The market saw heavy selling to finish last week.
The action was so brutal, in fact, that I went to 100% cash.
Some stocks are getting hit harder than others.
Nowhere to Hide
Minerals, chemicals and energy – the only groups that have been advancing this year – are now getting destroyed.
Take a look at Alcoa Corporation (AA), for instance…
The aluminum producer was doing well this year thanks to rising commodity prices and the possibility of a federal infrastructure deal.
But shares are down 26% in just three days with no sign of slowing down.
Freeport-McMoRan Inc. (FCX) is also getting killed…
It’s too soon to know if the party is over for good.
But when stocks fall that hard, that fast, on high volume, it is usually a sign that institutions are selling.
And you don’t want to be on the other side of their trades.
Go On Defense
If you’re looking for safety, consider a stock like Sysco Corporation (SYY)…
Sysco sells and distributes food wholesale to restaurants as well as healthcare and educational facilities.
This is the company that delivers French fries, chicken fingers and lettuce to your favorite local restaurant.
As you can see in the chart above, relative strength is making new highs.
In other words, SYY is outperforming the rest of the market.
The stock is down just 1.3% while most others are getting clobbered.
It actually went up on Thursday when everything else sold off, which is a sign that money is flowing into this stock for safety.
That’s one option if you don’t want to just go all cash like I did.
Sometimes there are no trade setups. When the indexes are down 6% in three trading days, I sleep just fine holding cash.
Options for Less Risk
However, there’s another way to limit your risk in the market… You can trade options.
If you’re looking to make a bet that a stock will move up or down but don’t want to risk a lot of money, consider a long call or put option instead of trading the common stock.
When you buy an option contract, the most you can lose is the amount of money you paid for the contract.
You have a fixed amount of risk and a much greater potential for reward if the underlying stock moves in your favor.
This brings me to today’s special presentation with my colleague and expert trader, Josh Martinez…
Join Us This Afternoon
Today, April 26 at 1 P.M. ET, Josh is unveiling a new futures trading system.
It’s set to make history. And it begins now, right here, where you have a chance to become one of the first people in the world to trade “options on micro futures.”
As you’ll see in this special event, you can learn how to make these futures trades again and again – in about 20 minutes, one day a week.
You’ll want to save your spot, because every seat will be taken, and fast, for this epic event.
Click here to sign up for the upcoming event: Futures Trading Summit.
Embrace the surge,
Ross Givens
Editor, Stock Surge Daily
The post Why This is the Perfect Time for a Defensive Stock Strategy appeared first on Stock Surge Daily.
