Oil Shares Sizzle, Tech Shares Enhance: Utilizing A ‘Jealousy Issue’ And Place Sizing To Win Massive

MarketSmith senior product coach Scott St. Clair joined the Investing With IBD podcast this week to provide his take on the market’s current action as oil stocks break out and tech stocks make notable moves. St. Clair also shares how he uses a “jealousy factor” to help determine his trading outlook and details why proper position sizing is the key to unlocking significant outperformance. Plus, we discuss three trade ideas to watch: Ovintiv (OVV), North Shore Global Uranium ETF (URNM) and Sea Limited (SE).

OVV stock surged past a cup-with-handle buy point on Tuesday, along with other oil stocks. Uranium plays like the URNM ETF remain compelling and SE stock is a 2020 standout that remains on St. Clair’s radar.

Audio Version Of Podcast Episode

Video Version Of Podcast Episode


Market Snaps Higher After Test; Oil Stocks Sizzle

The major indexes finished Friday on a high note after a key test at the 50-day line for the Nasdaq the session before. The tech-heavy index now has two tight weekly closes at the 10-week line.

Solid end-of-week bounces for the S&P 500, Dow Jones Industrial Average and Russell 2000 came after finding support at their 21-day lines on Thursday. The S&P 500 now is right at all-time highs, a positive sign for the market’s health.

Underneath the surface, the action among technology stocks is improving. But it’s unclear if this is yet another short-lived comeback for the tech sector, or if the strong action will turn into another meaningful leg higher for technology stocks and recovering growth names.

OVV Among Oil Stocks Breaking Out

While the strength in technology was notable on Friday, the short trading week kicked off with a number of oil stocks breaking out of cup-with-handle bases. Among them, OVV stock jumped above a 27.63 buy point in heavy volume on Tuesday with a gain of 9.3%. Shares then extended their gains, surging 16% for the week.

And OVV stock wasn’t alone. The Energy Select Sector SPDR ETF (XLE) popped nearly 7% on a weekly basis. In comparison, the Technology Select Sector SPDR ETF (XLK) rose 1.2%.

St. Clair said he uses what he calls a “jealousy factor” to help him determine whether he should have a bullish bent. If he’s seeing a lot of stocks breaking out and surging higher that he wishes he owned, that he’s jealous of, then that’s a positive signal for overall market conditions.

Why Position Sizing Is Key To Outperformance

Even more important than picking the right stocks at the right time is sizing positions properly, according to St. Clair. A big-winning stock won’t move the needle in your portfolio if the position size is too small.

St. Clair says the key to unlocking substantial outperformance comes down to what percentage of your portfolio is allocated for each trade you make. Make sure to listen to the full episode for all the eye-opening details, including how to determine an appropriate position size, how to scale into positions and more.

Trade Ideas To Watch

St. Clair’s jealousy factor revealed itself this week in the form of oil stocks like OVV breaking out. He analyzes three trade ideas to watch: OVV stock, SE stock and the URNM uranium ETF.

OVV Stock

Ovintiv appeared last weekend as St. Clair conducted stock research. As a handle formed for OVV stock, volume dried up, a positive sign. Then, breakout on Tuesday for OVV came in above average volume.

The relative strength line for OVV looked strong before this week’s move, and now looks even stronger.

Uranium ETF URNM

St. Clair remains interested in uranium plays and currently owns the URNM ETF. A compelling fundamental story for uranium accompanies the strong price action. But investors interested in getting into URNM need to wait for a new setup in the form of a pullback or tight, sideways action.

SE Stock

Sea Limited was a standout stock in 2020, skyrocketing roughly 370% last year. SE stock is currently consolidating, now back above its 10-week line for a third straight week after a test of the 40-week line.

St. Clair says SE stock is a good gauge of how the tech sector is performing and is a “go-to” stock for him when he wants technology exposure.

Oil Stocks Pop: Which Group Is Next?

If you’re looking for the next top stocks primed to make big moves, check out IBD’s Stock Lists page. To get IBD’s real-time assessment of stocks like OVV and SEf, check out IBD’s Stock Checkup page.

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