Alex,
of course I have on my screen all usual indexes, like Dow, S&P, NAS etc. But it would be oversimplifying to say that I just trade in direction they indicate. Here are some thoughts on this matter (usual disclaimer is in order, like: everything said is just what works for me etc :)).
1. Stocks that trade under influence of some dramatic events tend to live in the world of their own. Issue that got cut in half on fund dumping because 2 cents earnings miss often will trade with no relation to indexes. Or small biotech with fresh FDA approval with little average volume may just explode on short-lived momentum. When I deal with this kind of situations my trading is very stock specific.
2. Stocks that have no event-related momentum often (not always) trade in relation to indexes, with some lag usually. They can be tracked and traded using S&P, NAS futures and NAS COMP (I seldom trade listed). In any case, I want tape and level 2 to confirm that stock follows index.
3. There is sector specific momentum that can be tracked as action of second tier stocks in relation to sector leaders. Roughly speaking, if EGRP beat estimates and went up big you may want to keep an eye on JBOH. Remember some of last year mania? Seeing KIDE run you had to identify GRIN as (and 5-6 others, can't remember symbols now) as sympathy play, and you got a decent trade. Some of "tulips" were: Pokemon, wireless, China, Linux...
4. There is one more unconventional indicator I use... I do not encourage anyone to go there, nor do I expect any criticism that I would have to defeat. It's just what I do. I monitor couple of free chat rooms (not line by line, not in order to get really useful info although sometimes they generate interesting idea). They give me feel of general mood among daytraders. Sometimes it's amazing enthusiasm and I know that nice looking news or buy announced by room leader has a great chance to create big momentum. Sometimes it's skepticism, boredom, frustration etc, and I know I need to be rather picky because crowd is not likely to create good follow-through.
I can also think of trades based on intraday money rotation between sectors but it's still too raw, can't offer any real thoughts.
Sheesh, it looked like small question at first... :)
Vadym |
