Those who know me, know I’m a systems trader.

I don’t mind spending countless hours and thousands of dollars testing ideas and strategies — even the ones that don’t work out.

It’s how I put those potential trade ideas to the test. Because when they do work out, it’s more than worth the time, energy and money I put into them.

Anyone can win on a few trades. I want to know with certainty that my strategy will work out over the long haul.

And there’s one unique approach that’s proven to deliver profits time and time again.

It’s something I call “the slingshot method.” And right now, it’s presenting three trade setups so enticing, I just had to put them on your radar.

We’ll get to those in just a bit. But first, here’s how the slingshot method works…

This Sector Is About to Slingshot the S&P 500

Have you ever heard of the slingshot method in space travel? It’s where astronauts use the gravity of another planet to slingshot around it without using much fuel.

In other words, it’s an easy opportunity to coast and still see massive potential.

Right now, one sector is entering this so-called slingshot phase — the Materials Select Sector SPDR Fund (NYSE: XLB). This is an exchange-traded fund (ETF) that tracks the materials sector. It holds companies that produce materials such as paper, concrete, plastic and so on.

And we can see that it’s about to beat the market thanks to a market timing tool I track called the Relative Rotation Graph (RRG).

The RRG shows us that assets move through four phases relative to the broad market: leading, weakening, lagging, improving and then cycling back to leading once more.

When you follow the RRG, you begin to understand that this rotation is common and almost guaranteed. It may not come in the same pattern each time, but stocks and sectors of the market generally follow this type of rotation.

Let me show you an example. I put together a chart of the RRG showing how XLB is performing relative to the S&P 500. Check it out…

(Click here to view larger image.)

We can see that XLB is about to slingshot around the S&P 500, as it swings from lagging the market to improving and then eventually leading the market again.

And we can capitalize on this move today with three stocks set to outperform the rest of the market.

3 Little-Known Materials Stocks Poised to Beat the Market

Three stocks in XLB — DuPont de Nemours (NYSE: DD), Albemarle Corp. (NYSE: ALB) and LyondellBasell Industries (NYSE: LYB) — are all making a key transition right now.

They’ve moved out of the “weakening” phase, have spent some time in the “lagging” phase and are now crossing into the “improving” zone.

It’s a rotation, or “slingshot,” that’s giving us a big trade opportunity.

Here’s how each of these stocks look on the RRG right now…

(Click here to view larger image.)

Keep in mind that the rotation above isn’t based on the S&P 500. I’m looking at these stocks’ rotation around the materials sector.

This is an important distinction. Because for the slingshot to really take off, we want to see outperformance in individual stocks within the sector.

So let’s recap…

We have XLB set to outperform the overall S&P 500 (first chart).

With this second chart, we’re diving into the materials sector to spot three stocks that will outperform XLB.

By using these two charts together, we see the best opportunities to profit as the materials sector starts to beat the broad market.

As you can see, ALB is already crossing into “improving” territory. DD and LYB are following closely. So, we’re in the perfect position to capture gains from the slingshot momentum in the market.

These are all weekly charts, and a typical rotation takes about 12 weeks, or three months, to play out.

But with the rotation already underway, now is the time to put these three stocks on your radar.

Option traders can take advantage of this move by buying call options on these names dated out to September or later. That should give you the time required to profit.

As for the strike prices, I like to use the price closest to where the stock is currently trading.

Regards,

Chad Shoop

Chad Shoop
Editor, Quick Hit Profits

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