Today, I wanted to give you a sort of mid-month update on one stock to add to your buy list — a tech stock.
In our October Monthly Market Outlook, I had my eye on the utilities sector to bounce back.
So far, it hasn’t been outperforming the S&P 500. It still has some time to play out, though, so don’t give up on those stocks yet. You can keep American Electric Power Company (AEP), Xcel Energy (XEL), and Eversource Energy (ES) on your radar.
That doesn’t mean those haven’t been good trades, though. Chris says he made 109% buying call options on XLU after our Outlook. And Mike did just as well buying call options on AEP.
But now I have my eye on this red-hot sector. It’s everyone’s favorite, and according to my Profit Radar, you want to keep an eye on these stocks in the coming weeks.
My Profit Radar’s Favorite Tech Stock
Regular readers know that my Profit Radar is a finely tuned and proprietary version of the Relative Rotation Graph, a common trading tool.
It’s great at spotting turning points for sectors and stocks. And I use it for various strategies across my trading advisories.
But in our monthly outlooks, I take a different approach.
For our Monthly Outlooks, we’re looking for sectors in the market that are building bullish momentum — coming out from lagging the market, and expected to be leading the market in the coming weeks.
And right now, the Technology Select Sector SPDR Fund (XLK) is in the perfect spot. It’s set to outperform the S&P 500 in the coming weeks.
XLK was lagging the market (red quadrant), but recently broke into improving (blue). As it makes the move into leading the market (green), we’re likely to see outperformance in the tech sector.
The slingshot effect comes after we identify that sector — tech stocks right now — and dive deeper into it to spot the stocks set to slingshot past the underlying sector’s performance.
To do this, I take the stocks that make up XLK, and look at them on my Profit Radar relative to the XLK as the focal point.
After taking a deeper look into XLK, the one stock in the best position for profits in the coming weeks is Applied Materials (AMAT).
This stock is lagging the sector right now, but is set to improve and eventually lead it.
With the tech sector already in the improving quadrant, it’s the perfect time to pick up stocks that are just beginning to turn. This will allow us to capture the full ride from lagging the market, to leading it, which will maximize our profits.
Since these are daily charts, these plays tend to happen in a matter of weeks.
So we can expect AMAT to lead the tech sector higher, as the tech sector leads the broad market higher, over the next two weeks.
I’ll recap how this performs in our next monthly market outlook.
For now, this is another stock you definitely want on your radar in the month of October.
When this lines up — where we spot the sector set to outperform the broader market, and then the stock that will likely outperform the sector — this creates a major slingshot effect that boosts our gains.
Chad Shoop, CMT
Editor, Quick Hit Profits
Chart of the Day:
This Is Where You Buy
and Sell Bitcoin
I’ve been working on an exit plan for the crypto markets lately…
Not because I think we’re anywhere near the top. I just think it’s prudent to have an idea of when to sell these assets when the time comes, because it’s often so hard to tell when that time is.
I missed the top in the 2017-2018 bull market, for example. I got greedy. And even though I had multiplied my money nearly 100 times over, I didn’t sell. I was convinced we were in the middle of a new paradigm, and it would just keep going up.
That didn’t exactly pan out. So I held through the years of bear market that followed.
Not this time. This time, I have a plan.
Take a look at the above BTC chart. I marked two purple “zones” on the Relative Strength Index (RSI), on the top and bottom, isolating conditions where BTC usually tops out on a long-term, macro perspective.
Where the RSI peaks inside the top zone, I added a red vertical line to the price chart — that’s a sell signal. Where it dipped into the bottom zone, I added a green line — a buy signal.
This system is far from perfect — it churns out potentially too many buy and sell signals, making it unclear when to buy or sell a full position. I also expect it not to work forever, at least in this configuration, as the crypto markets will eventually mature and stabilize.
But you gotta admit, this does get you into and out of BTC at key price levels.
In 2017, for example, this chart would’ve had you selling bitcoin after the first major run up in June, and again right at the blow-off top in December.
Then you would’ve bought back into bitcoin just before and right after the 2020 pandemic crash, putting you in a fantastic position to profit.
Then, you would’ve sold that December and the following February, locking in some of the highest prices bitcoin would see for months.
I’ll keep an eye on these RSI zones and let you know if I think it’s time to start selling some crypto. Right now, the RSI has plenty of room to run before we enter either zone.
Managing Editor, True Options Masters