The Simple Secret to a Jackpot Trade

Your Monday strategy session... February 9, 2015 Archives | Unsubscribe     The Simple Secret to a Jackpot Trade   Your Monday strategy session Price action leads the news Plus: More from the crazy world of terrible golfers...   Greg Guenthner coming to you from Baltimore, MD... How'd you like the secret to hitting jackpot trades before anyone else gets the news? Thought so. Read on because today I'm giving you the secret on a silver platter... But before I go on, you have to know that this secret doesn't require any fancy math. You don't have to spend hours digging through complex financial documents, either. In fact, all you have to do is change the way you evaluate stocks and jettison some of those herd-minded "survival instincts" preventing you from beating the market. Look, most investors have no clue how the market actually works. They get so worked up over gossip, tabloid financial "journalism" and irrelevant data that they literally can't get out of their own way. But here's the thing... If you're ever going to making any money in the trading game, you're gonna have to memorize the following statement: Prices lead the news. Say it out loud and click your heels three times, Dorothy. It might not take you to Kansas, but it could take you to Easy Street. Maybe you've heard this old saw--or something similar--before. And maybe you don't know what to make of it. Well, hang onto your pants because I'm here to walk you through it. If you can wrap your mind around it, I can all but guarantee you'll never get caught up in the boneheaded investment blunders that your moron neighbor complains about every time you run into him walking the dog... Simply put, when you're looking to trade a turnaround play, the numbers will never be perfect. I'm talking about P/E ratios, earnings, debt structures - all those things the "experts" worship. If they were, everyone would be buying, right? Lucky for you, there's a way to jump out in front of the data. All you have to do is watch the price action in the charts... Yup, it really can be that simple. Here are the necessary ingredients for a jackpot turnaround trade: A depressed or hated sector, poor financials, and a chart that looks like it might be forming a bottom. Still not sure what I'm talking about? Let's take a look at a real-world example. This one has 'em all... Last year, I told you I thought homebuilder stocks were poised for a huge turnaround over the next 18 months. That call inspired almost as much hate mail as my bearish predictions for gold back in early 2013. Not only did you inform me that I was an idiot--you also couldn't get over the fact that mushy numbers had become the norm in the homebuilding sector. First-time home buyers sunk to their lowest level in 30 years! Mortgages applications are down! Home prices are still too damn high! Yada, yada, yada. All the "numbers" said I was wrong. And the hate mail kept on rollin' in. But I was sticking to my guns: price action leads the news. And the charts were telling me that something was brewing with homebuilders that didn't mesh with all the bad, backward-looking news and data out there. So, back in October-- when all the bulls packed what was left of their belongings and headed out of town-- magic began showing up in the charts. A rally was ignited--even as the major averages were pulverized. Something was up...and the chart was telegraphing a secret to those who knew how to read it. After nine months of lower prices, homebuilder shares began to sharply rise in as the major averages tanked. That breakout above the highlighted consolidation area was our signal to buy... And it worked. While the S&P is barely clinging to life this year, the homebuilders index is up 15% from its breakout in mid-October--and more than 25% from its 2014 lows. All that backwards-looking data about mortgage applications, home prices and all the rest was just fooling the herd into thinking these stocks were heading for Davy Jones' locker. They weren't. But that's what happens when you don't know how to read the charts. Price action said these suckers were about to jump on a trampoline. Now that these stocks have rocketed off their lows, suddenly the narrative is changing. Just like magic, the "numbers" are looking a lot more bullish. Prices lead the news. Heck, even Bloomberg is beginning to publish stories about how a huge increase in housing-related employment will be the big surprise this year (I'm not sure how it will be a surprise if we're announcing it to the world in a massive headline. But whatever). The bottom line is this: If you're constantly waiting for blue skies and smooth sailing before pulling the trigger on a new trade, you're going to get left behind every time. The "numbers" will never be perfect. But prices - reflected in the charts - will tell you when it's time to buy, even when the data you see in the rear-view mirror is mangled wreckage. The classic breakout in October is one sign, but not the only one. And you'll learn to spot other market signals every Monday in our weekly strategy session. More next week... Listen, there's a fortunes to be made in these charts. You just have to learn how to read 'em...         Urgent Tax Research Notice   If you HAVE filed your 2014 tax forms, please click here.   If you HAVE NOT filed your 2014 tax forms yet, please click here.   Either way, the research we have for you today could change everything you knew about taxes… And could instantly save you $1,000s this tax year, and every year for life.   Simply click here for all the details.           Rude Numbers Targets, Predictions and Wild Guesses   $16.91 is the price of silver this morning. Silver is attempting to catch a bid after dropping last week. It's up more than 1% in early trading... $1,240 is where you'll find gold futures this morning. Gold's up about $6 today after taking a hit Friday... $52.39 buys a barrel of crude today. Oil is building on last week's gains. It's up a cool 1.3% so far today... $2.63 is the price of natural gas. After missing last week's party, natty is trying to make up for lost time. It's up 2.3% in early trading... 2,043 marks the spot for S&P futures before the morning bell. Stocks are looking to open well in the red to start the new week...     Rude Trends When to Buy... When to Sell   If there's one thing I've learned over the past week, it's that traders lover to commiserate over golf failures just as much as we do over bad trades... "I had a hole in one at a great course in Arizona," explains a reader with some golf skills. "But I consider it a fluke, not skill. It is like viewing a big lottery win a result of my investing skill. I would quit though if I ever shot par." Hmm... that sounds reasonable. Maybe a bit too reasonable for my tastes. Who's next? "About 25 years ago, not only couldn't I get a hole in one, I couldn't double bogey a course," says another reader. "If they never drained the lake, I'm positive my clubs are still there!" That's more like it! Just think--millions of years from now, alien archeologists are going to find what's left of those clubs and put them on display in a museum. There will be a little plaque with an explanation of the bizarre, ancient game where a player hit a tiny round object with a metal stick to try to put it into a small hole very far away. Aliens visiting the museum will read the description, nod their protein lobes, and agree that it's probably best that these primitive beasts went extinct a few million years prior. How barbaric! [Ed. Note: Send your feedback here: rude@agorafinancial.com - and follow me on Twitter: @GregGuenthner]     Ignore At Your Own Peril Today's Must Read Links   Five Pre-IPO Companies You Need to Know Now Why Is the Government Preparing for Catastrophe? [must read] Ex-Banker Makes Shocking Prediction for 2015     BE SURE TO ADD rude@agorafinancial.com to your address book.       Additional Articles & Commentary: Join the conversation! Follow us on social media:         The Rude Awakening is committed to protecting and respecting your privacy. We do not rent or share your email address. By submitting your email address, you consent to Agora Financial delivering daily email issues and advertisements. To end your Rude Awakening e-mail subscription and associated external offers sent from The Rude Awakening, click here. Please read our Privacy Statement. For any further comments or concerns please email us at rude@agorafinancial.com. If you are you having trouble receiving your Rude Awakening subscription, you can ensure its arrival in your mailbox by whitelisting The Rude Awakening. © 2015 Agora Financial, LLC. 808 Saint Paul Street, Baltimore MD 21202. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investment advice. We expressly forbid our writers from having a financial interest in any security they personally recommend to our readers. All of our employees and agents must wait 24 hours after on-line publication or 72 hours after the mailing of a printed-only publication prior to following an initial recommendation. Any investments recommended in this letter should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.