By Teeka Tiwari – Creator: ETF Master Trader
The hardest thing you may ever have to do as an investor is to teach yourself how to buy stocks when they are down.
How many times have you said, "as soon as the pullback comes I’m buying in"?
How many times did you actually buy?
If you are like most investors, the volatility probably scared you off, and that great deal you were looking for on that hot stock came and went without you doing a single thing about it.
“I’ll get it next time” is the phrase that probably went through your head.
Don’t feel bad, because I would tell myself that same lie all the time. That is, I used to… until I stumbled upon and started using a very simple strategy.
This strategy guaranteed that I would never again miss a compelling buying opportunity. It has allowed me to profit from panic sell-offs, flash crashes, and just good old-fashioned bad news.
The most enjoyable part of it, though, has been that it’s worked for me when I’ve been out of the country and nowhere near a computer or phone. It’s even worked for me when I’ve been asleep.
It’s made my trading life easier, stress free and much more fun, and I look forward to revealing it to you in a moment. When I do, you’ll be floored by its simplicity.
Over the past two weeks, the editors of The Tycoon Report have been fervently warning you against an impending pullback. Our former options floor trader Costas Bocelli wrote an excellent article last week highlighting a dangerous divergence between the DOW Industrials and the DOW Transports that typically precedes a general market pullback.
Now that we are pulling back, I’ve discovered two stocks that are worthy of your attention. One of them you can buy right now, and the other is going to need the application of my special strategy.
Above is the chart of GDX, an ETF made up of large and well known gold mining stocks. At the time of this writing, the stock is at $52.07.
If I’m right on gold, I think you see GDX hit $65 this year. If I’m wrong, I’d use a $48 stop loss. So you’re risking $4 to make $13. This is the trade that I think you can move on right now.
Now let’s talk about why gold is down, and why I think it’s going higher.
Gold prices have been hammered on two pieces of news: Ben Bernanke’s lack of discussion of QE3 at his last congressional appearance, and a resurgent US Dollar.
The Dollar has rallied on fears that Thursday’s Greek debt-restructuring agreement will not be approved. But here is the good news: If the Greek restructuring fails, markets will tank and will require even more quantitative easing.
More QE means more money printing, and that means Dollars and Euros get devalued. When paper money gets devalued, what happens to hard assets like gold? They go up, that’s what happens!
Today’s second trade — the one for which you can use my simple strategy — could be a perfect fit for those investors looking for some income without taking the outlandish risks that the bond market currently represents.
Above is a chart of GE. Over the last two years, the stock has traded sideways and offered very little in the way of excitement. This is exactly what you want to see in an income producing stock.
I know many of you use bonds for income and, if you’re in the market to buy bonds right now, you must ask yourself if a bond can protect both your income and your principal from the ravages of inflation?
It can’t, and that’s what makes blue chip, high divided paying stocks like GE so compelling for investors seeking income.
Given that GE survived the 2008 financial crisis, I am confidant that GE can survive virtually anything. Let me be very clear though: I would not buy GE right here, right now. Even though it currently sports a 3.64% dividend, it is not a buy yet.
What it is, though, is a perfect candidate for my simple strategy.
Here’s the way to play it…
I’d split my buy into two entry points — one at $17.50 and the other at $15.50. These prices are far below the current market, and there is no guarantee that that you will get them. There is also no guarantee that, even if they do hit these prices, you’ll have the courage to buy them, which is why my simple strategy is go great.
All you have to do to put the simple strategy to work for you is to use a Good-Till-Cancel Buy Limit order.
See, I told you it wasn’t earth shattering, but its impact on your portfolio and your investor psyche could be.
By using a Good-Till-Cancel Buy Limit order, you set the exact price at which you’re willing to buy ahead of time. You put the order in, and then you can forget about it. Your brokerage firm will automatically segment funds from your account to cover the trade should it get hit. This way, you don’t have to worry about spending more than you have.
Call your broker and make them walk you through how to use this order type on their trading platform, because once you learn how to use this simple strategy, you will start feeling like Warren Buffett!
Because unlike before, when you were held in the grip of market fear, now you’ll be dictating exactly when you buy. You’ll be putting the manic depressive Mr. Market to work for you the exact same way Mr. Buffett does.
Editor, The Tycoon Report
Creator, ETF Master Trader System
Creator, Sector Hunter
Teeka Tiwari epitomizes the American Dream. He came to the United States from England at sixteen with just $150 in his pocket and the clothes on his back. By eighteen, Teeka had become the youngest employee at Lehman Brothers, and two years later he shattered convention by becoming the youngest Vice President in the history of Shearson Lehman.
By the time he was 23 Teeka had made and lost a million dollars. At 27, he was a millionaire several times over.
In June 2005, Teeka co-founded the Institute for Individual Investors and created Point & Profit, the trading service. Point and Profit made his wealth-building acumen available to the average individual investor for the first time.
Since then, Teeka has been developing and perfecting the ETF Master Trader System, an interactive education program that teaches a complete Sector Trading investment methodology, and gives ordinary investors the confidence they need to master the markets using Exchange Traded Funds.
In June 2008, Teeka launched Sector Hunter, the world’s first fully-automated ETF trading technology. Sector Hunter provides individual investors with an institutional quality tool for identifying big money moves in 46 narrow sector groups, and then selecting those ETFs and stocks best positioned to yield profits from the move.
Teeka is a regular contributor to FOX Business Network, and has appeared on FOX News Channel, The Daily Show with Jon Stewart, and international television networks. He manages a hedge-fund which is closed to new investors.
Teeka’s recent Tycoon Report articles can be found below.