An Idea for a Long Trade 10/27/13

A simple strategy for a long trade is to align the market, the sector and the stock in the same direction. When the tide rises, it takes everything up with it.

1. Using technical analysis, I see that the market is in an upward move and is signaling long. See chart on SPY (S&P500) below.

2. Next take a look at IYR, which is an iShares US Real Estate ETF (Exchange Traded Fund). The chart right below SPY is for IYR and it is also long.

IYR fund summary:

The investment seeks to track the investment results of an index composed of U.S. equities in the real estate sector. The fund generally invests at least 90% of its assets in securities of the underlying index and in depositary receipts representing securities of the underlying index. It seeks to track the investment results of the Dow Jones U.S. Real Estate Index 

3. Now take a look at a chart on a real estate company Hovnanian Enterprise HOV.

HOV Business summary:

Hovnanian Enterprises Inc. designs, constructs, markets, and sells residential homes in the United States. It builds garden homes, townhomes, single family homes, mid and high rise luxury homes, estate homes, adult lifestyle communities, attached and detached homes, urban infill locations, and townhomes and condominiums. The company also provides mortgage loans and title insurance services.

HOV just signaled long. Also the trend indicator on the color strip below the chart went from red to green.

è It is time to dip my toe in HOV. If we get a pullback and a secondary buy signal on the HOV chart, I will add to my current position.

We can never be sure if a trade is going to be successful or not but aligning the market direction with the sector and then the stock is a good way to increase my chance of success.