Friday, April 23, 2010

Market Leadership

In a few of my earliest post I had noted that I was deliberately focused on small cap Chinese stocks because that was where the greatest price, earnings and sector momentum was. However, it has become quite apparent to me that money has been moving out of this sector for the past few months or so. With only two to three Chinese stocks at a new 52-week high or poised to break into new highs where as only 4 -5 months the new highs lists were dominated by Chinese names.

Apart from the obvious large cap CANSLIM type stocks like AAPL, CMG, V, BIDU etc...I have been struggling to identify the stocks that are the true leaders until recently. What I have noticed is that money seems to be moving into small regional banks and home builders many of which are breaking out of inverse head and shoulders and saucer type bottoming patterns on massive volume on back of a significant turn around in earnings growth.

Add to that record low interest rates that will remain that way for the forseeable future, new home sales bouncing from record lows with what appears now to be huge upside potential after months of poor performance, it would seem that the home builders and the bankers have a powerrful wind at their backs.

Trading is not only about recognising patterns but also trading the patterns in the right stocks. You need to be in stocks with fuel and right those stocks are the HOME BUILDERS and REGIONAL BANKERS!

So they will be my sector of focus for the forseeable future.

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