Last week Bullish Percent Indicators (BPI) identified buying opportunities within sectors of the U.S. Equities market. Will we see a repeat or continuation this week or have many of the buying opportunities passed? Follow along with the BPI analysis shown below.
With exception of the NASDAQ 100, all the major indexes dropped this past week. The Dow Jones Transportation Average (DJTA) is at rock bottom and the DJIA has one bullish stock among the 30 that make up that average. We are in a deep bear market based on this data.
Every sector is over-sold so there are buying opportunities among all sectors. This does not mean one needs to rush out and go into a buying frenzy. If cash is available, select a few sectors of interest. For example, one might choose Staples, Energy, Financial, and Technology. Set up a ladder system that might look like this for one particular sector.
- Set a limit order to use 5% of the cash to purchase shares of several ETFs at 1% to 3% below the current price. This assumes the price will drop further sometime in October.
- Set a second limit order to use 10% of the initial cash position to purchase more shares of ETFs at 4% to 5% below the current price. These might be the same or different sector ETFs from the first limit order.
- Set a third limit order to use 20% of the initial cash position to purchase more shares of the ETFs of interest at 6% to 7% below the current price.
- With the remaining 65% keep increasing the percentage to invest while lowering the limit order price below the current price.
- Once all the limit orders are in position, be patient and wait for the sector ETFs you have purchased to move into the over-bought zone (70% bullish or higher) and when that occurs, place a TSLO on the shares you own of that particular ETF. This is a Buy Low – Sell High strategy.