The market continued being a sloppy mess ahead of Wednesday’s announcement from the Federal Reserve.
Looking through the options market, we saw a lot of trades being closed because institutions don’t want exposure to the potential downside.
And while choppy markets make it harder to book a winning trade, that doesn’t make it impossible.
When volatility picks up the way it has, traders can’t count on market trends to lift stocks that are normally correlated with one another.
If you’re looking for sector correlation trades, there’s really only one area of the market holding a trend right now…
Trading Sector Correlation in Volatile Markets
Two weeks after oil crashed on lockdown news from China, we saw energy names rally strong into May as oil prices recovered…
My Wiretap Alerts strategy took a win on HF Sinclair Corporation (NYSE: DINO), which snapped back up above its previous swing high in less than two weeks…
And it wasn’t just DINO… We can see that move translate from the commodity straight into oil and gas names no matter where they are in the supply chain.
It doesn’t matter if it’s drillers like Schlumberger Ltd. (NYSE: SLB), you can see the stock price (the green candles) move in correlation to oil prices (the green line)…
Here it is again with pipeline company Kinder Morgan Inc. (NYSE: KMI)…
The oil and gas names tend to follow the industry trend — which is why I’m not a fan of trading these stocks for earnings… You can see SLB’s earnings pop fade hard, sticking with the broader market.
Check out the quick clip and let’s talk about trading sector correlation in these choppy markets.
Don’t forget you can follow me @LanceIppolito on Twitter, Instagram and our YouTube channel for more trading insights and tips. And as always, you can find me right here talking stocks and options trading — and printing money — on WealthPress.com!
P.S It’s a bloodbath out in the markets…
With many traders’ accounts going red, day after day…
No one knows what to do… But this former $700 million hedge fund manager is warning investors:
It’s only going to get worse!
