How to Turn a Market Negative into a Personal Positive

Editor’s note: The following is a special re-run of the market update that I provided this week to subscribers of my elite research service, Stealth Profits Trader. Each week I provide similar market analysis, plus a specific trade recommendation which includes:

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  • my limit price recommendation
  • protective contingency exits
  • a profit-taking exit strategy

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This morning, markets opened down after an impressive run-up produced by Fed dovishness and mega-tech stock earnings reports.  The last two days, the mega-techs have taken a pretty good beating, but their recent earnings have helped fuel optimism. 

The big tech stocks, notably the FANG stocks (acronym seen below) are STILL the place to be for intermediate to long-term investing. After all that they’ve done over the past few years, how (might you ask) are they still good investments?

One word – growth.

Everyone who has owned a business or been involved in the financial end of a business knows how difficult it is to sustain double digit growth over a number of years.  And as the revenues get bigger, it’s even harder.  That’s what makes the continued 20% or more year-over-year growth of the FANG stocks so impressive – and so investible.  Here are the quarterly revenue growth results for the most recent quarter, all reported in the last 10 days:

If we allow AMZN to round up that’s four out of four with 20% or more revenue growth.  Just amazing.

Today’s pullback will give us an opportunity to buy some stocks that were getting short-term overbought as of Tuesday.  And I do believe that we have a strong expectation of continued move up over the next two weeks.

On Thursday of last week we got a volume spike in the S&P 500, which as you can see from previous occurrences in September, October and January, is usually a sign of a short-term market reversal:

However, something unusual happened after last Thursday’s volume spike: we had the following three days continue in the direction of the big up volume day, with all three having higher highs, lows, and closes.  This shows strong momentum.

And this pattern has only happened 30 times dating back to 1995. 23 of those occurrences, or 77% saw the market close higher two weeks later, with the average gain being 3 times greater than the average loss.

So the market remains under strong momentum, and a pullback like today just gives us a good buying opportunity.  Let’s see if the selling slows into the morning – if so, I’ll be send out some new trades that take advantage of this temporary weakness.

Great trading and God bless you,

D.R. Barton, Jr.

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