Wall Street is finally catching up to me.
And I have to say, it feels great.
See, since late last year, I’ve been one of the few analysts out there saying there is no need to fear a recession this year.
After all, the economy is in overall great shape.
Unfortunately, the recent escalation of trade tensions between the U.S. and China has many investors on edge.
We’ve seen stocks declining broadly on profit taking after a huge run up for the S&P 500, which gained 17.5% this year through May 3.
But a headline last week in the Wall Street Journal says it all – “Despite Markets’ Jitters Over Trade, Signs of Longer-Term Fear Are Few.”
I couldn’t agree more. Fact is, this remains one of the all-time best periods to be invested in market-crushing tech leaders.
What many investors need right now is to take the long view and use the right tools to manage your portfolio.
With that in mind, today I want to show you my three Trade Tension Tools…
What the Trade War Means for Investors
We are literally living in one of the nation’s great economic booms. Our jobs market is the best we’ve seen since 1969.
And new data from the federal Department of Labor shows the number of Americans seeking jobless assistance also is at a 50-year low. And first-quarter GDP for the U.S. was up 3.2%.
I bring all this up to prove a point. While trade tensions between the U.S. and China are high right now, the impact of it all would be a blip for our huge economy.
We’re talking about tariffs on about $200 billion in Chinese goods. By contrast, the U.S. economy is worth about $19 trillion, which is a stunning 9,400% larger.
As the Wall Street Journal article I mentioned made clear, professional fund managers are very optimistic for the market overall. And consumer confidence about the economy remains at a 15-year high.
Now, the market does seem to be discounting growth on fears of slowing trade and the impact on GDP. The Dow and S&P are both off more than 3%. The selling so far is pretty broad based, with the Dow and S&P both off by nearly 4% since April 30. The Nasdaq is down 5.4% over the period too, but part of that has to with profit taking after a blistering first quarter, and the fact that healthcare and biotech are out of favor on Wall Street.
Here’s the thing. Tech is still strong.
Right now, there is no tech sector singled out as up or down based on the battle. It’s more confined to individual firms with broad exposure to China as a source for products or components. That does mean some hardware firms like Qualcomm and Apple could get hurt. And chip firms with exposure to Huawei would be more inclined to have issues than, say, a “fabless” semi-conductor firm that doesn’t manufacture its own chips.
That leaves a lot of tech territory open for growth… I’m talking firms operating in the cloud, big data, fintech, medtech, software, telecom, e-commerce, and cyber security.
In other words, this is a short-term squeeze on stocks. What savvy investors need are tools to manage their way through all this choppy action.
With that in mind, I have put together three Trade Tension Tools. Take a look:
Trade Tension Tool No. 1: The Cowboy Split
I’m shocked more professional investors don’t know about this powerful moneymaking tool. But it’s one we use here all the time.
Simply stated, the Cowboy Split is a staggered-entry system. You take a position in a stock at market – and then enter a “lowball limit” order to buy more if a discount comes your way.
In general, I recommend employing a 15% to 20% discount from your entry price as a second buy point. Here’s how it works…
You acquire 50% of your intended stake of XYZ Tech Corp., at a price of $50. In this case, should the market trigger your “lowball limit” order, you would automatically buy a second 50% stake at $40 a share, for an average price of $45.
Now assume XYZ rallies all the way to $60. You would then have 16.6% appreciation on your original shares. But it’s that second stake that really juices your profits.
See, that second half’s gains are double those of your first buy. This way, you end up with overall gains of 25%, or roughly 50% more than had you just bought your full stake at $50.
Trade Tension Tool No. 2: The Free Trade
Whenever a stock doubles in value, take a free trade and lock in gains. That’s a sell order for half of your stake. Doing so means you have all your original capital back, and are then playing on the house’s money.
It’s a powerful way to protect profits against a choppy market, with two side benefits. First, you can end up owning a suite of stocks for free. And second, you stay in the position to reap any new upside.
Let me give you two classic cases of just what I’m talking about. At my monthly newsletter, the Nova-X Report, we took a free trade on a cyber-security leader on May 21. That was our second free trade in less than three months.
So, while many investors were struggling, my members were making big money by employing this and the other tools we’re talking about here.
And these free trades were not isolated cases. In all, Nova-X members are holding seven stocks, or 25% of the portfolio, for free.
Trade Tool No. 3: The Autopilot Profit System
Whenever possible, set yourself up so that you exit a position with specific gains, no matter what happens.
That’s where the “Autopilot Profit System” comes in handy. It’s a unique way of protecting profits with a combination of taking gains and using trailing stops.
It’s a great way to take some money off the table if you want to protect gains before a free trade would kick in. The tool works like this…
Let’s say you sold a portion of XYZ Tech when it was up 30%. Now, you can afford to see if the stock sill has more upside, while at the same time protecting your profits against any reversal.
In this case, you could set your stop at your original entry point, and walk away with combined gains of 15%. Or you can set the trailing stop above your entry price to lock in more money.
The beauty of the system is that you set up your minimum profit figure in advance. After that, there’s no need to worry about what happens, because the Autopilot System is protecting your hard-won gains.
I use this all the time when my members get a free trade. We often set a 50% trailing stop on the second half, so we walk away with combined gains of 75% no matter what happens.
You can see that by using our Trade Tension Tools you can keep on investing in winning tech stocks — even at this rocky market – and know that we’re prepared for anything the world throws at us.
And you won’t drive yourself nuts on this road to wealth… paved with tech.
A New Way to Invest
Before I go, I want to introduce you to the newest member of the Money Morning team, Garrett Baldwin. Garrett is a 38-year-old MENSA self-made millionaire.
He didn’t gain his fortune through an inheritance, or because of luck. Nope. He owes it all to what he calls “The Quantum Loop.”
Ten years ago, he was dirt poor. Now, he’s living a life of extreme privilege, thanks to the technology that’s been eight years in the making.
Cheers and good investing,
Michael A. Robinson