An “Old as Dirt” Trading Tool That Just Plain Works

I love things that just plain work.

I have a Shadrack car-top ski rack by Allsop that cost me $40 brand new in 1986.

It’s just some nylon straps that don’t hurt the car’s paint, with some epoxy-coated hooks that grab onto the doorframe. There are four sets of plastic ski holders attached to the nylon straps with ingeniously simple elastic ties that secure the skis. I can install the rack and toss four sets of skis on it in 3-5 minutes.

I wouldn’t trade it for any fancy $500 roof rack out there. (They quit making these 20 years ago – and I’ve really tried to find them. So please let me know if you’ve found somewhere to buy an extra one…!)

Every time I put this wonderful gadget on the car, my wife has to endure a soliloquy where I extol its magnificent design.

And why not?

It makes something that should be a chore (mounting skis for a trip) into a sheer delight.

And I love trading tools that work this way too – turning tasks like finding extremes from being a labor into something simple and easy to execute.

Last Saturday, I spent some time in our 10-Minute Millionaire Weekender Video talking about how we buy stocks in a broad market that doesn’t give any significant pullbacks.

We looked at three very recent examples – two from my elite Stealth Profits Trader service, and our most recent recommendation here at The 10-Minute Millionaire.

Today, I want to dig a little deeper.

I want to show you how I used my single-most-used tool for identifying and confirming extremes on these trades.

A Tool That’s Older Than the Hills

When I identify extreme pullbacks, I use multiple indicators and tools.

But there’s one that trumps them all.

Support and resistance levels are the most important indicators in my toolbox for two simple, and powerful, reasons:

  1. They are key reflections of what market participants are thinking.
  2. They just plain work.

Support and resistance areas show us, quite simply, where market participants reacted, forming short-, mid-, or long-term tops or bottoms.

10MM_1

The zone at $26 on this chart of the iShares Latin America 40 ETF (NYSE: ILF) shows the classic characteristics of an important support and resistance area.

The price either tests the support and resistance level and bounces off, or it cuts straight through with a “clean break,” and clear follow through.

We can see that a support zone in March of 2015 broke cleanly, and became resistance in April of 2016.

After one more test, that zone is once again broken cleanly to the upside to become support multiple times in September – December of 2016.

What we see here is an action area on the chart created by the emotional reactions traders and investors have when the price of ILF approaches this level.

And it’s that exact “anticipation of a reaction” that allows us to effectively use support and resistance to help us Find the Extreme.

Now that we understand the psychology a little more, let’s see how this reliable tool worked in the three trades that we reviewed this past weekend…

A Precise Entry

Over the weekend, I explained that Best Buy Co. Inc. (NYSE: BBY) was a trade that my Stealth Profits Trader subscribers entered after a good earnings report (showing underlying strength) that was marred by poor forward guidance for profit margins:

10MM_2

It was a classic, emotional overreaction that led to 200% profits in the call options we recommended.

Under different pullback circumstances, a similar technical setup played out in Emerging Markets Bull 3x Shares (NYSE: EDC):

10MM_3

Here, Stealth Profits Traders pulled in 241.7% gains on our call options.
And for our last example, here’s how we discerned that the pullback in our recent Hudbay Minerals Inc. (NYSE: HBM) recommendation was at an extreme for the entry – you guessed it – using a support level:

10MM_4

Here, we see that after our entry, the stock tested the support level again and has pushed up from there.

Instead of being troublesome, this type of action is a confirmation of our premise and shows that the support level is quite strong.

The bottom line is, support and resistance is one of the oldest technical tools there is, and one of the most powerful. It’s not to be underestimated.

It doesn’t matter what you trade; it doesn’t matter how you trade it, if you use this successful technical tool on the market, you’ll greatly improve your chances for success – and great returns.

And as we continue to on our journey together here at The 10-Minute Millionaire, I’ll continue to show you how to use it like a seasoned pro…

Great trading,

D.R. Barton, Jr.

11 Responses to “An “Old as Dirt” Trading Tool That Just Plain Works”

  1. S&R is a long-time friend in my trading toolbox. Knowing how to utilize it with not only calls and puts, but in credit spreads when paired with two other tools at my disposal. It doesn’t require fancy analysis and is helpful on the fly in quickly deciding whether or not to perform some more in-depth checks.??

  2. Edwin Eugene McCurdy

    I need your help BIGTIME. Do you have a live seminar I can sign up for? I live in New Mexico and have some airline tickets that I need to use in the next two months before they expire. My success has been very poor since I started trying to use your services in Jan. of this year (2017). I am retired and can use the extra time to learn how to make money trading. I have eight of ten friends here in Albuquerque that meet once a month to study the trading systems and the market. I am the only one that is trying to use your Ten-Minutes system. My two biggest problems are the use of the TD Ameritrade platform for STOP-Losses and to get the Alert from you in time to put in the TRADE before the market moves past my entry point. I have started a subscription to Stockchart.com but am really having trouble with its training materials. I have read your new book through two time in the last two months, IT IS GREAT and have given two copies to my friends. The thing I like most about you is your sharing your faith in Jesus in such a darling way. The public library here in Albuquerque has five copies of your new book and they are loaned out all the time. I read you first publication the other two authors printed about ten years ago. I am a big fan of yours but am having trouble making money using your leads.

  3. I subscribed for your 10-min Millionaire service just a few days ago, managed to look through your archived recos, though still dont understand how it’s possible to grow a portfolio from $500 to $1M in one year only buying/selling stocks (not including penny stocks being actively played). I did not find recos for options that theoretically could make it possible to achieve the goal. So I would highly appreciate you giving me at least one example of your year-long recommendations that produced a 2,000-fold increase for the original $500 portfolio. Thanks a lot in advance.

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