Things have been mostly steady in the markets this week. Our pivot number (3645) stayed put pretty much all week. It’s probably a good thing, to be honest, to see the waters calm just a tad. I’m still feeling great about December. Especially what’s to come for some of our favorite stocks.
Speaking of steady – before I get to the next set of rules, I want to take a moment to share a brand new service for folks who like steady income…
It’s called the Small Stock Growth Formula. We’re looking at 150 of the best performing small stocks in the markets, and in our portfolio, we will keep the ten with the best chance of outperforming. The stocks are all cheap. And right now, the portfolio is showing a 69% annualized return, which is nothing to sneeze at. Anyone who signs up can use any dollar amount they feel comfortable with to grow their Small Stock Growth Portfolio.
We’re going to do live classes for everyone who signs up – the first one is happening two weeks from Monday. We’ll use our live sessions for some training and also for setting up and managing our portfolio. We’ll discuss how to screen stocks for growth and the health of their dividend.
Since we’re just getting started with this portfolio, we’re offering it at a special price for a limited time. Click here if you’d like more information.
Without further ado, let’s take a look at the next five rules for successful trading…
6. Relationship Trading
Successful trading is all about spotting patterns. That doesn’t mean looking at one chart and making a quick decision based on what you think you see. Rather, it’s about seeing the same pattern in many charts. We want these patterns to coincide. We don’t want to see outliers.
Here’s an example: Imagine you’ve got your eye on FedEd (NYSE: FDX), and you see a pattern that you like. But then you look at the transportation index… and it’s showing the exact opposite. That’s a bad sign. We call that divergence. Successful traders act when the patterns run together.
7. Seasonality
Here in Florida, we see a lot of people from up north showing up this time of year – from New York, Massachusetts and other cold places. We call them “snowbirds.” Some of them come after the holidays. But NOBODY comes in the middle of July. There’s no cold for them to escape that time of year.
The stock market has its own seasonality. Certain companies are a ‘buy’ in some parts of the year and a ‘sell’ in other parts of the year. Every. Single. Year.
Hershey (NYSE: HSY) for example. It’s a ‘buy’ in December and a ‘sell’ in May. Almost like clockwork. That’s just how the chocolate eating season goes, and it’s reflected in the share price.
8. Law of Divergence
This is something I’m looking at all the time when I check in on the ‘Seven Sisters’…
What’s gold doing? What’s silver doing? How about the bond market? And the S&P 500? And Nasdaq? Are some markets going up while others are going down? Pay attention to these. What are these divergences trying to tell you as a trader?
The more you get in the habit of checking in on the Seven Sisters, the better you’ll be at recognizing and understanding divergences. At that point, great trading decisions make themselves.
9. Hot and Sizzling
Successful traders are always aware of which stocks are performing the best at any given moment. What are the stocks that are high and going higher? I call them ‘hot and sizzling.’
In many cases, there can be opportunities to get in on the action. Sometimes they can tell us something about the broader markets – and perhaps even point us to where overlooked opportunities might be hiding.
10. Opens and Closes
Being conscious of where stocks (and broader markets) are opening and closing every day. Whether you are making trades every 30 minutes, every hour, every day or may just every month, it’s crucial that you learn about the opening price. The open price tells us where the race is starting every day. Note that the opening price is not necessarily where the stock closed the previous day.
Keep these rules in mind to make the most of all the great opportunities this December. I for one am fully invested because I do think we’re going to see higher prices. So stay alert.
And like I always say…
I’ll catch you on the flip side.
Tom
P.S. As a reminder, we’re just getting started with our Small Stock Growth Formula. The portfolio is showing 69% annualized returns… but we’re expecting it to move much higher as we get going. It’s a great way to rake in some steady income – and it’s also an educational opportunity.
Since this is the first week, we’re offering it at a special discount. Follow this link if you want to be part of this exclusive opportunity.