My bedtime routine is simple.
After enjoying the evening teaching youth group, watching a show or two with my lovely and talented wife, or catching up on some reading, it's time to hit the hay.
But, remember, I love to trade, so no evening is complete without a last look at the trading. Right before I run upstairs and tuck in for the night, I stop by my computer screens and make a quick run-through of the markets.
Nothing too sophisticated.
I check the S&P 500 overnight trading. Then I look at the markets in Japan and China to see what's happening there.
Lastly, I'll run through a few commodities like gold, silver, and oil to see how they're trading in the overnight markets.
But, as it happens, on the night of May 4, at the end of my scans, I saw that something odd and extremely profitable (to the tune of 117% and 132%) had happened.
Something I'm always looking for to make us money.
Now I want to show you what, because it really drives home the tremendous profits possible when you're reading charts and looking for market extremes.
A Lot of Excitement in a Dull Market
In these choppy, "sideways" times, with uncertainty creeping in around the edges, we have to pick and choose trades very carefully.
We have to bear in mind that the broader market has not made any moves greater than 3.4% in more than three months.
But, as you'll see, that doesn't mean there aren't big, extreme moves underway in very specific sectors.
There's always trading happening somewhere on Earth, and oil is one of those commodities that's traded 24 hours a day. So lots of casual observers, presumably asleep, missed what I'd caught.
I'd found crude oil had plummeted - dropped off a cliff, really.
Here's how the chart looked right around midnight...
I was certain there was breaking news of some kind.
Plunges like this usually only happen when there is geopolitical unrest - armed hostilities, terrorist attacks, events of that nature - or if there's big supply news like a natural disaster - a hurricane or earthquake, say, that damages a refinery - that would limit production.
So of course I checked my normal news feeds.
Nothing.
I went to specialty, industry-focused news sites.
Nada.
Social media.
Goose egg.
I zipped through trade message boards where some knowledgeable people post. I saw lots of activity, but no one had any news.
Essentially, nothing had happened.
Yet, when I looked at a very short time frame, the drop looked even more severe:
[mmpazkzone name="in-story" network="9794" site="307044" id="137008" type="4"]
It's important to keep in mind that, after a nice climb, crude oil had already dropped 19% over the past three weeks before this moment. That's an opportune time to put on a bearish trade, as we did in Stealth Profits Trader, because you can make some money on the way down, of course.
But what I was looking at was even better.
There was only one logical conclusion, in fact...
This Is Extremely Rare and Immensely Profitable
In the low-volume overnight trading, a collapse on zero news meant capitulation. That happens when buyers just give up any remaining resistance and prices plummet.
Capitulation bottoms are rare. Very rare. I'll show you what this one looked like in a moment, so you can spot the next one.
And trying to pick a bottom in a big down move is tough business.
Incidentally, that's exactly why I developed what I call the "Hooke Pattern," one of the clearest "Go" signals there is. I can't tell you exactly what it is, because that wouldn't be fair to my paid-up Stealth Profits Trader readers, but I rarely make a trade without the nice run-up and pullback that, among other criteria, go into a true Hooke.
But even with a good Hooke, some extra confirmation will tell you that everything's "green" for you to put on a short trade.
Here's how the entry decision sequence looked on the trade we had on in Stealth Profits Trader. It'll be helpful in your own trading...
I issued the alert to Stealth Profits Trader readers right away. This trade was in the green almost from the moment we entered.
It took us less than two weeks to blow past our first 100% profit target on our oil-bearish options play, ultimately closing out the trade for a little more than 117% in gains.
By this past Friday, May 19, our second profit target was exceeded, and we'd taken an additional 133% gain.
It's doubtful that traders and investors who don't use charts had the opportunity to profit from this rare capitulation bottom. Now that you know what to look for, you can spot the next capitulation in virtually any commodity you're interested in (or you can let me do the heavy lifting for you in Stealth Profits Trader).
The Bottom Line: Market extremes like a capitulation bottom can bring in big gains fast. You can spot them if you follow the news and know how these extremes manifest themselves in stock charts.
D.R. is always looking for market extremes like the capitulation bottom, because his decades of experience with trading have shown him just how potentially profitable they can be. To learn more about how you can get his best trade recommendations when these events occur, click here.
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About the Author
D.R. Barton, Jr., Technical Trading Specialist for Money Map Press, is a world-renowned authority on technical trading with 25 years of experience. He spent the first part of his career as a chemical engineer with DuPont. During this time, he researched and developed the trading secrets that led to his first successful research service. Thanks to the wealth he was able to create for himself and his followers, D.R. retired early to pursue his passion for investing and showing fellow investors how to build toward financial freedom.