Getting Started in Commodities

Chapter 11

Trading Commodity-Related Growth Stocks

Trading an existing secular trend in a commodity-related stock can be very profitable. Growth stocks, however, often have even stronger technical moves than stocks that are just riding the trending cycle for no other reason than they are directly involved with the underlying commodity. This chapter focuses on how traders can successfully trade this special breed of stock. Initially, I'll define some of the key components of growth—both fundamental and technical—and then explore the idea of growth outside of the traditional commodity-based sectors. The chapter concludes with an exploration of a few real-world case studies.

secular

a market that trends for several years or more and goes beyond the length associated with normal cyclical markets.

Defining Growth

In the most basic sense, a growth stock is a company that is experiencing above average increase of its earnings per share in comparison with companies in its sector or the broader market at large.

growth stock

shares of companies that are expected to show above-average increases in revenues and earnings in the future. In order to continue growing and expanding, these companies will retain most of their earnings in order to reinvest in operations.

Typical growth stocks that ...