Approach Works, Entry's Pending

Yesterday I said the financial sector (XLF) would have some motion as the money flows in to it, at the same time, I said utilities (XLU) might see money flowing in as well, but I did want to tread XLU more carefully.

Today I saw that the waves were taking place in XLF and most of the other sectors as well, but my job and approach is not to identify whether the money will be everywhere, but rather, which waters (sectors) contain the best waves to surf (stocks to trade).

In the above, the analysis proves that the XLF was in fact the most traded sector with a 50:7 ration between buyers and sellers. From the financial sector, I said I'd consider Mastercard (MA) or Berkshire (BRK-B).

The above chart shows how BRK-B gaped up from $474 closing yesterday to a $482 opening. I don't trade the first 30 minutes so we saw it go down to a $476-$478 range, which happened to be the resistance for today and we didn't see it break up further, not even at closing.

I also considered Mastercard for today, let's take a look

At opening, MA almost jumped up by ~$10 and continued to go up to $488 in the first 40 minutes. I knew that I needed to wait for a resistance break if I wanted to jump in. However, as shown in the chart above, we see that after 10:15, a major re-consolidation took place, where the resistance remained around $481.

So in conclusion, I didn't take any trades! It's not the most exciting thing, it is the boring thing, the structural thing. I preserved my capital by paying attention to the resistances; it's what I said I was going to start looking at after having bad entries. I looked at Citigroup for a case study, where after looking at the volume, I see that there were in fact more buyers than traders. It's evident that the volume would work at the micro level and entry as well. Below is what the performance was like for Citigroup today:

So, I think I need to start running this code at the moment of buying. Tomorrow is Friday, so I'll try this approach and see how it goes. In prep for tomorrow, let's go back to the sectors and the performance from today at the first image in this blog.

I think XLP and XLK are great contestants for tomorrow. XLK had more buyers than sellers, but still remained negative today, we've seen this happen twice already, except we observe a 50/50 ratio. Today it isn't an equal share of volume between buyers and sellers, but it does ring a bell in where it can go tomorrow. At the same time, XLP – High trading seller vs low buyers, almost to the point of exhaustion. I will be cautions with XLP, but for now these two sectors are the ones that I'm looking at. Let's track the volume for the sectors tomorrow, see if that gives us an entry.