This Sector Just Checked All Three of my Investment Criteria Boxes

I’ve been trading for more than 30 years, and I’ve never seen this level of chaos in the market.

Volatility ripped through stocks after yesterday’s close while unrest grew in DC. Investors could have looked at it with “worst-case scenario” tunnel vision, assumed a civil war was going to tear the country apart, and pull the markets down with it.

But that’s not the kind of volatility I’m talking about…

After this morning’s opening bell, stocks shot higher. As I type, the three major indices are all rallying over 1% higher.

The fact is that our market has been maturing since 2000. We’ve seen terrorist attacks at home and abroad, flash crashes, and other memorable events that would have taken the market down more than 20 years ago – and not one of them has had a lasting effect on stocks.

Today, stocks know how to digest these events and move on.

That’s why it’s important to avoid the noise and block out the headlines. Don’t let emotions – fear or greed – control your investments.

Instead, narrow your focus. Look only at how you can continue to profit from the strong bull run.

I, for example, only focus my research on two or three sectors at any time. In order for a sector to gain my focus, it has to check three specific boxes…

And one sector in particular just met all three of my investment criteria.

This name could be your smartest investment yet…

My Three Investment Criteria

Every day, I look for stocks and sectors that…

  1. Display strong technicals
  2. Investors are not bullish on
  3. Have a good fundamental story

And the steel sector just met all three.

  • Companies like U.S. Steel Corp. (NYSE:X) and Cleveland-Cliffs Inc. (NYSE:CLF) have seen some serious technical strength of late. In fact, they’ve switched into intermediate-term bull market leaders. That tells me to expect that they will outperform the market for the next 1-6 months.
  • These same companies are hated by the market in general. The rally that they’ve posted since November is compared to a blind squirrel finding a nut, or a broken clock being right twice a day. Seriously, people really dislike these stocks. And why not? They were almost bankrupt a few years ago.
  • All of that, and the steel stocks are now square in the middle of a group that’s getting ready to have a dynamite 2021. And that’s because we’re building things. Roads, bridges, buildings, ports, airports… all kinds of things. Steel will be part of that boom – making for a great fundamental story.

So, there you have it. All three boxes that represent my investment approach are getting checked on the steel stocks. Now, what do you do?

Well, my Strikepoint Trader subscribers have already been trading call options on these and other “rebuild & recovery stocks.” That’s clearly one way you could generate some great returns from the powerful flow of money that is moving into these sectors. Feel free to join us – click here to learn how.

For those of you looking to slow things down, to just ride the bullish wave caused by this strong-money migration, I would suggest the Vaneck Vectors Steel ETF (SLX).

The SLX shares hold 24 different companies, all related to the steel industry. Shares are trading almost 60% higher since the elections in November – but that’s the tip of the iceberg for this sector, as it will certainly be busy through 2021.

Volatility for the SLX shares is actually less than that of the Nasdaq 100, meaning that you’re likely to see less trading range “chop” and more low volatility trends through 2021.

Now, shares are a little overbought at their current prices, so I would suggest taking a week or so to let the prices relax a little… and then look to add to the portfolio. My charting skills are targeting a $48-level entry price that we will likely see within the next two months.

From there, this becomes a buy-and-hold investment through the year, as steel should outpace most other areas of the market for the next 12 years. This is one sector that will fell at home in your portfolio for the next decade.

Until next time,

Chris Johnson

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