3 Tools to Get Ahead of This Choppy Market
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| By Michael A. Robinson |
If ever there were a day that proved choppy trading is back again, it was Thursday, Nov. 20.
You may recall that just the day before, AI giant Nvidia (NVDA) said that in the most recent quarter, it beat on both sales and earnings.
And since this is the key stock in the market these days, the Street greeted the good news with a wave of “buy” orders.
It even led the Wall Street Journal to run a page-one story to the effect that the so-called “AI bubble” really wasn’t a thing after all.
Then, just about three hours later, the market’s headed down quickly.
The change: Some on the Street began to warn that Nvidia would have to have perfect earnings to sustain its rise.
You know what happened next.
Wall Street went into full freakout mode. With tech leading the decline, stocks sold off pretty much across the board.
What we need at a time like this are a few ways in which we can turn choppy trading to be more in our favor.
Not to worry. Today I am going to share three tools to enter new stocks and at the same time protect your portfolio from any sell-off.
So, let’s get started:
Choppy Market Tool No. 1: The Cowboy Split
I’m shocked more professional investors don’t know about this powerful moneymaking tool.
But it’s one my readers use all the time.
Simply stated, the Cowboy Split is a split-entry system.
You take a position in a stock at market prices — and then enter a “lowball limit” order to buy more if a discount comes your way.
In general, I recommend employing a 15% to 20% discount from your entry price as a second “buy” point.
Here’s how it works …
You acquire 50% of your intended stake of XYZ Tech Corp.at a price of $50.
In this case, should the market trigger your “lowball limit” order, you would automatically buy a second 50% stake at $40 a share, for an average price of $45.
Now assume XYZ rallies all the way to $60. You would then have 16.6% appreciation on your original shares.
But it’s that second stake that really juices your profits.
See, that second half’s gains are double those of your first buy.
This way, you end up with overall gains of 25%, or roughly 50% more than if you had just bought your full stake at $50.
My readers used this to perfection last year with AppLovin (APP).
After opening half their position on July 3 for $85.65 per share, they set a lowball order to buy more.
A month later, on Aug. 5, that triggered. So, they bought more shares at a much lower price.
Then APP skyrocketed.
My readers were able to close the first half of their position for a gain of 289%.
But because of this strategy, they actually netted an overall return of 363% — an extra 74 percentage points.
Choppy Market Tool No. 2: The Free Trade
Whenever a stock doubles in value, you can take a free trade and lock in gains.
That’s a “sell” order for half of your stake.
Doing so means you have all your original capital back and are then playing on the house’s money.
It’s a powerful way to protect profits against an unsettled market with two side benefits.
- First, you can end up owning a suite of stocks for free.
- And second, you stay in the position to reap any new upside.
To me this is particularly appealing for stocks that show rapid appreciation in a market like we have today dominated by a few names.
As I noted a moment ago, a retreat by a famous name could well spread to other stocks.
If you want to put this on autopilot, that’s easy to do.
You set a limit order to sell automatically half the holding when the stock hits returns of 100%.
We did this earlier this year on Sanmina (SANM). My readers locked in a 100% gain on half their shares, giving them a free ride on the other half.
Choppy Market Tool No. 3: Lock in Gains with Trailing Stops
These days, when I talk with investors, a lot of them seem worried about their profits and what might happen if the market reverses.
I get it. After all, we have been reaching record highs for some time now.
And the old adage that “what goes up, must come down,” is giving them some anxiety.
Remember this fundamental investing rule: There is no such thing as perfect timing.
That’s why I advocate in conditions like we have now to lock in gains and get on with your life.
This may be the simplest tool of all: trailing stops.
By that, I mean you decide how much of a reversal you are willing to take in advance and then use that as a trailing stop, with 20% as a good rule of thumb.
It’s easy to do.
You simply tell your broker to put in a 20% trailing stop, good till cancelled.
That way if the stock reverses by that amount, you automatically exit with most of your profits still in hand.
My readers also took advantage of this tool with Sanmina.
You see, they had a free ride on the second half of their original position. And shares kept going up.
So, we added a trailing stop on those remaining shares. When that triggered, they closed the second half of their position with a gain of 127.3%.
You can see that by using our Choppy Market Tools, you can keep on investing in winning tech stocks and know that you’re prepared for anything the world throws your way.
And you won’t drive yourself nuts on the road to wealth that is paved with tech.
Best,
Michael A. Robinson
P.S. These tools are extremely helpful. But they only help with portfolio management. You still need to have the right ideas in place.
Fortunately, I can help with that. I just put together a series of reports about the companies with the right partnerships for the next leg of the AI boom.
Watch this brand-new presentation until the end to find out how to get them.
