Here’s a short trading lesson on knowing when to pay and protect yourself.
So, you’re already familiar with the Magnificent Seven stocks.
- Apple (AAPL),
- Microsoft (MSFT),
- Alphabet (GOOGL),
- Nvidia (NVDA),
- Amazon.com (AMZN),
- Meta Platforms (META) and EV giant Tesla (TSLA)
These are the seven biggest stocks by market capitalization.
And when one or more gets downgraded, the market tumbles. This is precisely what happened after Barclays downgraded Apple (AAPL) last week.
The market rolled over following news of the downgrade. However, if you knew when to buy and sell, you could’ve cleared significant gains off the table.
For example, take a look at the chart below.
(It chronicles the story of what happened and how you could’ve played it).
(1) represents where the market tumble began in August 2023.
(2) shows where the recovery started / in late October 2023.
From (2) to (3), you can see at least two great entry points where you could have bought Apple on the upward surge for pennies (using options).
Now, you’re probably looking at (3) and thinking that has to be where the market gapped down following news that Barclays had downgraded Apple.
In other words, you could’ve done the needful upon the news release, right?
Not really, because the downward trend started before the downgrade.
And taking action after the news release would’ve cost you a lot of money.
So, how would you have known the right moment to exit the rally?
That’s where the final piece of the puzzle falls into place.
All you need do is look at the arrow running from (1) to (3).
That’s one of the straightest lines you’ll ever see on a stock chart.
It tells you clearly where sellers took control before (1)…
And very importantly, where they’ll likely retake control (3).
In other words, as buying picked up pace and the rally approached that level on (3), you could’ve used the above insight to take profits and protect yourself.
This simple art of paying and protecting yourself is at the core of what we do with our Hawkeye trading service (knowing when to enter and exit a rally).
And once you master it, you can consistently double the market’s returns.
For more insight, use the ideas in this video for your next big trade.
Wishing you many blessings,
Anthony Speciale