If you’re an investor, I have a warning for you. There’s a lot more pain ahead for many of the most popular stocks you might hold in your portfolio.
In short, I suspect there could be another significant correction coming for the broader market, especially in tech stocks.
Even more hawkish statements from Federal Reserve members leave me nearly convinced that a 0.50-point rate hike is coming, and soon. And I firmly believe that a 0.75-point hike could also come in the next few hikes.
Moreover, I don’t think enough tech investors are pricing this in, and to me that’s a recipe for disaster, especially given additional technical indicators I see in the Nasdaq chart.
Over the past three months, we witnessed three distinct double tops in the Nasdaq chart (black circles):
Now, this capitulation in the tech-heavy Nasdaq would normally lead to a retracement toward previous highs around 16,000, but with the headwinds of rate hikes looming, I think we’re about to see a fourth double top for the Nasdaq before we break back toward 12,500.
I see a very similar pattern shaping up in the S&P 500, which I typically describe as a basket that’s part growth stocks and part value stocks. Very much like the Nasdaq, I see numerous double tops that have formed, and we could be due for a fourth leading into the next rate hike.
I also see similar patterns manifested in the Dow year-to-date chart as well. Once again, we have a pair of clearly defined double tops (black circles). The subtle difference is I do not see a well-defined third double top like I do in the S&P 500 and Nasdaq charts. March’s action looks more like a coiled spring pattern, which is a bullish breakout indicator.
If the money flows are going into the Dow and away from the S&P 500 and Nasdaq, this indicates the market anticipates defensive stocks to outperform. With a flattening yield curve in front of us, stagflation a real concern, and a real threat of a global conflict, hedging for a recession is exactly what the smart money is doing.
You should do the same!
All it will take is a bit of headline noise to kick off more selling, and I won't be convinced the risk of another correction (or worse) is over until the major indexes retrace back to their February levels.
But here’s the real kicker: I’ve managed to give my Naked Trades subscribers the chance to open and close numerous trades that have locked in multiple double- and triple-digit gains since the beginning of the year, all while the broader market collapses around us.
How do I do it? It starts with deciding whether I’m making an investment or a trade.
Investors Are Getting Destroyed, but Naked Traders Are Getting Rich This Year
One of the most important distinctions we need to make before putting new money into the market is whether we’re making an investment or a trade.
A lot of people use these terms interchangeably, but they are very different concepts that require vastly different approaches for success. A trader’s portfolio could look very different from an equally successful investment portfolio.
The big difference between the two approaches to the market is time. The time you spend in a trade is usually much shorter than the time you expect to spend with an investment.
Investments are held for a period of years or even decades, taking advantage of passive income generators like interest and dividends or stock splits along the way. Of course, in the long term, markets inevitably fluctuate, but investors will “ride out” the downtrends with the expectation that prices will rebound and eventually retrace to much higher levels than before.
Trading involves more frequent transactions over shorter periods of time. The goal is to generate returns that outperform buy-and-hold investing. While investors are usually content with annual returns of 10%–15%, a trader will look to gain 10%–15% in returns each month.
And I look for even higher returns month to month.
That’s why in this year alone, the Naked Trades army and I have closed out trades for 206%, 125%, 55%, 158%, and, just this week, 94% gains!
These trades are all closed at this point, so don't jump into them now (some have already expired, so you can’t anyway).
But if you’re into this trading thing — meaning you don’t want to wait three years to lock in triple-digit returns and you want to minimize your risk on each trade, all while having the very real chance to earn up to 49x greater returns than investing in traditional stocks — I have something just for you!
But first let me ask: Would you spend $86 to make $340?
The reason I ask is because this is exactly what traders who use my Asymmetric Profits system were able to do just a few months back. It was a trade I uncovered in the world’s most popular coffee brand, Starbucks (NASDAQ: SBUX).
But here’s the really cool thing for any reader who multiplied their investment: They also exponentially increased their returns. For example, in this same trade, if you had invested $860, it would have become $3,400, and an investment of $8,600 would have become $34,000!
All from just a single small trade made at the right time with the right asset.
Take my most recent closed trade, a 94% gain on Baker Hughes Co. (NASDAQ: BKR) that we closed out just yesterday. Betting $100 on this trade would have given you a total of $194; $1,000 would have turned into $1,940; and $5,000 would have turned into a total of $9,700!
That’s the kind of money that could seriously change your life in just a few trades.
It could insulate you from ever worrying about the things most people have to worry about: retirement, your future, your kids’ futures…
This is hands down the best way to trade the markets I've ever seen, no matter if they're bearish, bullish, or flat.
To your wealth,
Editor, Energy and Capital