So last week we used the technique of checking the sector to enhance our probability of success in a trade.  I called it “churching up the trade”.  There is, even more, we can do to give ourselves an even better chance of being on the right side of a trade.  What if when we started to look at a trade we made sure that several facets of the market were in our favor before we even put the trade on?  Do you think that might give us a leg up on our trading because really who doesn’t want super high probability trades, right?

So let’s say that when we go to the markets we line up as many technical possibilities as practically applicable? What I am referring to is ensuring that the overall MARKET is trending in one direction as well as the SECTOR going in that same direction and then if we can find INDUSTRY GROUPS that are going the same direction and then adding a STOCK that is showing either strength or weakness depending on the bias of the previously mentioned items then would you think that this would be beneficial for our trade?  You bet it would!   For example, let’s say that the Russell 2000 Index(Overall Market)is bullish.  Then we look at the retail/cyclical SECTOR and it is bullish. Then we look at the INDUSTRY GROUP of apparel retailers and it is also bullish and finally, we look at a stock like ANF and it is also bullish.  All of these things lining up would put us in a decent position to have a winning trade.  The reality in this scenario is that you might be looking at these items in reverse to confirm your trade.  For example, if you found a bull retracement pattern on ANF then you might go look for the INDUSTRY GROUP that ANF belongs to and ensure that the trend of that group is bullish, at least to a degree.  Then you would want to check the SECTOR chart and then maybe the INDEX after that if you haven’t already done so.  Chances are you may already have looked at the overall market if you are following the daily routine that we have written about on this blog before.

Some of the questions I get from the newbies are where do I find this information?  I am sure by now most of you know how to find the charts of the INDEXES, and possibly the SECTORS as well but what about the INDUSTRY GROUPS?  There is an easy way to get all the information you need to accomplish this task.  Take a look at the following screenshot and you will see a resource that you can utilize to get the information you require.  The screenshot below is from stockcharts.com.  You can go to that website and look for the symbol lookup tab which is part of the SharpChart drop-down menu.  I have circled the drop-down menu in yellow.  You will notice that if you read the first line for ANF it gives you the SECTOR and the INDUSTRY GROUP.  You can then google the sector and industry group ETF to check the chart to see that it matches all the others, at least in direction if not in magnitude as well.

In the video below I go through exactly how to line all this data up so that we get the bias that we are looking for.  I have found a bullish retracement in ANF and then I look at the retail ETF RTH and then I look at the sector ETF for Consumer Discretionary/Cyclicals and finally the RUT index to see if they are all similar and there isnt something that will hurt my trade if it turns against me.

This is just one more way to “church up our trades.”  In next weeks blog, we will add another block to this and look at how far our equities can run and how we must look at targeting for our trades to have a shot at being successful.