Greatness is blinding…
The blazing Nasdaq, fresh from its best January since 2001, refuses to cool down.
Fed Chairman Jerome Powell did his part on Wednesday, Feb. 1, by dumping gasoline into the fire. Right now, they’re winning the war against inflation, and some market pundits believe we might even see rate cuts in the back half of the year.
If you’ve been following the work of Mark Skousen, you’re probably smiling from ear to ear. On Jan. 9, he recommended Tesla as a buy when the stock hovered around $119 per share. Six days prior, Tesla shares had dropped by 13%.
While the mainstream talking heads were discussing a further decline in Tesla, Mark told his Fast Money Alert subscribers…
“Remember that money loves to flow into stocks that have been bloodied because, as we mentioned before, that is when you can see some big rebound gains.”
Most people who fail to make money in the stock market are too emotional. They want to buy when stocks are raging… and dump them when they’re crashing.
However, if you’ve read Mark’s book, “The Maxims of Wall Street,” you know that’s not how the game is played.
“Invest at the point of maximum pessimism.” — Sir John Templeton (pg. 43)
“Buy when blood is running in the streets.” — Baron Rothschild (pg. 45)
“Unless there’s fear in buying a stock, you can’t make big money.” — Robert Wilson (p. 49)
Buying high-quality stocks when they are oversold is a recipe for profit.
With tech giants soaring past their lows, Wall Street is buzzing with revitalized confidence.
Animal spirits are back…
The focus is no longer on growth, revenues or future earnings…
It’s on crappy, unprofitable stocks with massive short interest.
That’s right… it’s the revenge of the turds.
Companies like Carvana (CVNA), Lucid Motors (LCID), Coinbase (COIN) and Peloton (PTON) are hemorrhaging money…
Yet traders are scooping up these stocks as if they’ve discovered a cure for cancer.
It is easy to get caught up in the hype…
But we’ve seen this enough times to know how it will end.
As Jim Woods pointed out to readers of his Eagle Eye Opener service…
“We’d still stick to adding exposure to the super caps and established tech businesses such as MSFT, GOOGL, INTC, AMZN, AAPL and CSCO, as opposed to the super-growth/no-earnings names.”
Despite the massive surge in stocks this week, Jim believes there’s plenty of uncertainty. He thinks the chances of a hard landing are higher than the market expects or has priced in.
That doesn’t mean you should get bearish or sell your stocks…
…but it wouldn’t hurt to get cautious after a monumental rally like the one we’ve just had.
Of course, all eyes will remain on the Fed and its rhetoric.
But we can’t underestimate the stupidity of this administration.
With Biden at the helm, optimism is hard to muster.
And let’s not forget about the debt ceiling, which has the potential to trip up the markets.
But for now, it’s important to watch your stock levels. Several of them are reaching overbought territory.
If we’re truly in a new bull market, then we should expect some consolidation or even a slight pullback in the near term after this recent rally.
If you’re looking for a way to play this action, one of the best ways to do it is with options.
Because it allows you to define your risk in advance and set you up for the potential for explosive profits…
Like Austin, Texas-based trader Jon Johnson, who directed his Technical Traders Alert readers to his Jan. 31 BUY on Tesla.
(Mark Skousen wasn’t the only Eagle analyst to ring the register on Tesla this past week.)
More specifically, Jon recommended the April 21 call option, selling for $20.86, with a $175 strike price.
Two trading days later, Jon hit his upside target, selling half his position with a 65%-plus gain.
We’ll take that two-day trade any day.
Until next time,
The Wealth Whisperer Team
IN CASE YOU MISSED IT
(HEARD THIS WEEK AROUND EAGLE FINANCIAL)
We can’t forget Bryan Perry’s Breakout Options Alert, which delivered an 85% winner in Pinterest calls in under 24 hours.
If you asked investors what their dream start for 2023 would like… it wouldn’t be far off from what we’re experiencing now.
But we’ve now reached overbought conditions. Don’t get sucked into the dash for trash. Stay disciplined and remain cautious.