Van’s Note: Van Bryan here, Jeff Brown’s managing editor. Here at The Bleeding Edge, we focus on the latest in technology. But we also like to bring readers special insights from our friends and colleagues like expert trader Jeff Clark.
I’ve known Jeff Clark for years. And his insights on trading, the markets, and life have endeared him to thousands of readers. I’ve never missed an opportunity to have a conversation with him or listen to him speak.
And now he believes he’s found a way for traders to profit big from rare setups using low-cost stocks. He’s going to tell readers all about it at his special presentation on Wednesday, April 28. If you’re interested, I recommend reserving your spot for free by going right here.
Then make sure to keep reading for today’s essay on how to make sure you’re trading in the right place at the right time…
By Jeff Clark, Editor, Market Minute
If the past year has shown us anything, it’s that the rules of the stock market are slowly but surely changing…
And that the balance of power has gone completely out of whack.
More and more, it seems like the hedge funds and institutions of Wall Street are losing power to the little guy. Before it seemed like no individual could find an edge against Wall Street, but now the power of sheer numbers and groupthink has found a way to best them.
Now, a lot of this likely has to do with the stimulus checks that the U.S. government sent out to citizens over the last year. Since the pandemic started, any single individual earning up to $75,000 a year – already more than most folks – has made as much as $3,400… all from doing nothing but working and paying taxes in the U.S.
That’s a lot of extra cash suddenly sloshing around in ordinary folks’ bank accounts. For some, it’s more than they’ve had in their whole lives.
At the same time, those folks have watched the market climb higher all through 2020, even making new highs as the pandemic raged on. It’s only natural that they’d want to get in on the action.
In my view, this all culminated in late January, when a group of everyday people on Reddit managed to band together and send GameStop’s (GME) stock over 5,400% higher than it was at the start of 2020.
I’m sure I don’t need to recap the whole story for you. It was the top story on every mainstream financial news channel. It was practically being shouted from the rooftops at the time.
But what’s important to understand is that a group of regular people with just a computer and a keyboard were able to shake a multibillion-dollar hedge fund out of a bet against GameStop’s stock – and bankrupt it in the process.
That’s powerful. And I don’t think it’s the last time that something like this will happen.
Of course, most bystanders of the GME debacle wondered if there was a way to be in the “right place at the right time.” To be able to catch a move like what we saw with GME is more than many professional investors can say they’ve done over their whole career.
And it’s funny… Because just a couple of years ago, I devised a method to be in the exact right place, at the exact right time… And in the exact type of low-priced stocks that these newly cash-flush investors like to target.
I call it the FLIP Trades System. And it’s led to some of the biggest gains I’ve ever seen – just by buying and selling stocks.
Let me give you an example…
Take a look at this chart of GameStop (GME)…
Now, it might seem like a lot is going on here. But it’s actually quite simple…
See those three colored lines tracking along with the stock price in black?
These are “moving averages.” Traders use these to show the average price of a stock over a specific period of time. A 100-day moving average, for example, shows the average price the stock traded at over the past 100 days.
These moving averages make up the basis of my FLIP Trades system. Note that my system uses three specific moving average lines to generate buy signals. And out of respect for my subscribers, I can’t reveal exactly which ones they are today.
But what I can tell you is moving averages, with the proper arrangement, make for a strong trading tool…
In the above chart, you can see three different moving averages for GameStop. And as you can see, they’re all pretty close to the price of the stock.
Traders often use the lines as support and resistance levels. If a stock is trading above one of its moving average lines, it’s generally seen as bullish – especially if it’s over a longer time frame.
If the stock comes down to touch one of those moving averages, it’s seen as a strong support level. And vice versa – stock prices below the averages signal a bearish trend and overhead resistance.
But I look at these moving averages differently from most traders…
Take another look at the chart above, at the green circles. See how the moving averages seem to “coil” together in June? That means that the stock price is right in line with the moving average on several different timeframes. And it suggests the stock has spent a lot of time around a similar level.
In bull markets, this doesn’t happen often. Usually, a stock is trading above one or more of these lines, and they’re spread far apart. But I’ve observed that when these moving averages “coil,” it tends to signal an imminent jump higher in the stock. And when the stock price breaks above these lines, it’s off to the races…
Let’s take another look at the GME chart, a few months later…
The green circle shows the timespan we were looking at in the first chart. As you can see, the coiled moving averages acted like a coiled spring. When all the averages come together like that, the stock builds up tension, or energy.
And when some buying interest comes into the stock – whether it’s from a favorable comment from an analyst or a band of Redditors rushing in – that energy releases… And you can see the results: GME stock more than quadrupled from August to December. (Keep in mind, this was months before the GameStop story became mainstream news.)
These lines are what make up the basis of my FLIP Trades system. And I’ve been following this system for far longer than the GameStop saga. In fact, I’ve recommended trades just like this to my subscribers that went on to rise 130%, 148%, and even 158%.
And while GameStop might seem like a rare event, my research shows that 2,667 stocks soared 100% or more last year.
That’s why I created the FLIP System. It’s a way for the everyday investor to identify these seemingly rare trade setups. And even better, it’s geared toward the kind of low-priced stocks that have exploded in value over the past year.
If you want to learn how to start using the FLIP Trades system to find these types of profit opportunities, you have to attend my webinar on April 28. There I’ll show the system in action, and I’ll even give you three trade setups with the potential to double your money just for attending. Sign up right here.
Editor, Market Minute
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