headline risk that I couldn’t justify. So I put it on my do not watch list And still to this day, I mean I’ve, I wish I could take this one off my do not trade list.

10:43
But to this day they keep having all sorts of problems.

10:47
I mean I read yesterday there was missing bolts on one of the airlines. I mean can they come off of the list?

10:52
Yes.

10:54
But they got it.

10:55
Show me a good reason for it. Stocks that have this constant like crazy news events that sink the stock.

11:00
Tesla used to be on it for a long time. I think I put it on there when Elon Musk came out and says, you know, I got buyers, I’m taking a private at 4:20 or they’re, you know, when he was smoking weed on the Joe Rogan show or or whatever and it was causing chaos for the market.

11:16
Yeah, I went ahead and put that on my do not trade list, but it’s come off of it. So yeah, I have a must watch watch list.

11:22
I have a do not trade watch list. I also think that in the case of Willie here who is trying to find these stocks that trade, I wouldn’t say abandoned the top down trading.

11:29
I think sectors are very important because if you’re trading in weak sectors, you’re not going to make money.

11:36
More than likely there will be 1 offs of course, but by and large it’s gonna be very difficult.

11:42
So I think the way around that is keeping a watch list for each of the separate ETFs. So if you’re seeing that one of the ETFs is rallying or the technical analysis is setting up for a certain sector to rally, yes, you can do analysis on the individual ETFs to be able to get a feel for which ones might be setting up.

11:59
I do it every day. And so then when you realize one might be setting up, might be primed to go, then start looking at the individual stocks.

12:05
But it’s good for this individual that he’s willing to look through hundreds of charts a night.

12:13
That’s one of the things you kind of have to do if you’re gonna be an active trader. You gotta be willing to always look through tons and tons of charts.

12:20
I look through thousands every week and then the more you do it, the better you’re gonna get at it. You’re gonna look at these charts and probably within one to two seconds you’ll realize whether or not to keep going through it.

12:28
That’s why I also think that the charting software that you use is important.

12:32
I use TC 2001 of the cool things about that is that I can just keep clicking the spacebar and with a fast Internet connection, the charts just instantly appear like the blink of an eye.

12:41
There’s no hesitation. So being able to shuffle through the charts really fast now, yes, I’m using a little bit of a staccato there because I’m my mind on like hitting the spacebar as I’m talking about that.

12:49
But being able to flip through those charts really fast, cuz there’s most charts you look at, there’s not gonna be anything there to work with.

12:58
So you can flip through it really quick.

13:02
The ones where you get bogged down on are the ones that actually have some opportunities to them. So you wanna be able to get through the froth, the stuff that’s not necessary to the substance of your trading, and really focus on the substance.

13:11
And the other thing too is that the fear of missing out, right. Even if you’re not trading a stock and you didn’t even see the stock ramping higher throughout the day, when you look at it in hindsight, it’s like, man, why did I not see that?

13:25
Oh man, look at that bull flag or oh, look at that consolidation. I could have played that.

13:29
There’s always gonna be a stock like that out there. There’s gonna be probably hundreds of stocks like that out there every single day.

13:35
And in hindsight it can really frustrate you. But I would encourage a person, especially when they feel like that they are getting a good handle on the market and an understanding of the markets and the macro forces that impact them.

13:41
Do not so much look on the outside, look at the noise. I mean, PLTR, for instance, it’s up, you know, it’s gone from like $17.00 a share to $24.00 a share in the last two days.

13:56
And I’m like, man, why did I not get into that, right?

14:00
I would have had to hold through earnings. I would have had to have bought at the highest from a 23 plus percent move the following day, hoping to get another 9% today, believing that that would happen.

14:08
And so in hindsight, everything always looks obvious. It really does like, oh, why’d you not buy at that bottom?

14:13
Oh, why’d you not sell at that top?

14:17
It’s easy to say, oh, I’m just not looking at the right stocks, but in reality, there’s thousands of stocks.

14:22
Unless you’re going to go through thousands of stocks each night, which most people are not, that’s gonna be a very, very difficult thing to do.

14:29
So there’s plenty of trades that are moving 510% clips on a regular basis, especially in this market right now, that if you’re looking at trade at this point in time, you can get long on that on those stocks.

14:40
And if the stock doesn’t work out, then have a tight stop loss to where you can jump out of the trade and if another trade opportunity arises that you can take advantage of, then jump into that one.

14:51
If you enjoy this podcast, I would encourage you leave me a five star review on whatever platform you’re listening on.

14:56
I do greatly appreciate that and it hurts when somebody leaves a main review. I do get them and don’t much appreciate it.

15:03
So I’d encourage you to leave a five star review and check out swingtradingthestockmarket.com. If you want more of my stock market research, that’s a great place to start at.

15:13
Provide stuff every single day, all throughout the day, and make sure to send me your questions. ryan@shareplanner.com is the best way to get to me.

15:22
I read all my emails, I fight through all of the spam that comes in and I find your emails. And I try to make podcasts out of pretty much every single one of them.

15:32
If you send it on right now that is relevant to swing trading, very good chance that it will make the show.

15:37
So send them to me. Thank you and God bless.

15:42
Thanks for listening to my podcast Swing Trading the Stock Market. I’d like to encourage you to join me in the SharePoint or trading block where I navigate the stock market each day with traders from around the world. With your membership you will get a seven day trial and access to my trading room including alerts via text, e-mail and WhatsApp. So go ahead, you sign up by going to shareplanner.com/trading Block, that’s www.shareplanner.com/trading-block and follow me on SharePlanners, Twitter, Instagram and Facebook where I provide unique market and trading information every day.

16:15
If you have any questions, please feel free to e-mail me at ryan@shareplanner.com. All the best to you and I look forward to trading with you soon.