Buying another bank stock (and here's why..)

We’re a big fan of buying strong stocks in uptrends.

Couple that with sector and industry strength within a bull market and you’ll find yourselves in some of the best trades of the year.

Which is why we entered a position in Bank of New York Mellon Corporation BK, a 49.44b investment broker company.

But let me give you a quick rundown about how we got here prior to buying it:

We utilize a trading process referred to as the “top down” approach.

Essentially, we’re more focused on the bigger picture than we are the individual stock.

Things like which direction the general market is moving, where the big financial institutions are buying, which sectors, industries and market caps are seeing the biggest moves, and relative strength are all really important to us.

Once we’ve built out a clear picture of what parts of the market are moving, we go find a small group of individual stocks within those parts that should outperform over time.

Here’s what it looks like opposed to a “bottom up” approach which focuses more on the individual stock setup than the bigger picture:

Not only does the “top down” approach take into consideration the broader picture, but it’s actively used by a majority of professional money managers and tends to yield better results over time.

So, here’s how we used our “top down” approach to get to the point of wanting to buy BK earlier today:

The primary trend of the markets is clearly up with the S&P 500 trading above its upwards sloping 200-day moving average and closing within 1% from all-time highs.

Along with various other market internals that we monitor on a daily basis, we expect this primary trend to continue into the intermediate future and so we want to be buying stocks expecting strength to persist.

Next, we want to find out which sectors and industries are outperforming against the broader market.

On both a quarterly and yearly basis the financial sector has outperformed the S&P500 which signals to us that we want to continue to own financial-related stocks that are showing leadership qualities.

If you want to beat the benchmark, you have to own the names beating the benchmark.

With so many financial stocks to choose from, we’ve built our customer scanners to highlight specific setups that emphasize strength, liquidity, and momentum.

We want to own the strongest financial stock against a basket of its peers and BK fits the bill.

I love this setup for a couple different reasons but the main being that owning all-time high breakouts are such simple trades to plan and execute.

If this process makes sense to you and you’re interested in learning more, I’m holding a free webinar on Thursday at 7pm EST where I am going to go over:

• what exactly the “top down” approach is,

• how we built our trading system around it,

• the results we’ve had from it and,

• how you can immediately implement it into your trading as well.

Click on the video and click “Notify Me” to be reminded about 5 minutes prior to me going live on Thursday.

And if you’re interested in our market research, including all of our trade ideas delivered straight to your inbox or smart phone, reply back to this email and I will send you all of the details.

I look forward to seeing you on Thursday!

PS. Who here remembers the epic JPM breakout we bought in January while it was trading at 170? It just closed at all-time highs again yesterday at 219! Bank stocks have rocked this year.