If you took a look at the headlines this week, turned on the TV or asked a friend what the stock market was up to, they’d probably tell you that things were trending up.
And why shouldn’t they? If you take a quick look at the S&P 500 and the Nasdaq 100, they’re up and pushing toward record highs.
But if you check under the hood to see what’s really driving the trend, you’re going to keep coming back to three stocks — Amazon.com Inc. (Nasdaq: AMZN), Alphabet Inc. (Nasdaq: GOOG) and Apple Inc. (Nasdaq: AAPL).
These three stocks are leading the entire market higher.
If you look at other sectors like Energy, Consumer Discretionary, they’re all down on the week. I mean, even the Financials sector is moving lower, and the banks just reported big earnings.
It might sound crazy that just three stocks can cause the whole market to go up… But, yes, they can because the market is capitalization-weighted.
And that’s just how big those companies are.
Look at the iShares Russell 2000 ETF (NYSEARCA: IWM). That small cap bad boy fell over 2% on Wednesday.
A lot of those small-cap stocks make up a big chunk of the Energy and Financials sectors, and they’re lagging.
There’s a lot of stocks in the S&P 500 that are still under their 50-day moving averages, so don’t be fooled by the hype.
Now I know a lot of people are reading this and saying, “OK, why don’t I just trade those three stocks if they’re so strong?”
Well, not only are those stocks expensive, but so are the options. And you need a drastic, fast, aggressive move to make money on those names.
So what can a trader do when the market is choppy and three leaders are holding up entire indexes?
Look at names you normally wouldn’t look at — low-beta stocks.
When stocks aren’t known for making wild moves day to day, market makers price the options cheap. So even a 1% move in low-beta stocks can turn into a good payday.
One low-beta market I’ve been hitting this week is the beverage industry — names like PepsiCo Inc. (Nasdaq: PEP), Keurig Dr Pepper Inc. (Nasdaq: KDP) and Coca-Cola Co. (NYSE: KO).
On Tuesday, Weekly Blitz Alerts closed a 105% gain on a leg of the July monthly Pepsi calls ahead of earnings.
Because of that, I didn’t have to sit around and wait to see if Apple could make new highs, pull back and try to day trade it. The only thing you’re going to gain from that is gray hair.
Maybe they aren’t as sexy or as aggressive as the FAANG names, but if you can get even a 1% move in a low-beta stock, they can help grow an account.
Let’s talk about that… Check out the short video below and subscribe to our YouTube channel if you haven’t already. Don’t forget to click that bell icon so you can be notified as soon as we post our next video!
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