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I talk to you a lot about the power of following patterns. Finding these trends is not something everyone has the experience, discipline, or patience to do. But they work because history tends to repeat.
It's like Isaac Newton's first law: Objects in motion tend to stay in motion… until acted upon by an outside force.
Think of it this way – a common New Year's resolution people make is to live a healthier life. The outside force in this situation could be a new book of clean recipes, or maybe a gym membership.
But the reality is that 80% of people break their resolutions by Feb. 1. Life settles in, and there isn't time to run on the treadmill every day or spend an hour roasting broccoli after work.
It's hard to introduce a lasting outside force. People often resort back to their original path – and the same is true for stocks. Stocks tend to return to their historical patterns.
With trading, we want to find the stocks that are in motion and haven't been hit by an outside force. And then we hop on for the ride.
The following historical data reveals 15 high-probability, big-profit trades for this year:
No. 1: Longest Bull Market (10-Plus Years) in History
After bottoming in March 2009, the S&P 500 has risen from 666.79 to our recent high of 3,247.83, a 387% jump.
The Dow Jones has risen 343% from 6,469.95 to 28,710.66 since March 2009.
Over the same period, the Nasdaq grew from 1,040.41 to a recent high of 8,811.10, a 747% rise.
Talk about an object in motion. Although there will be a correction at some point, the most prudent course of action is to hop on the bull train for 2020.
No. 2: 2019 Was Extremely Bullish
The S&P 500 surged a whopping 29% in 2019 for its best performance since 2013. The Dow ended the year up 22%, the Nasdaq 35%.
And the good news is that it isn't over yet. History tells us that on years in which markets rise over 20%, most of the time, the markets will rise again the following year.
According to back-tested data, the S&P 500 rises an average of 11.2% the year following a 20%-plus gain. The Dow Jones and the Nasdaq tend to rise an average of 8.9% and 14.2% respectively the year following a 20%-plus gain.
Consider buying the market-following exchange-traded funds (ETFs) this year. These ETFs attempt to track the performance of the three major indexes. If history repeats, you can reasonably expect the gains shown above.
S&P 500: SPDR S&P 500 ETF (NYSE: SPY)
Dow Jones: SPDR Dow Jones Industrial Average ETF (NYSE: DIA)
NASDAQ: Invesco QQQ Trust (NASDAQ: QQQ)
No. 3: Strongest Sectors – Tech, Healthcare, and Financials
The strongest sectors leading the pack during the last six months of 2019 were Technology, Healthcare, and Financials. The following three Select Sector SPDR ETFs attempt to track these sectors' performance. Here are the strongest stocks from each sector – and how they did in the second half of the year:
Technology Select Sector SPDR (NYSEArca: XLK) +17.49%
Qorvo Inc. (NASDAQ: QRVO) +66.56%
Lam Research Corp. (NASDAQ: LRCX) +59.14%
Advanced Micro Devices Inc. (NASDAQ: AMD) +57.17%
Financials Select Sector SPDR (NYSEArca: XLF) +11.56%
State Street Corp. (NYSE: STT) +44.68%
JPMorgan Chase & Co. (NYSE: JPM) +23.98%
Bank of America Corp. (NYSE: BAC) +22.26%
Healthcare Select Sector SPDR (NYSEArca: XLV) +9.11%
Humana Inc. (NYSE: HUM) +40.01%
Bristol-Myers Squibb Co. (NYSE: BMY) +35.69%
CVS Health Corp. (NYSE: CVS) +35.33%
Above, we have a strong bullish market, the strongest bullish sectors, and the stocks leading the pack in each of those sectors. Sector analysis tells us the best bet is to buy the leaders of each sector, shown above.
These sectors have the strongest bullish momentum as we continue into 2020. To diversify and reduce risk, you could buy the ETFs in addition to the component stocks, or the ETF alone.
No. 4: Gold Is White-Hot
Despite a "risk on" (stock buying) environment, gold rose 19% in 2019, its best year since 2010. Many industry analysts are forecasting a rise to the $1,900-$2,000/oz. level. That's a healthy increase from its current price range in the mid-1,500s!
Now, the profit potential doesn't stop there. You can increase your returns approximately tenfold at a fraction of the cost of buying stocks. All you need is a call option.
Consider buying in-the-money (ITM) six-month calls. If you want a longer play, you could buy January 2021 calls, referred to as long-term equity anticipation securities (LEAPs).
These plays could be your key to a prosperous and joyous 2020, but for even more plays and trading strategies to help you profit year-round, click here, and you'll automatically be signed up to get my Power Profit Trades research delivered to your inbox, absolutely free.
These 15 opportunities are great places to start for potential profits right now. There are even bigger opportunities when you plan for the full year – and I want to show you something that could potentially help you reach millionaire status.
Just like with my profit patterns, I've boiled how it all works down to a simple strategy that starts with just five minutes a day from you.
It's true – with just five minutes a day, you could be on your path to $1 million. It's a one-of-a-kind phenomenon that Wall Street cannot replicate, and it's throwing off opportunities that, depending on your stake, could be worth thousands in extra cash every single day. Get the full story here.
About the Author
Tom Gentile is widely known as America's #1 Pattern Trader thanks to his nearly 30 years of experience spotting lucrative patterns in options trading. Now, he's diving into the biggest market in the world - one that almost no one has heard of before.