Two Key Move to Make Now for Big End-of-Year Profits
Editor's Note: Market volatility over the last several days — and even since the start of August — may have your portfolio looking like a seesaw — going up and down. But you shouldn't expect stocks to trade this way forever. Jason Bodner — the inventor of the Quantum Edge investing system — has some advice for moves to make to be prepared for what he sees next. Today's TradeSmith Daily issue first appeared in Jason Bodner's Power Trends.
I'm a dog person, but I feel a little bit like a mouse right now.
That's because of the old saying…
When the cat's away, the mice will play.
Well, most of Wall Street is away right now. I talked to several of my friends who work on Wall Street last week, and not one of them was in the office.
When Big Money is on vacation, we get lower volume and higher volatility.
We're also in August, which along with September are the two worst months of the year for stocks.
So why would I want to "play"?
Think of it more as a strategy game.
Now is the time to get in position for the fourth quarter, which is historically the best quarter by far. And there are other catalysts lining up this year that point to an unusually big finish to the year.
With Big Money traders tanning themselves at the shore, smart investors can swoop in to position themselves to make the most of what's coming.
That's what we're doing right now in my investing services, and it's a simple two-step strategy:
Take some profits.
Pounce on great stocks at lower prices when you get the chance.
With Nvidia's dominance in AI, its trailblazing technology, and the escalating demand for AI applications it makes a robust candidate for continued growth.
But if you feel like you missed out on Nvidia's meteoric rise, and you don't want to wait around for a pullback, there are smaller players out there ready to breakout...
Notice I said take some profits. I don't mean sell everything. This is not about going to cash.
I would focus on your biggest gainers, whether you sell all or some of your shares, as well as stocks that may be lagging and whose potential is not what it was when you initially invested.
We recently put this strategy to work in my Quantum Edge Pro service when we sold five stocks.
The five stocks we sold included four big moneymakers and just one loser:
Arch Capital Group (ACGL): 49.2% overall returns
Axcelis Technologies (ACLS): 34.2%
Federated Hermes (FHI): -14.1%
Monster Beverage (MNST): 15.5%
Vertex Pharmaceuticals (VRTX): 20.6%
This is exactly what we aim for and expect. The goal of my Quantum Edge system is to crank out a lot more winners than losers… and to have the winners be a lot bigger than the losers. Our winners averaged 30% gains, with our one loser down 14%.
You can't help but succeed if you keep doing that.
It's also in keeping with my system's historical win rate. Through extensive back testing and years of "real world" use, I expect to make money about 70% of the time. In this case, 80% of the stocks we sold were in the green.
If you're looking at a similarly successful portfolio, first of all, congratulations!
And secondly, consider locking in some of those gains.
I want to be clear that we did not sell these stocks because they suddenly became bad investments. In fact, we may get back into some of them if they continue to rate exceptionally high — but pull back enough to give us some juicy bargains in the August and September volatility.
We sold simply because it's smart portfolio management.
Selling these stocks accomplished two things…
Reduced our overall risk in these historically volatile months
Raised cash for us to put right back to work in the market's best stocks that dip in the summer slowdown.
These are not bad summer strategies most years, but they are especially important this year because the fourth-quarter surge could be powerful and profitable.
As we go through the next couple of months, some of the best stocks in the market will fall to prices that are too good to pass up.
You want to start by identifying those elite stocks with the highest moneymaking potential.
These are the companies I've programmed my Quantum Edge system to help me find. These are the stocks with superior fundamentals, strong technicals, and Big Money flowing in.
These characteristics led us to the stocks we just made money on, and these are the characteristics that produce the high win rate that's possible with a data-driven approach to investing.
I have a watch list I'm following closely for my Quantum Edge services. I update it every day, depending on how the ratings change and which stocks are getting closer to where we want to buy.
I can't give you that information, but I can give you a sector to consider. And I think it will surprise you.
My system analyzes and ranks sectors the same way it does stocks. We can tell which sectors have the best fundamentals, technicals, and Big Money inflows.
As you would expect, tech has been the strongest sector for months. It continues to score well but now ranks third in my system. Discretionary stocks rank second, and the current leader is a bit of a surprise…
Source: MAPsignals.com
Energy has surged to dominate all other sectors thanks to oil prices popping from the $60s in June to the $80s today.
Our system picked up the explosion of big buying in energy stocks in that time, which are the green bars on the chart below.
It's the most Big Money buying we've seen in energy since 2022… and with very little selling (the red bars).
Source: MAPsignals.com
Energy looks as if it may lead higher for a while, so you may want to do some digging there.
TradeSmith is not registered as an investment adviser and operates under the publishers' exemption of the Investment Advisers Act of 1940. The investments and strategies discussed in TradeSmith's content do not constitute personalized investment advice. Any trading or investment decisions you take are in reliance on your own analysis and judgment and not in reliance on TradeSmith. There are risks inherent in investing and past investment performance is not indicative of future results.
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