Traders,

Yesterday saw profit-taking strike stocks. But not every sector succumbed to the selling pressure. Instead, we saw rotation out of economically sensitive sectors and into defensive ones. In other words, the money fleeing technology, industrials, and consumer discretionary found a new home in utilities, health care, and consumer staples.  

Though a single session, the movement was straight out of the recession playbook. In times of trouble, fund managers who must own stocks seek shelter in areas less vulnerable to a slowdown.

So what do you do about it?

First, if you think the rotation persists, look for bullish plays in defensive sectors. However, a pullback is likely needed at this point for a lower-risk entry.

Second, consider this a good case study for why having diversification across sectors can be helpful. Investors with all their exposure in offensive sectors get hit harder on a day like yesterday than those with positions spread into defensive sectors too.

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Video Of The Day: Trade Masters – Hot Trading Picks From Tackle Trading

Every Wednesday at 7 PM EST join us on the Trade Masters Show where two Coaches go head-to-head to see who can find the best #tradingsetup.

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Chart of the Day: Sectors

This graphic is from the Bear Market Survival Guide. It shows how consumer staples, health care, and utilities fell the least during the 2008 bear market.  

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Today’s line up

Traders Lounge 11 AM EST

Join the coaches in this live lounge, ask questions, discuss ideas or just sit back and listen to veteran traders discuss market conditions.

Cashflow Club 8:30 PM EST

Held every Thursday before Friday’s option contract expirations, this show helps you perfect your favorite cashflow strategies.

Halftime Report 12:30 PM EST

The Halftime Report starts at 12:30 EST and covers what news is driving the market, chart analysis from the movers and shakers of the day, and fun in a way that only the coaches at Tackle Trading can deliver.

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