The Best Way to Trade This Market: Focus on Sectors

The Nasdaq started Tuesday with its seventh straight day of gains but the gap-up open triggered some profit-taking in many of the hot momentum stocks that have recently been leading. For example my Stock of the Week, Zynex (ZYXI) had a hefty gain of 17% Monday as it hit a new all-time high. This morning it has given back about 7%.

There are a number of other momentum names with similar reversals but the mighty Apple (AAPL) refuses to give in to any profit-taking and that is helping to keep a bid under the broader market.

Also, there are still some pockets of momentum in names such as DataDog (DDOG)  , which posted very strong earnings. DDOG was one of my top picks for 2020 but I sure didn’t expect it to become a runaway train to the upside during the coronavirus crisis.

Biotechnology and technology have been two of the strongest groups in recent months but I’m looking for other themes as well. One group that is attracting interest is online gambling. I have two small-cap plays that I’m focusing on. GAN, Ltd.  (GAN) which provides internet gambling software to the U.S. land-based casino industry. The other is Esports Entertainment Group (GMBL)  a “blank check” company that recently acquired an online sportsbook and casino operator.

Another sector that should continue to attract interest in the months ahead is gold mining. I added to a position in Barrick Gold (GOLD) this morning and will continue to stalk the sector for trades.

It should be quite obvious that the best way to trade this market is to focus on sectors rather than the indices. There are some big winners while the value plays continue to languish.

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