This market’s sentiment can completely turn on a dime.
Around a year ago, the market was setting up for new highs. Although some momentum stocks were crushed early, we didn’t see serious damage in the markets.
Now…
We’re down 30% off all-time highs, and it seems like the entire market is at the whims of Fed policy changes.
But there’s been one glimmer of hope this whole time…
Well… it was until the Fed cranked rates another 75 basis points.
Here’s OIH, an oil ETF, to show you what I mean:
OIH Chart
I’ll let you in on a dirty little secret about oil stocks and commodity names in general:
Buying strength is a sucker’s game.
It’s so hard to get followthrough in these names because they’re tied to the commodity markets, which don’t tend to run as much.
Consider Occidental Petroleum (OXY).
This name’s been in the news because Warren Buffett is directly involved in the company.
Here’s a chart of OXY:
OXY Chart
There was one good breakout that saw followthrough. If you caught that move, you probably earned a handsome return.
But what happened after?
OXY Chart
I want to highlight this mechanic — any time this stock had a “clean breakout,” institutional investors used it as a way to sell into liquidity…
Only for the stock to give it all back on a failed breakout setup.
Then, when you get enough panic, those same institutions come in and scoop up shares for cheap.
A lot of folks will tell you that a stock is a stock and that all price patterns will play out the same.
It’s simply not true — sector absolutely matters.
You’ll see much more followthrough on a low-float, high-growth tech stock than on a large-cap, super-liquid oil name.
One way I insulate myself from sector differences is with my Trading Roadmap.
It points out key price levels in any name I look at, helping me time entries and exits like I’m some Wall Street genius.
In fact, I already showed you a component of my Roadmap in this very article.
For more information about my Roadmap…
