Secrets to Swing Trading Success
2017 is shaping up to be another great year for those using our techniques.
Many of our top swing trading setups featured in the Daily Alert around the first of the year have already made a 10% to 50% move in our direction. And the Investtobefree 3 Stocks to Wealth newsletter, a newsletter for those who do not want to use technical analysis, is off to a good start.
In a recent live webinar, I explain why our swing trading methodology has done so well over the years.
I’m not a professional public speaker by any means and I was getting over a cold when I delivered this presentation. But it explains why many have commented that we are the best stock picking service online.
We combine best-of-breed technical analysis with fundamental characteristics proven to beat the market over the average time horizon of our trades. The video gives some great examples of how to find explosive trading setups using our strategy.
And the price is pretty good for this recorded live webinar. It’s free 🙂
Brian C Neall – Founder
Explosive Bottoming Patterns Unleashed…
The explosive bottoming pattern training video is now live!
This is my favorite go to candlestick reversal pattern that is a true workhouse. Its so easy to nail the entry point and you have plenty of opportunities each month.
This reversal pattern, when identified correctly, is my current favorite reversal pattern and usually leads to a move of 4% to 100% higher in short order.
Not only can you use it for swing trading, you can also catch a great day trading opportunity near the ideal entry point. The day trading setups are beating all the rest with its consistency and high probability of success.
And I continued to see that last week. In just over the past month we have seen stocks in our newsletter soar around 15%, 25%, 35% and over 65% out of this one chart pattern. A couple of these patterns occurred after subscribers made big profits on short patterns on these stocks following the short entry and exit targets given in the newsletter.
Now you can learn to take advantage of these big rebounds as well. This video explains the huge benefits of this explosive bottoming pattern in more detail….
New Explosive Bottoming Pattern Course
Our Explosive Bottoming Pattern Course is being unleashed. The first course in our master trader training series revealing many of our powerful swing trading secrets.
As I was putting the finishing touches on the video course, several stocks appearing in our newsletter, including ADPT, soared 20% to 65% within just a few trading days out of this bottoming pattern. Some of these explosive gains occurred after the stock reached our profit target in a short trade.
And this was with using a tight 3.5% stop-loss below the ideal technical entry point I am about to share in this course covering this reversal pattern. It has an absolutely terrific risk/reward ratio when done right and a very high rate of success while using a tight stop.
Of course, not all stocks will make a huge move out of this bottoming pattern, but many will.
It takes about 2 to 3 hours for me to teach someone the important details to help them differentiate between a decent setup and a great trading setup using this technique. From there, they can start using it on a simulator and then later transition to a live account.
But this bottoming strategy is much more than identifying a candlestick reversal pattern in a downtrend. That is all too often just catching a falling knife.
With this technique, the chance of success is about 75% when following all the important rules carefully based on our back-testing over approximately 1.5 years including the recent bear market in small caps from mid 2015 to early 2016.
More recently during a market uptrend (the market is in an uptrend more often than not) the success rate was 85% to 90% in December, January and February of 2017 during a recent back-test.
Now this assumes you know the important technical rules in the video course. Ignore these, and the chances of success deteriorate quickly.
Today I want to share with you a large portion of the first video in the training course.
If we get a volatile market in the months ahead, these videos could be worth a fortune to you and may be one of the few options to make money in the market. Even if you have a full-time job and are only swing trading part-time.
I say this because this technique is very successful during a market that is either very suspect or one that is trending higher.
The video explains more and gets you started on learning this powerful bottoming pattern in today’s market. My favorite reversal pattern I now use all the time in my own trading.
Swing Trading – Top Reversal Patterns Setting Up
Since the bearish market signal we reported to customers a few weeks ago, the market has gone down a few percent – most of which occurred last week.
The Nasdaq, which has been the leading index this year, has now come back to near the top of a prior consolidation area on this pullback – setting up a potential rebound and some quality swing trading setups.
Now this could be a strong rebound off the 200 day or 150 day moving average, or it could be a weak rebound. Time will tell. So its best to look for good short-term swing trading setups at this point and keep a portion of your position after reaching a first conservative target. And then stop the remainder at your entry point.
Many top growth stocks are pulling back sharply including AMZN and PAYC. Here is a strategy to catch these rebounds once we have enough confirmation that a rebound rally is for real.
First of all I want to mention that buying a stock in a sharp downtrend is normally a recipe for losses because sharp declines in a stock are normally followed up with a secondary decline taking out the prior lows.
That being said, we can use a shorter-term swing trading strategy to profit off of the initial bounce and then keep a portion of our position for a potential huge profit.
One of the favorite strategies used by top traders is a “candle over candle” pattern. This is where a stock pulls back substantially before a daily candle closes above the high made the prior day.
You want to find this pattern on stocks in a longer-term uptrend. You can pull up a weekly chart over the past year or so and confirm that the stock is making higher lows and higher highs over the long-term and has not made a lower high on a weekly chart. A lower high would be an uptrend that lasts a few weeks that ends well below the prior high. Or, you could just focus on stocks trading above their 200 day moving average to keep it simple.
But its all about buying great stocks on a pullback. Just be sure that the pullback is not the start of the inevitable fall that occurs when a growth stock ends its growth phase.
Fortunately, a lot of great growth stocks will set up this pattern when the future outlook is still positive for the company. These are the stocks that should be on our list to watch.
To illustrate this pattern, lets take a look at IPHI over the past year and circle the candle over candle patterns that many top traders look for after a substantial pullback of 15% or more.
IPHI is a good growth stock and was featured in a prior video as an example of a great channeling stock candidate several months ago.
Now what top traders often do is buy near the close if the price is likely to close above the prior days high when using this strategy. And put a stop below the low of the prior day. It could be a mental stop or a hard stop-loss order. You could also use a 3.5% stop.
Then you could take profits after a 3% to 10% gain. A small portion if it gets off to a strong start and selling a larger portion or whole position if it gets off to a weak start. Then stop the remainder at your entry point.
The success rate on this setup is good to achieve a 4% profit before hitting a 3.5% stop-loss.
However, the success rate was significantly better when you look for other key characteristics covered in our new video training series covering our favorite short-term reversal pattern.
In our study, using key parameters yielded a success rate of around 75% over about a year and a half period that included the recent bear market in small caps late last year and early this year. Terrific results for a long-only strategy that included a period where small caps were in a bear market for about half the time.
Stay tuned for the release of this very valuable training series. This new pattern is great for swing trading on a shorter time-frame of less than a week and a half. Its also an excellent setup for day traders as well because its beating every other successful pattern I have looked at that is used by top day traders online when the entry signal is reached before 10:30am.
In my next post I will be sharing the first video in the new training series on the blog. Stay tuned.
44% in 3 Days. How to Swing Trade Stocks
We had an important market signal discussed in the Weekly and Daily Alert a few weeks ago that will affect your swing trading.
This series of technical events often leads to very profitable swing trading setups in stocks. And we featured a few of them to customers over the past couple weeks.
This latest video shows how to swing trade stocks and how our customers made 17% to 44% within just a few days using the swing trading setups in our newsletter – without any risky options or leverage. Those trading the options must have made a small fortune – all within a week.
Just click the subscribe button off to the right and watch the video to discover this swing trading setup that is working extraordinarily well over the past few weeks. The video also covers a couple great day trading setups that continue to work as well.
Catch a Bottom – Not a Falling Knife on Top Stocks
Although we have seen many big moves this year out of large continuation patterns on the best stocks, bottoming patterns continue to work well on the top small cap and even larger cap stocks.
Today I am going to share with you a great trade on a top bottoming pattern setting up now and also go over a couple other trades so you know what to look for.
Several weeks ago we talked about the large rounding bottom pattern on NPTN on our blog. We were able to nail a great entry point with a small downside risk and huge upside potential for customers of our Weekly and Daily Alert.
Our Youtube video on the rounding bottom pattern gives you a great primer for this very bullish price pattern.
In real-time we showed the explosiveness of the rounding bottom pattern, giving you the next ideal technical entry point before it soared more than 60% within a couple months after the video was published on Youtube. Nearly 80% from where it was featured to customers in our newsletter who received the trading setup a few days earlier.
Another example of a great bottoming pattern in 2016 was NTES which was featured to customers before it exploded more than 70% within 4 months.
NTES was in our classic swing trading pattern (talked about on our home page) and it gives a great example of a quality bottoming pattern. Today I plan to take you through my thought process on why this was such a good trading setup and also talk about another setup that is very near a good technical entry point as I write this.
Its likely too late for NPTN and NTES for now, but other great opportunities will inevitably come up in the future on quality stocks.
Now the first thing we noticed before finding NTES is that the market had a bullish signal in late January and then again on the first day of March. This signal generally occurs during the early stages of a new market uptrend. This tells us to become more aggressive on long swing trades and to close out short positions.
Another key to this successful trade was identifying all the strongest sectors and industries in the market. Money was starting to move back into emerging markets because fund managers perceived that those markets hold the best profitable growth opportunities.
Large institutional money managers set the trajectory of the market and industries with their enormous buying power. When swing trading and day trading, you need to know where they are putting the most new money to work by checking the RSI of various industries.
We noticed the strong trend of putting more money into Chinese stocks such as XRS which we had already featured earlier in the year.
But one thing we noticed about NTES was the strong long-term uptrend over the past several years with the wide swings. Earnings growth had averaged over 22% per year over the prior five years. Sales growth had nearly doubled in 2015 and was expected to grow strongly based on projections and their income statements.
Return on equity was nearly 32%. They also have a large cash position relative to their debt. They also had a strong track record of blowing away earnings expectations when they reported.
Here is the chart featured to customers back on March 21rst. Lets review what we liked about the all-important technicals.
You can see on the chart that the stock is developing a large symmetrical triangle pattern with both higher lows and lower highs. At the same time, there is a very consistent, long-term uptrend support that actually goes back several years to the left of the chart.
The company was getting close to its earnings release. We generally get out of a trade ahead of earnings except when the company crushes expectations consistently which was the case with NTES.
So all the factors that we look for were in place – strong sales and earnings growth along with other important growth stock characteristics, a strong long-term uptrend for years, a large bullish pattern while the stock was bottoming near the uptrend support, and a strong tendency to beat estimates with rising future expectations. They even paid a 1.73% dividend yield.
After featuring NTES it broke out of the bullish symmetrical triangle pattern and went from about $140 to over $240 last week. And this is with a lot less risk than a penny stock.
A couple weeks ago we featured a trading setup with a lot of similar qualities – LGND. Earnings growth has averaged over 50% per year over the past five years. Sales growth has been strong over the past few years and is expected to be over 60% this year and nearly 40% next year. Return on equity is over 100% and the PEG ratio is .73.
Now this stock had another very interesting bottoming pattern just before we featured it to customers. A pattern that along with an oversold RSI usually leads to very nice gains over the next week or so on quality small caps and top growth stocks. We also recently called this pattern on AMBA and CBM.
LGND jumped more than 10% within a few days after featuring it to customers which is typical with this pattern that I will be going over in detail in future videos. But for now, I would put LGND on your radar and look for ideal technical entry points in the weeks ahead.
The pattern we played on this for the short-term trade has very specific rules and takes advantage of a truly oversold condition on a quality small cap and even mid to large caps.
We are developing a new training series for this and other bottoming patterns because when found on top stocks this pattern has a very high rate of success while using a tight stop-loss. 4% to 10%, often within a couple days, is the norm with this pattern as long as the market is not too volatile and trending sideways or higher.
But when you find this pattern also within strong, consistent long-term uptrends on top stocks, you can hold a large portion for much longer while putting a stop-loss at an ideal technical entry point. For a terrific high reward – low risk swing trade similar to NPTN and NTES.
Very large bullish continuation patterns have worked great this year, but these oversold bounces should be your bread-and-butter trades.
Done right, they are very profitable over time and will inflate your trading account. Done wrong, its just catching a falling knife. The video training series being released soon will explain exactly how to catch a bottom with a higher percentage trade and a great risk/reward ratio.
Trend Trading Strategies & Multiple Time-Frame Alignment
Multiple time-frame alignment is a concept used by top traders where you find ideal technical entries on more than 1 time-frame. Usually this means finding a breakout in a good day trading chart pattern near the breakout point in a longer-term swing trading pattern.
For example, you can find a good flag pattern breakout formed over the past several weeks and then look for a good day trading pattern near that breakout point. This is a must-know strategy for any day trader.
It also helps to better pinpoint swing trading entry points to improve your percentage of success while trading off a small portion of the gains.
To use multiple time-frame alignment, the first step is finding a list of great stocks near an ideal swing trading entry point. Then you find the great day trading pattern and entry point. This video gives you a great example of how we do it.
Just click the subscribe button off to the right and play the video below.
Like I said, its a very powerful concept that can make a big difference in your own trading. In the video I also go over the flat base pattern and give you a great setup if the market starts a strong rebound next week!
Large Chart Patterns Yielding Big Profits
In our last blog post we talked about ELMD breaking out of a very large symmetrical triangle pattern. In the Youtube video covering this trade we explained how you can come up with a more aggressive target and said that it was between $6 and $6.25.
After the video was published, the stock continued to rally and hit $6.26 before pulling back.
A pretty text book symmetrical triangle trade. But our other top trading setup for the week was also a tremendous trading setup. And is off to a good start towards our target.
This stock is in one of the hottest chart patterns this year – the bullish inverted J pattern. As with other successful chart pattern breakouts we called this year, this one was a very large pattern – meaning the price change from the start of the pattern to the top of it was more than 40% as was the case with HA, GRAM, X, SBGL, ELMD and many others appearing in our newsletter this year before making a big move.
This year its been all about being in the best trading setups, with the best near-term fundamental characteristics, but in very large and well-formed chart patterns. You don’t find them every week but they have been yielding huge profits when they come along while being much safer than penny stocks.
ACTG was the featured trading setup – our top pick for the week. This stock had some of the best earnings estimate revisions in the market with a 30% increase in future estimates over the past month.
We only feature stocks to customers that have the short-term fundamental factors to support a big move higher out of the technical pattern with real results to justify a higher valuation.
The chart above shows the pattern as it was developing when we featured it to customers. The ideal entry point is a move above the high or when the stock makes a higher low on the right-side of the base and then a higher high. Stocks with a smaller pullback on the right-side of the base are actually better as long as the fundamentals are rapidly improving.
The price exploded through the entry point a few days after appearing in our Weekly Alert.
For those day traders among us, the price had a very nice horizontal consolidation on a 5 minute chart after reaching the swing trading entry point. The horizontal consolidation being a little above the ideal swing trading entry point which is perfect. Once the price breaks out of that consolidation, it often makes a big move – in this case about 10% within a couple days.
This is a great example of the power of multiple time-frame alignment. The great entry point on a daily chart and then a tight horizontal consolidation near that entry point (ideally just above it) on an intra-day chart followed by the breakout.
The stock quickly gained 12% within a couple days from the swing trading entry point. ELMD quickly gained 25% from the ideal entry point but ACTG may beat that in the days ahead as it just broke out a couple trading days ago with upside potential.
So look for the larger chart patterns on a daily chart, rapidly improving fundamental factors that can support the price move and nail the entry point with a tight stop-loss. Its been a recipe for success again in this latest market uptrend.
Enormous Symmetrical Triangle Breakout – ELMD
So what’s better than a very bullish chart pattern on a great stock? How about 2 bullish chart patterns!
Last year we released a video sharing with our audience how we found ANAC before it soared more than 120% within a couple months. One of the keys to this trade was the multiple bullish chart patterns. A cup with handle pattern with another cup with handle on a shorter time-frame within the handle of the larger pattern.
Some traders and investors are looking primarily at daily charts covering the past few months to years. Some traders are focusing just on the past few weeks or few days. So if you have bullish chart patterns on multiple time-frames, you have more traders and investors that may jump in to help to push the stock higher.
And sometimes you have more than 1 pattern on the same time-frame as well. A good example is ELMD which was one of the two top trading setups this week in the Weeky Alert.
This is a great example of a large, bullish chart pattern that I mention in our newsletters but have not brought up on the blog or main site up until now. Its the symmetrical triangle pattern.
So lets take a look at it because its one of the most bullish continuation patterns.
So lets define this pattern. A symmetrical triangle is when you have both lower highs and higher lows being made as time goes on. Over time, the highs get closer to the lows until the price has to break out in either direction.
To be a valid pattern, you need at least 2 lower highs and 2 higher lows. The highs and lows need to about line up in a straight line connecting them.
Now what happens is that short sellers short near the highs as the price starts to turn and then often put a stop just above the prior high and above the top trendline. Those trading to the long side buy the stock and then often put a stop beneath the prior low and bottom trendline.
So this adds buying pressure if the price breaks out of the top of the pattern and adds sellers if the price breaks below the lows of the pattern.
In both cases, notice the direction of a trend is not confirmed by taking out the prior high or by taking out a prior low as the symmetrical triangle develops. Taking out the prior low would confirm a trend change to the downside. Taking out the prior high would confirm the trend change to the upside.
This is a continuation pattern meaning the price tends to break out in the same direction it was heading before the pattern started.
The one we found this week was a very large pattern on a small cap stock with strong growth in sales and earnings with a reasonable valuation. A stock that has also beaten estimates 3 of the past 4 quarters with steady future estimates. We prefer rising estimates but the fact that they beat 3 of the past 4 quarters is a good sign.
We only feature strong growth stocks and/or stocks beating estimates with rising future expectations. This gives us an edge over pure technical strategies.
The entry point is a close above the upper trend line if you are playing a long trade. And below the lower trend line if you are shorting or buying put options. Again, you want to play a breakout in the same direction of the trade.
Now this stock happened to gap higher after we featured it and reached our target sell price for about a 10% profit within 15 minutes earlier this week.
When a trade like this gets off to a such a good start we often keep a portion of our shares until the next uptrend is broken or another bearish technical event. It could make a much larger move since its only trading for about 20 times earnings with good growth and about 15 times next years expected earnings which they tend to beat.
At this point the risk/reward ratio does not justify entering a new trade. However, those subscribed to our newsletter can just let a portion of your profits ride while stopping the remaining shares at your entry point.
You see symmetrical triangle patterns not only when swing trading on daily charts but also when day trading. And they are often successful on stocks in strong trends that day in the morning before 11am and sometimes later when the market and stock are moving strongly that day.
Red Hot Trend Trading Chart Pattern
One of the most bullish, yet underutilized, chart patterns continues to be the bullish inverted J. Sometimes this is referred to as a bullish inverted ascending scallop as well.
We are seeing this bullish chart pattern A LOT this year and it continues to perform well in most cases. HA and X are two monster inverted J trades for us this year on stocks with rapidly improving fundamentals.
Both made moves of greater than 50% out of this pattern. And these are not penny stocks where you question if the business is for real.
But we have been mentioning an even larger pattern recently in our newsletter that is one of the best setups this year. So far its made a move of about 20% higher from where we featured it 3 weeks ago with a lot of upside potential left after this latest pullback.
I am about to share with you this tremendous opportunity in the gold market but first lets talk about the bullish inverted J pattern and why its so powerful.
You can think of the bullish inverted J pattern as an inverted J Hook or rounding top pattern gone bad for the shorts.
So as a rounding top pattern starts to turn over it generally starts to attract short sellers as it makes lower highs and lower lows on the right side of the base. But what fools some short sellers is that the strong initial move higher is often just the first wave up.
As the price rounds to the downside it sometimes suddenly makes a higher low. And this is the key event in the pattern. Because if the price makes a higher high from there you have a confirmed trend change to the upside. (One day with a lower low is not that significant but 2 consecutive lower lows defines a new short-term downtrend for us.)
This is probably the single most important concept to understand in technical analysis – aside from horizontal and moving average support and resistance. This highly important tenant is that a higher low is the first trend change signal to the upside. And a lower high is the key trend change signal to the downside.
The higher low is often cited as the ideal entry point in the bullish inverted J pattern. Although we like to wait for the higher high on the right-side of the base as this often acts as strong support which can set up a terrific risk/reward ratio if you want to play with a tight stop-loss.
Lets go over the chart and I will explain why this was such a good trading setup and what we can learn from it. And how we can continue to make money off this stock.
Here’s the daily chart from when it was featured in our Weekly Alert:
Notice the well-formed rounding shape of the pattern. As the price starts to round over, short sellers start to place stops just above the preceding highs – playing the rounding top pattern. This sets up a strong move back through those highs at a later date on small catalysts because the shorts need to buy to cover their short positions.
Now we did not feature the pattern until after the first entry point was reached. The initial entry point was the higher low being made on the right-side of the base. However, as is often the case, this would have required a wider stop-loss as the price was still regaining its footing in a new short-term uptrend.
The best entry point in our opinion is a move above the prior high after the higher low. With this entry you can play with a tight stop-loss just a few percent below the prior high – around $13.80 in this case. This would have worked out well. A wider stop would be below the prior low.
Here are the factors that make this a great trading setup.
First of all, we have a strong uptrend in the stock and the gold market in general. Secondly, the stock had some of the highest estimate revisions according to Zacks.
Third of all, it was a very large and well-formed chart pattern. Money talks and technical analysis will tell you more than talking heads on TV. You can listen to opinion but where is the big money going? Technical analysis will answer this question more than anything else.
That being said, we prefer very bullish technical patterns with some real results and improvement to back it up. The large estimate increases and a strong trend in gold prices, lowering bond yields world-wide, are some of the fundamental factors that support this trading setup. Its not just a pump and dump penny stock in other words.
This pattern is enormous. In fact, some technicians would place a target close to $30 or more on this.
Here is the most recent chart:
So far, the stock has moved nicely higher. Its a good idea to take some off after a 5% to 10% move higher. But we would leave the majority of our position on and stop it just below the ideal entry point – just below $16.63 in this case. Or just below a prior low in the trend.
If you are a day trader you could look for a pullback to the 9 EMA, center of the bollinger band, or 20 day moving average. And then find a bullish candlestick pattern near there. Enter a trade with about a 3% stop-loss and then have a very good shot at a move of 10% or more within a few days.
One of the big secrets to day trading is finding a great swing trading setup. And then look for good day trading patterns after the price reaches the ideal entry point in the day trading setup. Or just before then as it nears the breakout point of the longer-term swing trading pattern.
This video has another great example of this chart pattern and some valuable tips to make money off of it.
Small Cap Tech in a Very Bullish Rounding Bottom
The bullish rounding bottom pattern is another very bullish chart pattern that offers many great trading opportunities during a market uptrend.
Top traders generally have strong knowledge in a few key areas including analyzing the overall market trend, trend analysis on individual stocks, the behavior of stocks around key moving averages, and chart patterns. Reading the description of the top chart patterns on this site is a good place to start.
The rounding bottom is a close cousin to the well-known cup with handle pattern. In fact, all swing trading cup and handle patterns have to form a rounding bottom and reach their entry point before forming a quality cup and handle pattern.
In this blog post I will review the rounding bottom pattern and show you a great setup on NPTN that is still in play for next week.
As the name suggests, the rounding bottom is where a stock pulls back but the downtrend gradually becomes less steep, forming a rounding shape on the chart. For swing traders, you want to find these on a weekly chart where the rounding shape can be seen much more clearly in most cases.
Here is a great example of this in the current market. Notice the difference between the weekly and daily chart on NPTN.
Here’s the weekly chart:
On the weekly chart you can see the rounded shape clearly. Any charting package including the free version of stockcharts.com will have the weekly chart option. As you can see on the chart, this is the second rounding bottom for this stock this year.
Now the entry point is once the stock starts to make higher lows and higher highs on the right side of the base. To find a great entry point you can then look at a daily chart. You need to see a couple lower lows on the daily candles to occur before you can have a higher low.
Here’s the daily chart:
For us, the target entry was a move above $10 around July 12th. If you miss this entry, another good entry is a close above the next short-term downtrend resistance line created by connecting the highs in the most recent downtrend. Or a bullish candlestick pattern off around the 9 EMA or 20 day moving average. You want to see the former breakout area acting as strong support and a key moving average starting to act as strong support as well.
In fact, if you have day trading skills you could wait for a bullish entry point on a 5 minute or 10 minute chart off one of these support levels.
Now you could enter once the price makes a higher low – in late June in this case. However, you would likely need a wider stop-loss and it will have a higher failure rate because the trend change has not been confirmed by making the higher high.
There are a few ways to execute a stop-loss strategy. A good tight stop-loss would be a couple percent below where the price cleared the higher high. In this case, $9.75. A more conventional stop-loss would be below the prior low or below $8.94 in this case. Or below the bottom of the pattern. If this is too much risk, you would just lower your position size accordingly.
This stock has a lot of upside potential. At the point of entry, the prior high was nearly 50% above that price and offers a good aggressive target. Take some off at the next level of resistance which was about $11.30 in this case. Then you can stop the rest just below the ideal entry point.
One reason this setup made it into our newsletter is that it had the strong long-term uptrend on a multi-year chart. And strong growth in sales and earnings.
Also, the company consistently beats earnings expectations with rising future consensus estimates. The stock has to be either a strong growth stock or be beating estimates with steady to rising estimates to be presented to our customers. This stock has both qualities.
Now because they have the strong results to back up the move in the stock price, this stock could break through the 52-week highs. But you just have to wait and see how this plays out. If it does not look strong near $13 to $14, then you could take the rest off and wait for another good technical setup.
A Great Swing Trading Pattern for the Coming Week
This year, we have seen several swing trades make huge moves out of a classic chart pattern in our newsletter.
The first stock to soar out of this pattern for customers and in our own trading was HA. It hit our entry point after another big earnings beat in January and then soared nearly 50% within a few weeks.
Several weeks later we featured US Steel, (ticker X), in the same chart pattern breaking out. X quickly moved about 20% higher within a few days after being featured in our newsletter, later moved nearly 40% and is still surging after recently hitting another entry point in this chart pattern last week.
And another great swing trading setup just came up on our radar in this same chart pattern that I am about to share with you.
But first you need to know the chart pattern because there is not a lot of good information on this one online. Yet it often precedes some of the biggest moves on quality small and mid cap stocks.
This chart pattern is called the bullish inverted J pattern. Sometimes called the inverted ascending scallop.
Its one of the most bullish swing trading setups top traders look for so its good to know the entry/exit points that other traders are using.
You often see it early within a new uptrend for a stock or ETF. Look for them in leading stocks in strong industries.
This week we found one for the 3 Stocks to Wealth newsletter and Daily Alert. A monster pattern in a red hot industry. But today I want to share with you another one, in the tech space, that is looking excellent for several reasons I am about to explain.
This gives you a great example of how we get an edge in our trading.
The stock is AMBA. The same stock that made a 60% move for us within a month out of an ascending base pattern last year. After exiting the trade, the stock corrected with the rest of the market.
The first reason I like this trade so much is that its been a top growth stock in the past and has a history of crushing earnings expectations. AMBA has seen revenue growth in the mid double digits over the past few years. Net income, year-over-year, has been growing about as fast. Top growth stocks normally have sustained growth in sales and earnings of at least 15% per year for a number of years. The higher the better.
According to Yahoo Finance, they have beaten consensus earnings estimates by 6 to 22 cents each of the past four quarters. This is another key differentiator. A stock has to be a top growth stock or have a track record of beating estimates with rising future expectations for our own swing trading and our newsletter. Expectations have gone down slightly for next year recently, but its a top growth stock that has the consistent track record of clobbering earnings estimates.
Lets take a look at the chart:
From a technical standpoint, this trading setup is also superior for a few reasons. First of all, the stock is in the strong inverted J pattern and is above its 20 day, 50 day and 200 day moving averages. Its also making higher highs and higher lows in a new uptrend.
The first move in the inverted J pattern was on strong volume. And the pullback retraced a smaller portion of the first move higher than most of these setups. The pullback was on lower volume and the Brexit mini-crash took out a lot of weak hands.
Notice how the pullback stopped at about the 20 day moving average which is acting as support. The price then broke out of the top of the pattern and has now pulled back while respecting the 9 EMA (exponential moving average). Its a good sign when a stock is trading above the 20 day and 200 day averages and suddenly finding strong support at the 9 exponential moving average.
I also like that the price closed strongly on Friday after another test of the top of the prior consolidation as the market digests recent gains. Another good sign.
Another positive is the overall market and Nasdaq being in an uptrend and the S&P 500 breaking out of a 2 year trading range. So the overall market trend is in our favor as well.
This one is set up to break strongly into new 2016 highs off the 9 EMA if the overall market continues to trend higher. If the market pulls back, then we will probably see it rebound off the 20 day moving average before making another move.
We will likely put a buy stop a little above $56 and it should quickly move to $60 or beyond if it gets to that point. $67 seems a likely final target over the next several weeks. This is a 1 to 1 projection of the first move higher and corresponds with the top of a consolidation last March.
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The New Investtobefree Ultimate Strategy
Thanks to the hundreds of traders and investors who completed our recent survey for the latest add-ons to the Investtobefree.com 3 Stocks to Wealth newsletter.
You voted on the most valuable upgrades and add-ons in our recent online survey and now the finishing touches are complete!
Investtobefree.com and the 3 Stocks to Wealth newsletter was launched in April of 2012 and has clobbered nearly all long-only newsletters since inception. By combining my more than 10 years of technical analysis expertise with sophisticated stock screening technologies to find the top 3 stocks to hold for the coming week.
This strategy destroys the biggest obstacle that keep most traders and investors from the big gains in the aggressive portion of their overall portfolio.
This obstacle is the time needed to stay on top of the market and execute a proven strategy. With this strategy and our newsletter you spend just 15 minutes per week adjusting your aggressive portfolio. Always on Friday.
With work, family responsibilities, social time, and hobbies, most people just do not have the time to stay on top of the market and execute a proven strategy consistently through ups and downs. But this is absolutely required to make the big gains over time when trading.
The Tradetobefree strategy certainly goes a long way to reduce the time needed, but some people just do not find time to apply it each day.
So for those short on time and who do not care for technical analysis, I developed a new strategy where you just hold the top 3 stocks each week. A strategy producing results rivalring top swing trading strategies.
A strategy that requires just 15 minutes of your precious time each week on Friday with the newsletter.
Trend trading hot stocks is very easy with this strategy where you leverage the skills of a successful trader and expert technical analyst.
This free presentation goes over all the latest add-ons included in the new Ultimate Subscription and why its critical to your financial future.
Swing Trading Put Options and Shorts
I just published a new video going over our short strategy for swing trading and channeling stocks.
CONN was in a terrific downward sloping channel breaking an uptrend back to the top of the channel when we featured it. One of the better channeling stock setups you will find.
Some of the put options doubled, tripled and more within a week on this one.
Of course not all of these will move like this but we had a strong feeling that many retail earnings reports would come in below expectations. So it was a perfect storm really.
This video has some great tips for swing trading shorts in a market trending lower.
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Investtobefree Webinar Covering the New Upgrades
Several years ago, I noticed that some of my subscribers were just buying the stocks in the newsletter and holding them for a week. This is not recommended as many of the stocks are in a short-term downtrend.
The Tradetobefree strategy calls for waiting until the short-term downtrend has been broken before entering a trade as pointed out on the site and with each trading setup featured on the subscription site and newsletter unless that resistance has already been broken.
The reason we do this is because the odds of success increase if the stock can break the short-term downtrend while not going below the long-term uptrend support beforehand.
So if the stock stays above the long-term uptrend support and breaks the short-term downtrend, we are interested in the trading setup.
But some were simply just buying the stock beforehand with mixed results. At the same time many were asking for an even simpler way without having to use technical analysis.
Many people just don’t have the half hour to hour a day to use the Tradetobefree newsletter and execute the strategy. And many just can not do it consistently with their schedule.
A lot of people will cancel the subscription and say they do not have the time for trading. And later come back when they have more time. Unfortunately, sometimes after missing some big gains.
So for those short on time and who do not care for technical analysis, I developed a new strategy where you just hold the top 3 stocks each week. After many months of research, back-testing and testing in a live account, I brought the Investtobefree.com site and 3 Stocks to Wealth newsletter to the public in April of 2012.
A strategy that requires just 15 minutes of your time each week with the newsletter.
Back then I made the bold statement that this could be a 5 to 10 bagger in five years before commissions and fees. And its still on track to do that. In the free webinar yesterday I revealed the latest performance chart after the first four years and discussed the new add-ons to reduce volatility I have been working on for more than a year.
This free webinar also discusses the results from the hundreds who completed our recent survey and the exciting new add-ons being planned for the next release to reduce volatility and ensure you are getting good results closely matching the performance chart before commissions and fees.
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Trend Trading the Incredible Run in Gold Stocks
I just published a new video talking about how to trend trade the incredible run in gold stocks.
The GLD just broke out of a flag pattern on Friday. And many mining stocks are making incredible moves right now. Despite weakness in the overall market.
This video also goes over one of the key concepts all great traders have mastered to some degree.
We all know you have to play the trend. But how do you know when the trend has changed?
Its more than just following a couple moving averages as this video points out.
Our latest video covering trend analysis will explain key concepts you simply must know. All great traders I know of have a strong understanding of trend analysis.
Its key to successfully utilize our trading methodology and to profit from our top trading setups.
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Vote for Your Favorite Add-ons to Investtobefree.com
Several years ago I noticed that, despite delivering a great swing trading strategy and a lot of very profitable trend trading setups, a lot of my audience was not using and profiting from the strategy.
I mean, I did get a lot of positive feedback, people who had literally changed their quality of life for the better. However, others were just quiet and not continuing with the program.
Often they would come to me and say something that basically meant “I don’t have time or really understand technical analysis and the technical entries/exits, just tell me what to buy, when to buy it and when to sell”.
I hear this often enough that it finally got me thinking, is there really a way to make it that simple for people? Maybe most people just want to harness the skill and 10+ years experience that I have to beat the market by a wide margin.
So I went to work to find a great, more passive trading system for people who just do not have the time for chart patterns, candlestick patterns, moving averages and the myriad of other technical analysis tools.
I was really trying to figure out whether you can use the principles underlying my trend trading strategy to make a great return with no follow-up technical analysis.
After a lot of trial and error with proprietary screeners and testing on a live account, I found an excellent strategy that my audience could really benefit from and actually change their quality of life. A strategy that took literally just 15 minutes per week to make the returns of a professional trader once I gave them the top 3 stocks to hold the following week.
After proving it in a live account, I decided to offer it to everyone. And Investtobefree.com and the 3 Stocks to Wealth newsletter was born in April of 2012.
Back then I made a pretty bold claim. Based on back-testing results and our experience in a live account, I said that we could help people generate a 5 to 10-bagger in about five years in your aggressive portfolio.
Well its been four years now, and those who faithfully use the approach each week, with full positions each week, are still on track to pull this off. Before commissions and expenses. And for many, after commissions and expenses.
But, with all aggressive market strategies, you have more volatility. And you have to be disciplined week in and week out. And many people have not followed through and stuck with it.
And I think a lot of that has to do with understanding and expecting volatility. Any great strategy will have periods of draw-down. Even mutual funds have draw-down. Anyone who held money in a mutual fund in 2008 can tell you all about draw-down.
So I have found ways to reduce volatility significantly, protect yourself from sudden market corrections and still keep most if not all of the great results we have seen in the first four years of Investtobefree.com and the 3 Stocks to Wealth newsletter.
But, before I complete these optional add-ons, I wanted to ask you what you most wanted to see added to the 3 Stocks to Wealth system.
As an incentive for filling out the following survey, I am giving a free subscription to 2 people chosen at random.
Vote now on your favorite new 3 Stocks to Wealth add-ons and win a free subscription!
Trend Trading – Here’s a Great Example to Learn How
Over the past few months we released free videos on the most bullish chart pattern – the bull flag.
The bull flag is one powerful trend trading continuation pattern as you are about to see.
A couple months ago, we could see conditions were setting up to produce these patterns.
We witnessed a strong bullish market signal in late January and another on the first trading day in March. Signs that the overall market trend was switching towards the upside for a while.
And many sectors, including the beaten down materials group, were due for a strong relief rally.
So I wanted to publish these videos so you could prepare.
Now one of our top trading setups in this pattern just hit its second target last week. And has nearly doubled from our target entry point within a month.
There are different ways to trade this pattern and the GRAM trade provides a great example to go over our different strategies for entering and exiting this powerful chart pattern.
Fund managers can not hit these ideal entry points because they have to buy millions of dollars worth of stock. Which pushes the price up too far, too quickly.
In fact, the video above shows how larger investors push the stock higher after our customers got in. And how they inflated the trading accounts of those who followed our buy/sell points closely when we featured this setup at the end of February.
Click the video above to see how we traded this stock with both the right technical AND fundamental factors to support an enormous move.
Subscribe to our Youtube channel and see how we trade this pattern.
Channeling Stocks and Nervous Fund Managers
Whenever you have a period of higher volatility, fund managers look for places to hide.
Capital preservation suddenly becomes king when the market waters become turbulent.
But they need to buy stocks because they have a lot of clients money to invest in the market. So they put more money into safer stocks whose earnings and stock price are not going to be affected as much by the volatility.
So how does this affect the market? And how do we profit from frightened fund managers?
Well, suddenly stocks like Tyson and Campbells Soup become real attractive because they know in the worst case scenario, people will still buy chicken and soup. So they buy these stocks like crazy and suddenly they can even act like growth stocks.
This is why consumer staple stocks were the first sector to make new highs coming out of the most recent correction. And many broke out of bullish chart patterns.
A couple weeks ago we published a free web page as the definitive free guide to the channeling stock pattern.
And in our latest video lesson we show you how we make big profits in the flight to consumer staple stocks. By channeling the right stocks for the current market in superior, upward sloping channels.
Click above to see our latest free instructional video.
Subscribe to our Youtube channel and get our free expert instructional videos when released!
Channeling Stocks and Bull Flags in Today’s Market
Now that many material and industrial stocks have been take to the woodshed over the past couple years, we are seeing a lot more very bullish chart patterns. A couple in particular that I want to share with you.
Probably the most exciting of these is the bull flag pattern. Simply because this pattern often leads to gains of 20%, 50% or 100% or more within a few days to a few months.
Over a year ago we sent a message to our audience with the headline – “$1.50 at the pump?”. A lot of people scoffed at this at the time – not realizing the ability of many companies to quickly reduce costs and keep drilling for oil despite having to use fracking technology.
But we were looking at both the technicals and fundamentals and seeing that oil could go into the $20s. In fact, this was nearly a perfect 1 to 1 projection of the first move down from the highs the prior summer.
In early January of 2016 when the writing was on the wall for most traders and investors, oil plummeted to the high $20s. Putting many oil companies in jeopardy.
When oil hit $26 and change we said that was likely the bottom for now in our newsletter and the long-term trend would change to the upside.
Now the small oil companies that survive could be looking at a windfall as demand continues to grow and starts to overcome daily supply generated. This caused the best positioned small oil companies to jump into some of the strongest bull flag patterns. Along with steel companies, miners, and early cycle stocks.
While more risky, these stocks quickly jumped 100% to 200% or more and formed bull flag patterns in many cases. And took off after breaking out.
But another type of trading setup is coming up more and more. Channeling stocks. So watch for these patterns to develop as they are a less risky yet very profitable in many cases. This pattern often develops after stocks sell off and bottom.
Very few stocks would be considered good channeling stocks. But we find many throughout the year – but only the ones with the fundamental momentum to truly support the higher prices.
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Swing Trading vs Day Trading – Hardware & Software
Before jumping into a trading strategy its important to know the hardware and software required to do well. In this final video in a 3 part series I discuss the equipment and software you will need for both in detail.
I also discuss the potential profitability of both. Both in the short-term and over the long-term.
Swing Trading vs Day Trading
Stock trading can be categorized into 2 basic types of trading: Swing trading and Day Trading. The term “swing trading” can have different meanings to different traders. So this term really needs to be clarified and the different meanings understood.
Questions you need to ask yourself include: which type of trading is best for me – Swing Trading or Day Trading?
How much reasonable profit potential exists for both swing trading and day trading in the era of high frequency and algorithmic trading?
And how much time is required to swing trade and day trade and how long will it take to master each and be consistently profitable?
After 13 years of successfully trading stocks and using both techniques, I can give you a good answer to these questions.
Open Season for the Bull Flag Pattern
Fall and Winter is open season on bull flag patterns. Its like a sport fisherman seeing a 500 pound tuna on their fish finder. It gets you excited once you see how powerful the moves can be out of this very bullish chart pattern.
This is a chart pattern where the price of a stock soars 90% or more within a couple months and then consolidates for a few days to a few weeks before another explosive move higher. The strong initial move forms the flag pole on the chart. And the sideways move generates the flag or, in some cases, a triangular pennant.
You want to have this chart pattern on your radar and this just released video explains how to identify the bull flag pattern and how to trade it!
Learning from the Trade of the Year
As the market pulls back and digests the big gains over the past few years, its a good time to get ready for what is generally the most exciting time of year to trade – late Fall through Spring of the following year.
Over the years, many of our best trades were made during this time period. A lot of very bullish momentum trading setups appear on our radar during the months ahead. Bull flag patterns, double bottoms, rounding bottoms and an even better chart pattern – multiple patterns.
This is a great technical setup that a lot of traders overlook. As with our other trades, we only look for these on elite growth stocks and stocks with rising estimates that are beating those estimates and only on the best penny stocks with the right fundamental factors.
The trade of the year so far in 2015 has been ANAC which we featured to subscribers back in May just before it nearly tripled within a couple months.
And this is a classic example of multiple time-frame alignment and multiple bullish patterns nearing an ideal technical entry. In the following video, I teach you insights to help you find and trade these often highly profitable gems.
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Where the Money is Going Now
As the market pulls back, an industry is quietly gathering strength and establishing itself as one of the leaders in the next market uptrend.
With Europe growing less than expected, China growth slowing, and Japan a real concern, money managers are looking for stocks selling stuff mostly in North America.
And US housing-related stocks fits that bill.
During the financial crisis and just before, housing was one of the worst places to be. But the housing industry has been slowly recovering for a number of years now. And many housing stocks have been showing strong growth in sales and earnings for quite a while.
Now all of this conjecture is proven in quarterly numbers for corporations and on stock and index charts. As a trader, we want to know where the money is going so we can be there to receive our share of it.
And as we emerge from a market consolidation or after the next pullback, its even more critical to find these leading industries and sectors. The industries and stocks that make new highs out of strong technical consolidations tend to lead the market higher after a pullback.
And when we look at the housing index, we are now seeing a classic sign of an industry about to take off during the next market uptrend. Here is a chart of the housing index to illustrate.
Note on the chart how the index has moved sideways for several months from about February through July. Over the past few weeks, the housing index has moved into new highs, pulled back a percent or two from that breakout point, and is now surging into even higher levels.
This is a great sign that we should keep top housing-related stocks on our radar. And be ready to pull the trigger on trades once the overall market confirms a new uptrend. Buying long positions on good technical entry points on top housing stocks.
One stock breaking out of a cup with handle base pattern is DHI. This stock only pulled back modestly during the latest increased market volatility and is surging into new highs out of a bullish cup with handle pattern.
Earnings growth has averaged over 45% per year over the past five years and they have beaten by 2 to 10 cents per share over the past 3 quarters. Estimates have gone up about 5% over the past 30 days.
Sales are expected to grow over 30% this year. The PEG ratio is still less than 1 and they are selling for about twice book value.
And Toll Brothers just broke out of a bullish base pattern as well.
Of course, we keep track of all the top stocks in this sector (and all leading sectors) and feature them on our subscription site when they are near an ideal technical entry point.
But only those stocks beating estimates with rising future expectations and top growth stocks. Factors proven to beat the market in the short-term.
The biotech index broke out of a beautiful, bullish double bottom pattern last week within one of the best uptrends of any industry in today’s market.
Biotechs have been leading the market higher for a long time now. Since the bottom in 2009. In fact, Biotechs are up more than 600% since its lowest point in 2009 as measured by the Biotechnology index ($nbi is the ticker) – more than doubling the return of the Nasdaq.
And biotechs did not correct as much during the financial crisis. Correcting just 37% from top to bottom versus nearly 56% for the Nasdaq and nearly 58% for the S&P 500.
So not only is it a great growth area but the group tends to hold up better during market crashes than the Nasdaq. So traders need to have this group and individual biotech stocks on their radar.
The biotech bull market continues to rage on. And last week the biotech index broke out of a bullish chart pattern within its terrific multi-year uptrend.
You can see on the weekly chart above how the group pulled back in late March and then late April. Forming the “W” in the double bottom pattern. Notice too how this double bottom has a handle on the right side of the pattern.
The 2nd low in April took out the prior low in March which is a bullish sign. And the handle, or horizontal consolidation area, on the right side of the double bottom, makes lower lows – another very good sign from a technical standpoint. And then we see the strong breakout that occurred last week.
A pretty text book bullish consolidation pattern in a biotech bull market that has been going on for many years.
Many of our top biotech and healthcare-related stocks are starting to move strongly as the group breaks out, including ANAC.
The medical equipment index has also broken strongly out of a bullish cup with handle pattern recently.
We have a few other healthcare stocks that are very near ideal technical entry points on our site. Stocks with rapidly improving fundamentals to support a big move higher. Sign up for a free trial off in the upper right if you have not already. We are also offering a promotion right now for a limited time.
Our Top Trading Setup This Week. A Freebie.
Our top trading setup featured to our customers this week was one of the best momentum setups we have seen in a long time.
The stock was Ambarella (ticker AMBA).
Now a good question to ask is “why was this such an incredible trading setup?” Why has it easily surged 15% within a few days after breaking out?
Well, there is a big reason why this was such an ideal setup and why we recommended it so highly in our newsletter. And its key to understanding how we can all make more money trading.
You may think that the reason is because it had very strong earnings and sales growth since going public about 2 years ago. While a great sign, this is not what made the setup on AMBA so attractive to us.
And its not because it recently had a blowout earnings report and a strong track record of beating earnings estimates.
And it wasn’t because the earnings conference call was so bullish. Raising estimates and mentioning new exciting markets that are not even factored into the estimates.
It wasn’t even the 2 bullish well-formed chart patterns and a strong uptrend leading into it.
This stock has accelerating earnings beats as well. Another very bullish factor that we have talked about in our webinars and blog. But that’s not the reason either.
No, the reason is that this stock had ALL these factors at the time it broke out. As a major market index was hitting new highs after a small correction.
And its in an industry where other top growth stocks are taking off.
When the market is breaking out of a consolidation or starting a new uptrend after a larger correction, a few top stocks are poised to lead the market higher.
Now AMBA is well past its breakout point and is due for a short-term pullback. But its already shown its a top contender for being one of the biggest winners this year and a leader in the next leg higher for the market.
Its also formed other very bullish patterns. Such as our classic swing trading setup when we featured it to customers in January and last fall.
When you can find a stock that has nearly every bullish factor that matters near a great technical entry point, you need to act. Of course not all will make a big move. But in our experience, they normally do when the market is trending higher or at least sideways.
There is no sure thing when it comes to trading, but setups like these are as close as we have found to it.
Look for a stock that has all these factors in place. Then wait for an ideal entry point in a positive market environment. And you will thank me later.
Our book that comes free with most subscriptions covers how to trade these stocks – a formula for when to buy and when to sell.
What to Do After a Bearish Market Signal
A few weeks ago we did something we rarely do for our subscribers. We featured a short trading setup on DDD.
Shorting is tricky. Many say more tricky than making a bet that a stock will go higher. So we only do it when the market generates a bearish signal that tells us that some some kind of correction is likely in the near-term.
Now some avoid shorting altogether because they think its somehow “wrong”.
I personally believe its wrong to enter a “naked short” where the shares are not even sourced when the shares are sold. In order to enter a massive short that can drive down the price.
But I do believe that providing some economic incentive for investors to take a bearish stance and explain why is a good thing. Otherwise, who is going to make the case that a stock is a bad investment? And do extensive research to support a bearish view so investors and traders can hear both the bullish and bearish case?
But if you disagree with shorting, you can always buy put options and make a lot more money than shorting if you are right.
Anyway, the point of this article is to discuss what you should do once the market turns bearish. Whether you trade both long and short. Or just stick to long trading opportunities.
First of all, there are many bearish market signs that traders look for. And some look at price action only.
We use what is called a “bearish market signal” or confirmation signal to determine when the market is likely to enter a new correction of some magnitude. Popularized by the founder of Investors Business Daily, we have used this signal to go bearish in our newsletters right before the “flash crash” and all of the steep sell-offs in 2007 through early 2009.
One mistake traders make is to automatically sell everything and ignore the market for a while after a bearish signal. And not to watch the market closely after the bearish signal.
Sometimes after a bearish signal the market will only see a modest correction and then resume its trend higher. Especially during the early to middle phases of a long-term bull market.
What we do after a bearish signal is sell our weakest performers, maybe hold onto our best position, and make sure to follow our sell rules very closely. And hold off on entering any new long positions.
And look for the best shorting and put option candidates.
And then we take a wait and see approach. And update our list of top growth stocks and stocks beating estimates by a wide margin with rising future estimates.
We then hold our breath as the market attempts its first rebound after the bearish signal.
If the market rebounds strongly and convincingly with good volume, we become more aggressive. We also go long again if the market takes out the 52-week highs.
If it takes out the highs on weak volume, we apply our buy rules more strictly and only take on the very best trading setups.
And if the market continues to sell off and confirm the bearish signal, we find more short setups and wait until the next bullish market signal to go long again.
Our book that comes free with most subscriptions explains everything in more detail.
But the main point is that you have to be on your toes after the bearish signal. And not just turn your back on the market and assume the bearish signal will be confirmed.
Its sometimes just a small correction followed by another strong move to new highs within a couple weeks or so.
In our Daily Alert we are constantly on the lookout for stocks that are holding up well in good technical formations during a market correction. And then we feature them after we see a bullish confirmation signal (or the market has a smaller pullback followed quickly by a move to new 52-week highs) as they reach an ideal technical entry point. An effective trend trading strategy.
These stocks are often among the big winners in the next market uptrend. Keeping these things in mind is important to successfully navigate your way through the dark, murky waters after a bearish market signal.
Trading vs Investing
When making money in the stock market one thing you need to ask is “Should I invest or trade?”
And the answer to this question depends on a lot of factors. Not the least of which is how much time you have available each week to monitor your positions.
Investing is probably the least time-consuming approach.
Although some say you need an hour per week for each stock, it really varies.
During earnings season, you may need several hours as each stock reports earnings. Each earnings conference call may take 2-3 hours to comb through and properly analyze.
And many of us do not want to have our personal lives disrupted when a big announcement comes out related to our stock. Especially now that we are heading into the holiday season.
That is why having someone do the research for you is really worthwhile. And not only do you save all your precious free time, you get an expert's opinion and insight.
So using a successful investment newsletter makes all the sense in the world. And is probably the least time-consuming approach to making money in the market.
When we launched Investtobefree.com, we offered a free bonus to those who purchased an elite subscription to the 3 Stocks to Wealth newsletter.
This bonus was our top 3 long-term holds. Stocks you could likely hold and profit from for months or years until we send a notice that it was time to make a move.
Now this bonus, only currently available to our elite clients, has knocked the socks off the overall market. About doubling the market averages last year and this year through September.
The 3 Stocks to Wealth newsletter has a better track record of producing wealth than buy and hold. The 3 long-term holds bonus newsletter is unlikely to outperform the flagship 3 Stocks to Wealth but does require less time on your end.
In fact, it requires no time until the next alert is sent out instructing you to make a move.
And the exciting news is that this 3 Long-term holds newsletter will soon be available as a standalone service.
It will be called The 3 Generals. Stay tuned for the release announcement.
In the meantime, you can still get both newsletters when you subscribe to our elite service. Along with the 3 long-term holds, you also receive free training videos that tell you how to make more money with the 3 Stocks to Wealth newsletter.
And the 3 Stocks to Wealth newsletter just had another great week and has 2,000% back-tested return over a five year period.
Click the link above for more information or to order at a special introductory rate. Or, copy it to your browser address bar.
This special quarterly starter rate will only be good for a short while. So take advantage of it while you can.
If you decide to swing trade instead, you can scroll up and to the right to take our free trial. If you have not already. And here is a special offer to join
What’s Working Now
One of the most important questions you need to ask yourself to be a successful trader is “What’s working now?”.
Nearly every market has one or more bull markets raging within certain industries and sub-industries. While other stocks are falling out of favor or just stagnating.
You need to be aware of what these industries are. And look for stocks that are setting up in bullish technical patterns within them.
One of the hottest areas of the market right now are Chinese internet stocks.
Our first top pick of 2014 was VIPS, a Chinese internet stock that some would consider the Amazon of China. This stock had one of the highest sales and earnings growth rates at the time.
The stock was in a strong uptrend for a number of years, had formed a bullish double bottom pattern, and was nearing a breakout point as sales and earnings growth were accelerating.
The stock has soared about 200% since we featured the setup.
Another more recent example is Bitauto. We featured this stock in our Daily Alert newsletter back on June 19th.
Stocks in hot areas of the market will break out of bullish consolidation patterns during the bull market. We only focus on the stocks with the strongest earnings and sales growth. And stocks with rising estimates and a tendency to beat those estimates.
BITA had both which is the ideal situation.
So here is an example of what we mean by rapidly rising estimates and an elite growth stock.
BITA had beaten earnings estimates by 1 to 7 cents per share over the past four quarters. Estimates have gone up over 25% over the prior 90 days.
And not a penny going from 3 to 4 cents per share. We are talking 25 cents from $2.33 to $2.58 per share.
Earnings growth had averaged 46% per year over the prior five years. And sales were expected to increase 38% this year and 34% next year. Not 15% per year.
Ideally, we want to see those numbers over 30%.
The chart pattern was a bullish cup with handle pattern within a strong long-term uptrend which is ideal. Here’s how the chart looked when we featured it:
You can see the cup with handle shape on the chart. It can be seen better on a weekly chart and should be viewed there first. Our target entry on this chart pattern is a close above the resistance in the handle.
Soon after the stock broke out the price skyrocketed and nearly doubled in about 2 months. Making subscribers to the Daily Alert a small fortune for those who kept a portion of their shares until the uptrend breaks. A tactic taught in the Daily Alert and the book.
You most often see these kinds of moves in stocks breaking out of strong chart patterns within these hot areas of the market.
Hope that helps clarify what we look for in an ideal trading setup.
Brian C Neall – Founder