If you prefer to trade on the long side of things, finding the sectors (and the companies within those sectors) that are most likely to keep making gains even during bear markets is a must. Historically, there are a handful of sectors that keep making gains no matter what is happening in the broader market. Some of these include the healthcare sector, as well as certain types of technology. However, given the current market conditions, it’s pretty tough to know what’s going to happen in the near future thanks to extreme volatility. Experts have attempted to make some predictions, though, and hopefully their insights can help us all to make better trading decisions even if the volatility continues.
The energy sector is one of two sectors currently outperforming the S&P 500 since the end of September. Since September 28th, the S&P has gained 6 percent. The energy sector has gone up by twice that at 12 percent. While the price of oil has had a big impact on this, the big push is thanks to alternative forms of energy that are stepping up while oil becomes more and more problematic. The companies that deliver these products have a lot of strengths right now, particularly those that are able to capitalize off of oil’s volatility. Be on the lookout for the companies that are best able to deliver even when others in the sector struggle.
The materials sector is also up big in comparison to the S&P 500 at 10 percent. Materials are something that will always be in demand, and the fact that they are outperforming the S&P could be a sign that companies are trying to get major purchases out of the way before the Federal Reserve makes loans more expensive. Rates are low now, but if the Fed does raise rates, it won’t stay this way. For the time being, the companies that rely on materials are doing well. Watching for the right moment to enter short term positions with these stocks, particularly with binary options, can be extremely lucrative if these trends continue.
These two sectors have several things in common. They both rely heavily upon the price of commodities. They are both gaining momentum as the days go by. And they both are things that do not involve discretionary spending. Energy is a must. People need oil to drive their cars, and they need electricity for their homes and their businesses. Companies need raw materials to create their products, regardless of the sector.
The flipside of this is that the same measurements that evaluated the above two sectors found that two of the weakest sectors are currently healthcare (4 percent) and the financial sector (3 percent). Technology is not too far behind in weakness with growth at only 5 percent. The good news is that they are still gaining in value, but the bad news is that they are not keeping pace with general market growth. This is not a good sign for them if the direction of the S&P reverses, as is expected by many experts. If they continue to lose momentum in comparison to the S&P, it could be a good idea to prepare a short strategy, such as with put binary options, which will capitalize on these trends. Of course, every single position you enter should be evaluated with both fundamental and technical analysis before you execute the trade. Still, having this knowledge will help you to shape your overarching strategies. Knowing which sectors are the hottest will help you to form your long trades and your call options while knowing which are struggling will point you toward put options and short sales.