While most people may be taking time off during the upcoming major holidays, traders and investors that plan to stay may need to adjust their approach.
In this week's interview with Toni Turner of TrendStar Trading Group, we discuss how traders and investors can still keep a pulse on the market when they're away for the holidays.
EQ: As we discussed last week, most traders tend to take the last few weeks of December off. What are some tips that you may have for them when getting back into the market?
Turner: Assuming the market and the major indices are still at an uptrend at the start of the year, we know that many fund managers will move toward the sectors that have underperformed in the past year. So we want to look there, along with them. Many PMs (portfolio managers) look for the underperforming sectors of the past year to outperform in the coming year. It’s a very similar strategy to the Dogs of the Dow theory, where investors buy the worst performing stocks on the Dow at the beginning of a new year on the assumption that they will move higher. In other words, we look at the underperformers of the previous year and hoping they outperform in the next. Just so, I evaluate the various sectors and industry groups to see which have underperformed and then I try to identify a catalyst in the economy for the coming year that will help those particular underperformers gain momentum going forward.
EQ: What are some ways that you stay updated on the market even when traveling on vacation?
Turner: But when I’m traveling, I stay updated with my smartphone, and I know I have my stops in place for my positions. If the market is overbought when I go on a trip , I will pare down or completely sell out of very volatile positions. I keep my core positions, but if the market is overbought, I’d rather be in cash when I’m 35,000 feet up in the air and can’t do anything about it.
EQ: If you're holding position or swing trades during this time, do you adjust your stops any differently?
Turner: I don’t leave with many swing trades open when I travel. I learned a long time ago that you can encounter a real rude awakening when you get back in front of your computer. I would just rather be in cash when I’m away because I can have more fun that way. However, if I am in a good swing position that I don’t want to let go of, usually, I’ll pull part of that position and reduce the share size. I will then enter a slightly wider stop than I normally would. For position trades, I trail stops underneath for consolidations and pullbacks, and maintain those stops. So I set all that up before I leave. Generally speaking, the more cash I’m in when I travel, the more fun I have. I want to be able to relax and concentrate on family and friends when I’m away.
EQ: Are there any sectors or stock groups that you're looking closely for the start of the year?
Turner: I’m watching energy and the Energy Select Sector SPDR (XLE) here to see if it can break out if an economic recovery occurs. I’m also watching the iShares Dow Jones US Oil Equipment Index (IEZ) right now. If interest rates stay low, then I’m watching the iShares Dow Jones US Real Estate (IYR), as long as it can stay above the 200-day moving average. I think the IYZ may have more room at the beginning of the year, but I’m waiting on a pullback on it.
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