Money Morning https://moneymorning.com Money Morning is here to help investors profit handsomely on this seismic shift in the global economy. In fact, we believe this is where the only real fortunes will be made in the months and years to come. Money moves markets. But Money Morning lets you move first. en Fri, 27 Nov 2020 18:08:34 +0000 Fri, 27 Nov 2020 18:08:34 +0000 5 The Best Robinhood Options Trade Today Offers 282% Upside https://moneymorning.com/2020/06/17/the-best-robinhood-options-trade-today-offers-282-upside/
Last week's plunge in the stock market was certainly unnerving, especially for retail traders. But don't worry; a few bumps in the road are to be expected, and a little volatility can be good for our options trades.

Today, we're getting right back on the same path and riding the market's positive momentum since last week even higher. The best options trade to make today actually zeros in on an industry with especially bullish momentum. It's a trade available to anyone with an options account, including Robinhood and WeBull traders.

But before we get to that, let's talk about what happened last week and why we aren't ready to go bearish just yet.

The days leading to the June 8 high were rather strong and the Nasdaq topped the 10,000 mark for the first time ever with a series of all-time highs. But seemingly in the blink of an eye, a cautionary outlook from the Fed and spikes in virus cases sent traders heading to the exit doors.

However, volatility - even big volatility - can be good for investors as it can create bargains, if you know where and when to look. That's where our team of options trading pros comes in. They are using their proprietary tools to scour the markets for moneymaking opportunities, like the trade we'll show you today.

Options 101: It's never been easier to learn how to trade options, especially with our free guide from top trading expert Tom Gentile. Click here to get it.

Today's trade is in an area of the market that you might have overlooked. All the recent excitement has been in tech stocks with a smattering of value plays in the financials. But it's hard to gain an edge when everyone is already doing the same thing. That's why we are looking at a sector that's really been out of favor for a while but is finally coming back.

The oil market has been on a roller coaster this year. From demand getting crushed as the economy shut down to the insane drop below zero in April, the price of a barrel of crude has been under constant pressure. It was no wonder that nobody wanted to touch energy stocks.

That is the best time to start looking - when nobody else is.

Now that state after state is starting to reopen their economies, Money Morning Options Specialist Tom Gentile thinks that it is time for oil to stage a comeback.

Despite the pandemic, people are traveling more, especially now that summer is around the corner. Increasing business activity means higher demand for energy. And don't forget we've already seen surprisingly strong reports in jobs and retail sales. Plus, the Fed has pledged to do whatever it takes to get the economy back on its feet again, including pouring trillions into the economy.

That's going to fuel our latest options trade even higher over the summer months.

It could triple your money by July...

The Best Options Trade on Robinhood Now

Tom is bullish on Exxon Mobil Corp. (NYSE: XOM), which has been in a quiet recovery since the March low. Chart watchers will like that it moved above its 50-day average and bounced off it this week. The average itself has also turned higher, which is a good intermediate-term event.

You see, a moving average takes out the wiggles of the day-to-day trading and leaves behind a better indication of whether the stock is generally rising or falling. In this case, it is rising. As long as the stock is above the average, we know the intermediate-term trend is still intact.

Now, with the economy opening, people will need more gasoline in their cars, and airlines will need more jet fuel in their planes as they build their route systems back. Integrated energy producers like Exxon should benefit from increased demand.

Tom's price target on XOM is $55 per share. That is about where it traded last week at its recent high and only 14.1% above its Tuesday close of $48.20. Considering it took only a few days to fall that far, if the market stays firm, Exxon Mobil should reach that target in short order.

But as usual, we can add a little juice to the trade with options. You can use the July 24, Exxon Mobil $52 call. This option closed Tuesday at $1.75.

If the Exxon stock reaches Tom's target of $55 by early July, you could be looking at a 280% gain.

The best part is that your risk is lower than buying the stock outright. One-hundred shares of XOM stocks would cost $4,820 but the option costs $175. As always, while options help lower your risk, they do come with risk. Make sure you don't put more money in than you're willing to speculate with.

And if you want our experts to send their options trades directly to your inbox in real time, we have an exclusive invitation for Money Morning readers.

Learn how you could capture 52% gains, 78% gains, and even 108% gains in a matter of days, right here.

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About Money Morning: Money Morning gives you access to a team of ten market experts with more than 250 years of combined investing experience – for free. Our experts – who have appeared on FOXBusiness, CNBC, NPR, and BloombergTV – deliver daily investing tips and stock picks, provide analysis with actions to take, and answer your biggest market questions. Our goal is to help our millions of e-newsletter subscribers and Moneymorning.com visitors become smarter, more confident investors.To get full access to all Money Morning content, click here.

Disclaimer: © 2020 Money Morning and Money Map Press. All Rights Reserved. Protected by copyright of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including the world wide web), of content from this webpage, in whole or in part, is strictly prohibited without the express written permission of Money Morning. 16 W. Madison St. Baltimore, MD, 21201.]]> Wed, 17 Jun 2020 17:45:07 +0000 https://moneymorning.com/2020/06/17/the-best-robinhood-options-trade-today-offers-282-upside/ Will Alibaba Stock Be Delisted? https://moneymorning.com/2020/05/29/will-alibaba-be-delisted/ Luckin Coffee Inc. (NASDAQ: LK) shares sank 94% after the company received a delisting notice from the NASDAQ. Now, several other Chinese companies could be delisted as well. Alibaba Group Holding Ltd. (NYSE: BABA) is among them.

Will Alibaba be delisted? Here's what we know...


Luckin was China's answer to Starbucks Corp. (NASDAQ: SBUX). The stock soared 177% on hype from November to January, less than a year after IPO. But the company fraudulently reported $130 million in sales on a recent quarterly report.

That led to a delisting from the NASDAQ and plummeting of the stock.

U.S. executive and legislative branches have been railing against shoddy financial practices by China through the last year's trade war. A combination of the coronavirus pandemic and China's Hong Kong policy have added fuel to the fire in the last couple of weeks.

The U.S. Senate passed a bill that would delist companies unable to verify that they are not under the control of a foreign government. This has prompted many investors to think about what would happen if other Chinese stocks were delisted.

We'll get into how you can respond in just a minute. First, here's how an Alibaba delisting could affect you...

Alibaba Delisting: How It Affects Investors

A giant sell-off is very likely in each case, whether it's Alibaba, Baidu Inc. (NYSE: BIDU), or another Chinese stock. And the effects of that could be devastating to Alibaba investors who bought into the e-commerce giant's success.

The company connects manufacturers and sellers worldwide. And it's been growing its revenue significantly every year. This year, it reported $509 billion in annual revenue, up 35% from $376 billion last year. In 2021, the company expects revenue of $650 billion, another 27%.

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The growth prospects for Alibaba are so great that CFO Maggie Wu called it a "challenging quarter" when the company's revenue rose 22% year over year for the January-March quarter. Wu assured investors that the company's accounting practices were stolid, "in accordance with U.S. GAAP."

Shares of BABA have appreciated about 126% over the last five years. So many investors will hurt if Alibaba stock leaves the NYSE.

But the question is still whether it's likely to happen. Can U.S. investors trust Alibaba's CFO?

Alibaba Delisting: Will It Happen?

The bipartisan Senate bill is the biggest, latest indicator of a potential delisting of Alibaba.

The bill was introduced by Senator John Kennedy (R-LA) and Senator Chris Van Hollen (D-MD), and it passed the Senate unanimously. Now, it just needs to go through the House of Representatives, then to the White House for signing.

The White House has been arguably the most anti-China of all the branches of government through the pandemic so far. U.S. President Donald Trump recently tweeted that it was the "incompetence of China" that resulted in the "mass worldwide killing."

Alibaba stock has fallen 8% since last Wednesday, when the Senate passed the bill. But the stock is still up 4% on the year.

The e-commerce giant has been one of the most reliable growers trading on the market. It's even outlasted the pandemic. So investors need a contingency plan for if these foreign stocks end up losing their positions.

If Alibaba is delisted, shares don't evaporate into thin air. In fact, shareholders still hold their shares. But without the NYSE making it easy to trade, monetizing shares of BABA will be difficult. It will be harder to find a buyer without that secondary market.

Traders could rush to sell their Alibaba stock and other Chinese companies. This would send their price plummeting. What happened to Luckin Coffee after it received its delisting notice is a likely outcome if BABA faces delisting. Remember, Luckin lost 94% of its price, falling from $38 to just $2 for the year.

A more likely scenario, however, is that BABA won't be delisted. This is a massive, global company with plenty of American interest tied up. That could be enough to keep the stock on the NYSE. It means Alibaba is more likely to comply with any new requirements and remain on the exchange.

Action to Take: Several Chinese stocks are likely going to be delisted from American stock exchanges. But Alibaba Group Holding Ltd. (NYSE: BABA) is likely not one of them. It's a huge company, more likely to comply with any new disclosure requirements popping up. But keep watching the press on U.S.-China and BABA over the next few weeks to stay on top of these developments.

5G Companies Were Sitting Silent... So the FCC Launched a Multibillion-Dollar Initiative to Wake Them Up

5G isn't just an Internet upgrade anymore. The FCC just injected an unprecedented amount of money to roll it out faster than 1G, 2G, 3G, and 4G combined.

But this isn't just a positive sign for the roughly 162 million Americans who've recently experienced slowing Internet. If our projections hold, you could net a huge payout by year's end.

Click here to find out how.

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About Money Morning: Money Morning gives you access to a team of ten market experts with more than 250 years of combined investing experience – for free. Our experts – who have appeared on FOXBusiness, CNBC, NPR, and BloombergTV – deliver daily investing tips and stock picks, provide analysis with actions to take, and answer your biggest market questions. Our goal is to help our millions of e-newsletter subscribers and Moneymorning.com visitors become smarter, more confident investors.To get full access to all Money Morning content, click here.

Disclaimer: © 2020 Money Morning and Money Map Press. All Rights Reserved. Protected by copyright of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including the world wide web), of content from this webpage, in whole or in part, is strictly prohibited without the express written permission of Money Morning. 16 W. Madison St. Baltimore, MD, 21201.]]> Fri, 29 May 2020 15:07:17 +0000 https://moneymorning.com/2020/05/29/will-alibaba-be-delisted/ What Our Experts Are Saying as the Coronavirus Market Crash Accelerates https://moneymorning.com/2020/03/17/what-our-experts-are-saying-as-the-coronavirus-market-crash-accelerates/ We don't need to tell you it's been a rough few weeks.

You know trading has been halted four times in the last week, you've watched your 401(k) evaporate, and you're likely reading this from home as offices, restaurants, and other spaces are shutting down.


What you want is to cut through the headlines and hysteria and find out exactly what you can do.

Money Morning has assembled a team of experts with more than a century of market experience. This isn't their first time around the block.

And they're here to help you.

Our experts don't work for big banks or brokerage houses. They aren't money managers hoping to skim off a percentage of your portfolio. They are offering their experience and expertise directly to our readers because they are sick of Wall Street parting everyday folks with their money.

We reached out to four of our top experts to get their view on what's going on and how you can navigate the crisis. They cover everything from whether we've reached the bottom to how to use trading strategies to find opportunities right now.

We'll start with Money Morning Technical Trading Specialist D.R. Barton, Jr., who explains why the Fed's drastic rate cut this weekend isn't helping...

The Federal Reserve Doesn't Have the Right Tools

"By turning all its levers to the max, the Fed is using every financial trick in its books to try to turn the ship around," D.R. explains. "But the crisis we face as a nation and a planet isn't primarily a financial problem."

The Fed simply can't lift us out of this crisis.

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D.R. says "The financial/economic struggles are the EFFECT this time, with health and human issues being the CAUSE of the financial issues. What we need is a science/medical/social solution to the pandemic."

That's why D.R. says traders aren't going to be diving headfirst back into the markets until the scientific/health cause of the crisis is addressed.

Until then, he's keeping an eye on stay-at-home stocks like Zoom Video Communications Inc. (NASDAQ: ZM).

And there are more opportunities here.

Money Morning Chief Investing Strategist Keith Fitz-Gerald outlines which stock he thinks will emerge from this the strongest...

Don't Be Afraid to Think Long Term

As Keith told Stuart Varney on FOX Business Network this morning, the growth will come back. "It will be slow, but it will not stop. We are a resilient country. That's what people need to take comfort in, as hard as it is."

"The coronavirus is far more serious than experts are letting on, but it is not the end of the world when it comes to your money," Keith tells us. "If you're scared or uncertain about what's happening, you are NOT alone by any stretch of the imagination."

If you're investing for the long haul - think five, 10, or 20 years out - then your concern is less about finding the bottom right now than finding the companies whose businesses will roar back to life.

Keith puts it more directly: "The markets have an upward bias, which is why you want to be constantly playing offense even when defense seems like the better way to go."

Keith says one of his favorite phrases is "The night is always darkest before dawn."

"You can either give up (which I'd hate to see), or keep fighting. Here's what I say: Keep on going."

One way to play offense right now is to consider how the coronavirus will fundamentally change our society and economy. As Keith says, "Try narrowing in on what matters to YOU and what WILL happen. That's how you come up with real investment ideas and real profits."

"This is as 'old school' as it gets."

Keith thinks Amazon.com Inc. (NASDAQ: AMZN) is the future.

Home buying and delivery are going to be even more important once coronavirus fears die down. And Amazon is the leader by a mile. According to Keith's research, "about 30% of Amazon's online shoppers complete between 76% and 100% of ALL online shopping on Amazon." That means there's still room for Amazon to grow. Plus, once shoppers join Prime, they don't look back.

"Fully 75% of Prime members consider themselves unlikely or very unlikely to cancel their membership and spend an average of $1,704 per year on Amazon, according to U.S. News and World Report."

That's one way of playing offense, and Money Morning Defense and Tech Specialist Michael Robinson has more...

Use Time-Tested Strategies to Navigate the Crisis

Michael has seen it all before.

"As a boomer of a 'certain age,' I have lived through all sorts of events that have either roiled the economy, the market, or both," relayed Michael.

The good news: There's light at the end of the tunnel.

"I can tell you from firsthand experience that events like those unfolding before our eyes always look much worse when you are caught in the middle of it all."

Michael reminds us that our retirement accounts are for the long haul and you can turn the sell-off into an opportunity to add to positions for cheap.

But you don't want to buy just any stocks right now.

"It's imperative to have a strong investing thesis," cautions Michael. "If there are great tech stocks you want to start buying soon, enter with small amounts and build positions gradually."

And there is a tried-and-true strategy to make the most of a choppy market like this: the Cowboy Split.

"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," Michael explains. "In general, I recommend employing a 15% to 20% discount from your entry price as a second buy point."

Take a stock like Amazon. You buy a little at the market rate, then make a Good-Til-Canceled limit order about 20% below its current price. If stocks continue to plunge, your order fills at the discount. If a rally kicks in, then you've got a position. It's a win-win.

And stocks are just one way to find opportunities.

How to Use Options Trading to Profit from Volatility

Money Morning's options trading specialist, Tom Gentile, has helped our readers make gains of 1,000% or more on the sharp downturn. He says there's more opportunity out there.

"Of course, daily 1,000-point swings have handed us many new short-term profit opportunities. Exploiting this volatility, as many smart traders do, can be very profitable."

But you have to be smart about it.

Here's Tom: "Smart trading does not mean trying to find a stock that will pop and time your buying perfectly, as some investors have tried to do recently. Piling in to the 'hot' biotech stock that's jumping on vaccine rumors can be extremely expensive and high-risk - and it rarely pays off."

Instead, Tom is looking at options with lower risk right now. But that rules out some of the most popular stocks.

As Tom explains, "Typically, the more traders expect a stock price to move, the higher the option price will be. Options sellers are looking for higher premiums to offset the risk of holding that asset."

A way of reducing risk without cutting into upside is to look for options on stocks that aren't as volatile.

"Finding the 'cheaper' plays lets you get into options with a lower initial cost, but you still get a chance to multiply your return," Tom says.

Tom recommends taking a look at stocks like Stamps.com Inc. (NASDAQ: STMP) or Grand Canyon Education Inc. (NASDAQ: LOPE). These haven't seen the volatility of the bigger names.

You'll want to stay tuned to our coverage of how the coronavirus is affecting the markets, and expect to hear a lot more from our experts in the coming days.

Until then, make sure you've got all of your bases covered with our complete coronavirus action plan. It covers everything you need to do (and not do) right now to protect your money and set yourself up to emerge from this with a profit.

You can get it all right here, and it's completely free...

Follow Money Morning onFacebook and Twitter.

About Money Morning: Money Morning gives you access to a team of ten market experts with more than 250 years of combined investing experience – for free. Our experts – who have appeared on FOXBusiness, CNBC, NPR, and BloombergTV – deliver daily investing tips and stock picks, provide analysis with actions to take, and answer your biggest market questions. Our goal is to help our millions of e-newsletter subscribers and Moneymorning.com visitors become smarter, more confident investors.To get full access to all Money Morning content, click here.

Disclaimer: © 2020 Money Morning and Money Map Press. All Rights Reserved. Protected by copyright of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including the world wide web), of content from this webpage, in whole or in part, is strictly prohibited without the express written permission of Money Morning. 16 W. Madison St. Baltimore, MD, 21201.]]> Tue, 17 Mar 2020 20:03:32 +0000 https://moneymorning.com/2020/03/17/what-our-experts-are-saying-as-the-coronavirus-market-crash-accelerates/ Was Tuesday’s Rebound a Dead Cat Bounce? https://moneymorning.com/2020/03/11/was-tuesdays-rebound-a-dead-cat-bounce/ After stocks had their worst day since the 2008 financial crisis, they rallied back hard Tuesday. In fact, the Dow's 1,100-point gain was its third largest daily point gain ever, behind only two days last week.


If you think the market is volatile, you're right.

The question investors have now is whether that was the end of the correction or just a "dead cat bounce."

Before we answer that, let's first talk about what a dead cat bounce is. This is a short-lived rebound in the market after a lot of losses, so named because supposedly even a dead cat will bounce when dropped from a high enough place.

Take Action: Market volatility has everyone on edge, but we have three steps you can take to protect your money and even set yourself up to profit. Click here...

In other words, it's a false hope before markets fall even more. There will always be short-term scalpers around to buy beaten-down stocks and sell out after only a quick rebound.

And some of the largest dead cat bounces occur in the midst of a bear market.

To find out whether stocks are ready to rally again or Tuesday's gain was just a short-lived rebound, we're looking at three indicators...

3 Signs the Stock Market Will Reignite

First, see if stocks can maintain a level of support.

Many traders and just about all the financial media say that a 10% drop in price is a correction and a 20% drop is a bear market. The problem is that these things only trigger after the drop has occurred. Still, they do give us an idea of where we stand.

At its worst levels this week, the Dow was down 19.8% from its all-time closing high. Does it matter whether it was 19.8% or 20% - not one bit. But it was a sharp and fast move that left investors reeling.

Further, the lows came very close to the lows we saw in early 2018, after the market was finally knocked off its low-volatility, steady bullish trend. Chartists call this a level of support, which really just means that's where buyers got busy once again. They saw it as a value area.

This is not a guarantee that it marks the bottom now, but it is a likely suspect.

Second, look for buying volume to outpace selling.

It's no secret that NYSE volume has been huge over the past two weeks. That means a lot of people are taking action and putting their money where their mouths are. For much of the decline, down volume was far and away the winner over up volume. That means selling dwarfed buying.

What we want to see is the opposite. A few days where buyers were much stronger than sellers would be a sign that investors are back and want to buy again.

Third, look for market breadth to favor advancing stocks.

When fewer stocks are falling than rising each day, and fewer stocks are making new lows, it tells us that even though the major indexes are still looking weak, there are plenty of stocks beneath the surface that are improving. We see this at important market tops that only a few stocks are driving major stock indexes to new highs. The same is true at bottoms.

This is called the advance/decline line, and all it does is take the number of stocks going up each day minus those going down. We want that balance to start favoring advancers again.

When the Dow was smacked for over 2,000 points to the downside Monday, more than half of all issues traded on the NYSE hit 52-week lows. That is a lot of stocks in private bear markets.

What we want to see here are fewer and fewer new lows each day. Rising numbers of new highs will be a tough call since the entire market has fallen so far. But fewer lows means buyers are starting to scoop up these beaten-down shares.

No doubt, Tuesday's rally made a lot of progress in all these areas. But is one day enough? Probably not. If we see a few more good days, then we probably can put the idea of a dead cat bounce on the shelf and be happy that the dark days are over.

Learn How to Harness This Powerful Options Trading Secret for Yourself

Live from his private office in Florida, America's No. 1 Pattern Trader is revealing his most lucrative options trading secret yet.

It's the reason he's able to make such fast, profitable moves on companies like Netflix, Apple, Facebook, even Amazon - the reason he's able to see major paydays long before they happen.

We're talking about the potential to see the future of any stock on the market.

And Tom Gentile's going live to show you exactly how to do it.

Believe it or not, it's as easy as a few simple clicks of your mouse...

In no time at all, you could be lining up trade opportunities one by one and watching as your account grows bigger and bigger.

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Follow Money Morning onFacebook and Twitter.

About Money Morning: Money Morning gives you access to a team of ten market experts with more than 250 years of combined investing experience – for free. Our experts – who have appeared on FOXBusiness, CNBC, NPR, and BloombergTV – deliver daily investing tips and stock picks, provide analysis with actions to take, and answer your biggest market questions. Our goal is to help our millions of e-newsletter subscribers and Moneymorning.com visitors become smarter, more confident investors.To get full access to all Money Morning content, click here.

Disclaimer: © 2020 Money Morning and Money Map Press. All Rights Reserved. Protected by copyright of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including the world wide web), of content from this webpage, in whole or in part, is strictly prohibited without the express written permission of Money Morning. 16 W. Madison St. Baltimore, MD, 21201.]]> Wed, 11 Mar 2020 16:46:50 +0000 https://moneymorning.com/2020/03/11/was-tuesdays-rebound-a-dead-cat-bounce/ A Potential Coronavirus "Second Wave" in the Fall Would Slam Stocks Again https://moneymorning.com/2020/03/10/a-potential-coronavirus-second-wave-in-the-fall-would-slam-stocks-again/ The turmoil in the markets may make an unwelcome encore appearance in the fall. Yes, there's a chance that cases of the coronavirus will again start to rise as outside temperatures drop.

While there's no way of knowing now if this will happen for sure, viral respiratory diseases like the coronavirus, such as the flu, tend to follow seasonal patterns.

That's why "flu season" is synonymous with fall and winter.


The good news here is that if true, the arrival of spring in the northern hemisphere could help arrest the further spread of COVID-19.

That would help limit the damage to the economy and the stock market in the near term.

But it also means a resurgence of the coronavirus is likely to strike in the latter months of the year. And that would trigger another stock market crash.

We've already seen substantial economic damage, starting with the disruption to the global supply chain in China. The travel industry is getting slammed. And as more consumers - and workers - stay home, the impact will affect nearly every U.S. business.

That's why stocks are getting hammered.

Even if the coronavirus subsides over the summer, the economic damage will have the economy on its heels for much of 2020 - if it doesn't tip it into a full-blown recession.

Now imagine the impact of a second round of the coronavirus on the economy and the markets.

This doesn't mean you should panic. But investors need to bear in mind that this crisis could play out in stages over an extended period. You can't let down your guard.

So how likely is it that we'll see a return of the coronavirus in the fall?

Here's what the experts are saying...

Why the Coronavirus Could Turn Out to Be Seasonal

The Centers for Disease Control is among those expecting the coronavirus to slow with the arrival of warmer weather.

"Other viral respiratory diseases are seasonal, including influenza and therefore in many viral respiratory diseases we do see a decrease in disease in spring and summer," Dr. Nancy Messonnier, director of the CDC's National Center for Immunization and Respiratory Diseases, said on a conference call on Feb. 25. "And so we can certainly be optimistic that this disease will follow suit."

Multiple factors play into this seasonality:

  • Cold air causes irritation in the nasal passages, making people more susceptible to viral infections.
  • People spend more time indoors in close proximity in the colder months.
  • Respiratory viruses tend to spread in droplets in the air. Cold and dry air allows a virus to survive longer, giving it a better chance of infecting another victim.

This doesn't mean people can't get infected in warmer weather, just that it's much less likely.

Paul Hunter, an infectious disease expert at Britain's University of East Anglia, echoes the CDC hope that the coronavirus will decline during the summer months.

"Whether it comes back again is a moot question," Hunter told Reuters. "It would not surprise me if it largely disappeared in summer only to reappear again in the winter."

Two coronaviruses closely related to COVID-19 - severe acute respiratory syndrome (SARS) and Middle-Eastern respiratory syndrome (MERS) - are known to spread significantly faster in colder weather. One study found that SARS spread 18 times faster in cold weather than in warmer weather.

A rebound of a pandemic virus would not be unprecedented.

One of the worst respiratory virus pandemics in history, the Spanish flu of 1918, actually hit in three distinct waves.

The first wave, which hit the late winter of 1918, was not nearly as severe as the second wave, which hit in the fall of that year. A third wave struck in the winter and spring of 1919.


By the time it ended, the Spanish flu had infected a third of the world's population, killed more than 50 million people, and sliced 5% from the global economy.

That doesn't mean the coronavirus will get that bad; we have far better ways of fighting such diseases today.

But it doesn't take much to stoke public fears that affect consumer behavior - and the markets.

So here's what investors can do to cope with the market gyrations both now and down the road should the coronavirus strike again in the fall...

How to Prevail in a Coronavirus Market

The markets are down due to fears of the economic impact of the coronavirus. But the extreme price swings are driven by the kind of uncertainty I've outlined here. That means investors need to expect and prepare for more such volatility, possibly for the rest of the year.

Money Morning Chief Investment Strategist Keith Fitz-Gerald says investors need to resist their worst instincts as the markets gyrate.

"The coronavirus situation is going to be with us for a while, which is why you want to take a longer-term perspective rather than fall prey to the short-term narrative dominating headlines," he said. "Many short-term traders are getting their you-know-whats handed to them on a silver platter right now because they cannot tell whether the markets are coming or going."

Instead of reacting to what's happening, Fitz-Gerald advises looking for quality companies and resisting the urge to buy any stock that's suffered a large percentage loss.

"Amateurs are trying to buy stocks just because they're down, not realizing that they can go down further," he said. "But savvy investors are buying stocks that go down the least and roar back the fastest. You want to buy the world's best companies because they're the ones with (1) a clear path to profits and (2) the ability to protect margins in the face of challenging economic conditions."

Doing your research and buying quality will pay off when the coronavirus crisis ends - whenever that happens to be.

As for selling, Fitz-Gerald also advises hanging on to the quality stocks you own despite some paper losses in the short term. Selling out of fear could be a costly mistake.

"At some point, the volatility will start to decline, which is why you want to think about the choices you make in terms of playing the broader upside that still exists despite overwhelmingly negative headlines," he explained. "The average investor doesn't understand half of what they're missing if they sell out now simply because they're scared or uncertain."

Above all, Fitz-Gerald says you shouldn't lose sight of the money that can be made by keeping your head while those about you are losing theirs.

"The profit potential is simply unprecedented, especially if you can pick up shares when the rest of the market is scared silly," he said.

Action to Take: Recognize that the coronavirus situation is fluid, and prepare for the possibility that the outbreak may subside in the summer only to reappear in the fall. Resist getting caught up in the day-to-day volatility of the markets. Instead, focus on seeking out and holding quality stocks.

Your Financial Future Is at Stake (Are You Prepared?)

If you're like most Americans, you've felt a sense of market turmoil ahead. We could be in for another white-knuckle ride... a "Great Reckoning," if you will.

The vast majority of folks don't see this coming, and those few who do are not preparing properly... nor profitably.

So ask yourself, right now: Are you where you want to be financially?

If the answer is yes, that's great.

If the answer is no, then understand that you are not alone - and you need to click here now...

Follow me on Twitter @DavidGZeiler and Money Morning on Twitter and Facebook.

About Money Morning: Money Morning gives you access to a team of ten market experts with more than 250 years of combined investing experience – for free. Our experts – who have appeared on FOXBusiness, CNBC, NPR, and BloombergTV – deliver daily investing tips and stock picks, provide analysis with actions to take, and answer your biggest market questions. Our goal is to help our millions of e-newsletter subscribers and Moneymorning.com visitors become smarter, more confident investors.To get full access to all Money Morning content, click here.

Disclaimer: © 2020 Money Morning and Money Map Press. All Rights Reserved. Protected by copyright of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including the world wide web), of content from this webpage, in whole or in part, is strictly prohibited without the express written permission of Money Morning. 16 W. Madison St. Baltimore, MD, 21201.]]> Tue, 10 Mar 2020 20:54:23 +0000 https://moneymorning.com/2020/03/10/a-potential-coronavirus-second-wave-in-the-fall-would-slam-stocks-again/ Stock Market Crash 2020: How to Protect Your Money Now https://moneymorning.com/2020/03/10/stock-market-crash-2020-how-to-protect-your-money-now/ Just last month, the Dow Jones Industrial Average fell by over 1,000 points in a single day for the first time. Then Monday, it was over 2,000 points in a single day. If you're wondering if this is the start of a 2020 stock market crash, you're not alone.

But that's not what is happening here.

Clearly, the spread of COVID-19 is a bad situation for public health. It's also bad for investors in the short term.

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But there is a silver lining under all this. When the dust settles - and it will - there are going to be massive bargains to be had. You're going to get a second shot at buying some of the best companies in the world at prices they were trading for a year ago.

Now, we don't want you rushing out to buy everything just yet. But in time, the market will return to its centuries-old path of rising stock prices.

Where the Stock Market Is Heading Next

First, let's talk about what just happened. On Feb. 12, the Dow closed at an all-time high of 29,551.40. Yes, it was just a few weeks ago, and that is what makes the market's plunge that much scarier. As of Monday's close, it was down 19.3%, what pundits would say was just shy of a bear market of 20% or more.


Many now compare this to the market decline we saw at the end of 2018, when the Dow fell 18.8%. The difference is that the 2018 decline took nearly three months. In 2020, it took three weeks.

But there have been far worse declines in recent memory, including the financial crisis of 2008.

Back in 2008, the financial world was basically on fire. Banks were imploding, mortgages were underwater, and we were in the middle of a major recession.

Now answer this question - do we see anything close to that today? The answer is, "No, it's nothing like that today." Last month, the economy was strong, unemployment at record lows, and interest rates were low.

Basically, before the coronavirus spread and Saudi Arabia and Russia started a price war in the oil market, things were pretty good. And that means companies are still basically sound. Yes, the virus is causing events to be canceled, people to stop traveling, and supply chains to be disrupted, but all these things are exogenous. When they finally subside, there will be a hit to GDP, but it's likely things will return to normal.

Still, market indicators, like the put/call ratio, the VIX, and stocks falling to new 52-week lows, are the same now as they were at the height of the 2008 bear market. You can cut the fear with a butter knife.

That's creating an opportunity for you.

We'll show you how you can protect your money from the next stock market crash, plus how you can turn the recent downturn into profits in just three steps...

Our 3-Step Stock Market Crash Protection Strategy

Remember, even though a good deal of damage has already been done, it is very hard to time the market to know when a bottom will arrive. Money Morning Chief Investment Strategist Keith Fitz-Gerald has a few steps investors can take right now to protect themselves from further damage. And that includes avoiding selling it all at the very worst time so that you miss the eventual rebound.

Here are the three strategies that can protect your money and make you more right now.

First, don't panic. Markets rise, and markets fall. With the market down this much, a lot of damage has already been done. However, you can protect from further serious damage by making sure you have trailing stops in place. It's OK if you lose another 5%, but another 20% is not good. Adding or tightening your trailing stops means you set a maximum loss you're willing to take before exiting the market.

Second, Keith suggests adding a bit of defensive positions to your portfolio. This can include gold, via the SPDR Gold Trust ETF (NYSEArca: GLD). Just remember that between 2% and 5% is a good balance to volatile stocks.

Then, he suggests that you should prepare a list of stocks you'd like to own but didn't buy at their recently inflated prices. Any time the market makes a big move (like it has this week), you can pounce on these stocks and get in at discounted prices.

A great example of this is Lockheed Martin Corp. (NYSE: LMT).

The stock plummeted 20% from its February highs and is down about 12% on the year. On the surface that looks terrible, but the business case - to Keith's point - remains rock solid:

  • Fundamentally strong defense contractor with a $115 billion market cap.
  • Yield at 2.7%.
  • Payout ratio is a low 41%, meaning it has no problem covering its dividend.
  • Five-year dividend growth rate is 10.3%.
  • 18 years of dividend increase.

The company has top line growth from $47.25 billion in 2016 to $59.8 billion in 2019, and that's not something that will simply vanish... virus or no virus, no matter who's in the White House, no matter what the Fed does next.

That's a way to turn a market correction into a silver lining.

America's Favorite Angel Investor Shows How Easy It Is for Anyone to Invest in Ground-Floor Startups

You've probably seen stories about this person or that person making an absolute fortune from some unknown startup suddenly becoming a household name... like Uber, Airbnb, SpaceX, or Bird.

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About Money Morning: Money Morning gives you access to a team of ten market experts with more than 250 years of combined investing experience – for free. Our experts – who have appeared on FOXBusiness, CNBC, NPR, and BloombergTV – deliver daily investing tips and stock picks, provide analysis with actions to take, and answer your biggest market questions. Our goal is to help our millions of e-newsletter subscribers and Moneymorning.com visitors become smarter, more confident investors.To get full access to all Money Morning content, click here.

Disclaimer: © 2020 Money Morning and Money Map Press. All Rights Reserved. Protected by copyright of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including the world wide web), of content from this webpage, in whole or in part, is strictly prohibited without the express written permission of Money Morning. 16 W. Madison St. Baltimore, MD, 21201.]]> Tue, 10 Mar 2020 17:20:25 +0000 https://moneymorning.com/2020/03/10/stock-market-crash-2020-how-to-protect-your-money-now/ Why the Casper IPO Was a Bust (but Not for Everyone) https://moneymorning.com/2020/02/12/why-the-casper-ipo-was-a-bust-but-not-for-everyone/ Investors are finally cooling off on the unicorn IPOs. These used to be some of the hottest stocks on the market and your first chance to own a disruptive new company. But over the last two years, investors have shown they don't value these companies nearly as much as private capital did.


Slack Technologies Inc. (NYSE: WORK) is the perfect example. Slack went public last June at $26 per share, peaked at $42 its first day of trading, and then collapsed to $20 by October.

Now the Casper IPO is the latest example of a hyped-up company struggling once it hits public markets.

We warned our readers to approach this IPO with caution back in October.

But there's more to the story on what happened to Casper Sleep Inc. (NYSE: CSPR). And some people are still making a killing (you could be one of them next time)...

Why the Casper IPO Flopped

Casper Sleep is the disruptive mattress company that exploded onto the scene in 2014. It offers comfortable mattresses at the fraction of a price of other retailers. And the mattresses can be delivered right to your door in a small enough box that one person could handle it.

If it's that cheap and easy, why go haggle at a mattress store and wait weeks for delivery?

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That sort of innovation fetched the company a valuation of over $1 billion. And the company wanted to strike while the iron was hot with an IPO.

But it may have come at the wrong time.

Uber Technologies Inc. (NYSE: UBER) went public in May 2019, and shares promptly plunged 35% by November. The same thing happened with LYFT Inc. (NASDAQ: LYFT). It went public in March 2019, and shares are down 37% since.

If two of the most celebrated startups couldn't get investors excited, then what hope did Casper have?

The first signs of trouble came when the company slashed its IPO target price from between $17-$19 down to $12-$13 a share. That was a warning sign that Casper's underwriters were finding little interest in the company at the higher price. At $12 a share, Casper was worth just $500 million, half of what it was valued at privately.

It got even worse once it started trading.

When the stock hit the public exchanges, it sold for $13.50 a share before plunging 27% to today's price of $9.86.

Casper's IPO is a sign that hype alone won't make a stock successful. Investors are getting weary of the unicorn story and want to see concrete signs these startups can make money.

In Casper's case, the market is now full of "next generation" sleep systems that could be ordered online and shipped directly to the consumer. In fact, we warned last October that this might not be the good deal Wall Street was hawking. Sure, the company passed 1 million mattresses sold in 2018 and expected to be profitable by the end of 2019, but that seemed a bit aggressive.

As far as disruption goes, Casper merely caught the bigger players flat-footed. With their supply chains and marketing muscle, bigger brands like Tempur Sealy International Inc. (NYSE: TPX) are easily caught up. They are already matching Casper in gimmick, quality, and price.

And that doesn't take into account how IPOs are being used to reward insiders at the expense of the public.

These are the early investors who put money in when the company was just getting started. For them, the IPO is their chance to cash out. That's who makes the real money.

But you don't have to be stuck holding the bag when shares drop.

Here's how you can find profitable IPOs to invest in and even get in before the IPO...

How to Play IPOs in 2020

Money Morning Defense and Tech Specialist Michael Robinson doesn't look at IPOs when they are brand-new. He'd rather let them mature a bit by a few months before buying in.

He's been telling investors for years that they should avoid buying high-tech IPOs when they first start trading. When you buy at the open, you really risk losing big. It's natural, but people just can't wait to get in, thinking they are equal to the big players on Wall Street.

But they aren't.

Just look again at Slack. The stock finally found its floor late last year, and so far this year, it is up 15.6%. Even the mighty Facebook Inc. (NASDAQ: FB) stock famously fell from $42 on its first trading day to $18 in the months following its IPO. Now look at it!

Sure, you will miss a few rocket ships, but with the sheer quantity of companies that come public every year, there will be plenty of profit opportunities.

Michael recommends holding off for six months or more from when the stock hits the market. That's when insiders can first sell their stock, an event that could mean big drop in price as they cash out.

Then, healthy companies start to see their shares push higher, and you can join in on the fun with a whole lot less risk.

Action to Take: Wait at least six months for the lockup period to end before thinking about buying Casper stock. The initial volatility should settle down, and you'll have two quarterly reports to use in your decision-making. And if you want to learn how you can invest in startup companies before they go public, just click here.

Follow Money Morning onFacebook and Twitter.

About Money Morning: Money Morning gives you access to a team of ten market experts with more than 250 years of combined investing experience – for free. Our experts – who have appeared on FOXBusiness, CNBC, NPR, and BloombergTV – deliver daily investing tips and stock picks, provide analysis with actions to take, and answer your biggest market questions. Our goal is to help our millions of e-newsletter subscribers and Moneymorning.com visitors become smarter, more confident investors.To get full access to all Money Morning content, click here.

Disclaimer: © 2020 Money Morning and Money Map Press. All Rights Reserved. Protected by copyright of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including the world wide web), of content from this webpage, in whole or in part, is strictly prohibited without the express written permission of Money Morning. 16 W. Madison St. Baltimore, MD, 21201.]]> Wed, 12 Feb 2020 18:05:21 +0000 https://moneymorning.com/2020/02/12/why-the-casper-ipo-was-a-bust-but-not-for-everyone/ The Dow Jones Industrial Average May Recover from Coronavirus Today https://moneymorning.com/2020/02/03/the-dow-jones-industrial-average-may-recover-from-coronavirus-today/ The Dow Jones Industrial Average will claw back from Friday's massive sell-off today. The Dow shed more than 600 points Friday as concerns about the spread of coronavirus dominated headlines.

Travel, airline, and casino stocks are facing new pressure due to the novel coronavirus and related restrictions around the globe. Volatility remains high for investors. During the month of January, the VIX increased from 13 at the start of the month to 18. More on this below.

Here are the numbers from Friday for the Dow, S&P 500, and Nasdaq:

Index Previous Close Point Change Percentage Change
Dow Jones 28,256.03 -603.41 -2.09
S&P 500 3,225.52 -58.14 -1.77
Nasdaq 9,150.94 -148.00 -1.59

Now here are what I think will be the most important market events and stocks on Monday morning.

The Top Stock Market Stories for Monday


  • Momentum signals are still negative as the world experiences the grip of fear over the novel coronavirus. China's National Health Commission said Monday that the nation has experienced 361 deaths due to the virus. It also has confirmed 17,205 cases across the country. Economists are concerned that the ongoing spread of the disease will weaken the world's second-largest economy and drive growth downward to about 5% in the first quarter. That weakness could have a profound impact on a number of leading U.S. companies like Nike Inc. (NYSE: NKE), Boeing Co. (NYSE: BA), General Electric Co. (NYSE: GE), and Caterpillar Inc. (NYSE: CAT), which have extensive ties to the Chinese economy.

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  • Oil prices continue to slump as hedge funds and short sellers pile on over concerns about global economic growth and the coronavirus. Oil prices fell by 17% in January, and there appears to be growing pessimism that WTI crude could fall under $50 in the weeks ahead. The downturn has been so sudden and sharp that OPEC, the world's largest oil cartel, is again considering cuts to its production. OPEC could slash output by another 500,000 barrels per day, according to Reuters. Meanwhile, falling U.S. prices will likely lead to the suspension of operations in many shale fields.
  • Today is the Iowa Caucus, the first primary of the 2020 election season. The markets are on eggshells right now as it remains uncertain which candidate will walk away with the first prize of the Democratic primary process. Bernie Sanders (I-VT) led the polls heading into today's competition. However, reports indicate that mainstream Democrats are increasingly concerned that Sanders could weaken their ability to beat U.S. President Donald Trump in the 2020 election.

Stocks to Watch Today: AAPL, GOOGL, LVS, WYNN

  • Shares of Apple Inc. (NASDAQ: AAPL) continue to face pressure due to the novel coronavirus. One of the top Apple stock analysts slashed its iPhone shipment forecast by 10% due to the ongoing crisis in mainland China. Apple has already suspended production operations across the country. The downward revision comes a week after Apple announced record sales for its products.
  • Alphabet Inc. (NASDAQ: GOOGL) will report earnings after the bell on Monday. The pace of earnings will pick up over the next two weeks, and Google is an important bellwether stock for the rest of the tech sector. Investors are interested in hearing the numbers given that this is the first earnings report since its founders, Sergey Brin and Larry Page, announced plans to step back from day-to-day operations.
  • Finally, the novel coronavirus is weighing down casino stocks. This morning, China announced that gambling revenue in the popular Chinese region of Macau fell by 11.3% due to the viral spread. This news is weighing down shares of Las Vegas Sands Corp. (NYSE: LVS) and Wynn Resorts Ltd. (NASDAQ: WYNN) this morning.
  • Look for earnings reports from Watts Water Technologies Inc. (NYSE: WTS), Diamond Offshore Drilling Inc. (NYSE: DO), RingCentral Inc. (NYSE: RNG), Mimecast Ltd. (NASDAQ: MIME), Molina Healthcare Inc. (NYSE: MOH), and Rapid7 Inc. (NYSE: RPD).

Robert Herjavec: Indisputable Proof That Anybody Can Get Rich Through Angel Investing

When Neil Patel launched the Angels & Entrepreneurs Summit, he had only planned to invite a small group of guests to join him and guest "Shark" Robert Herjavec... but then Neil revealed something truly shocking.

During this clip (about halfway through the event), he reveals indisputable proof that anybody can transform their life through angel investing.

We knew we had to show this event to everyone - the information is just too valuable to keep under wraps.

You owe it to yourself to watch this right now.

Follow Money Morning on Facebook and Twitter.

About Money Morning: Money Morning gives you access to a team of ten market experts with more than 250 years of combined investing experience – for free. Our experts – who have appeared on FOXBusiness, CNBC, NPR, and BloombergTV – deliver daily investing tips and stock picks, provide analysis with actions to take, and answer your biggest market questions. Our goal is to help our millions of e-newsletter subscribers and Moneymorning.com visitors become smarter, more confident investors.To get full access to all Money Morning content, click here.

Disclaimer: © 2020 Money Morning and Money Map Press. All Rights Reserved. Protected by copyright of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including the world wide web), of content from this webpage, in whole or in part, is strictly prohibited without the express written permission of Money Morning. 16 W. Madison St. Baltimore, MD, 21201.]]> Mon, 03 Feb 2020 15:12:05 +0000 https://moneymorning.com/2020/02/03/the-dow-jones-industrial-average-may-recover-from-coronavirus-today/ [CHART] The Fed Won't Hike Rates Next Week – That's a Catch-22 for Investors https://moneymorning.com/2019/03/14/chart-the-fed-wont-hike-rates-next-week-thats-a-catch-22-for-investors/ Don't expect the U.S. Federal Reserve to hike rates next week during the March FOMC meeting. But while low interest rates are great for stocks, the Fed's dovish turn means it thinks the economy is too weak.


The Fed was initially expected to hike rates at least two times this year. But investors are breathing a sigh of relief over next week's FOMC meeting. That's because Fed Chair Jerome Powell is expected to hold off on announcing any additional interest rate hikes.

While that's great news for immediate returns, savvy investors aren't getting too comfortable.

You see, the Fed's sudden change in tune is a sign that there may be trouble under the hood for the American economy...

Low Interest Rates Could Mean Trouble on the Horizon

Last September, markets shook on reports that the Federal Reserve intended to raise interest rates three times in 2019.

Citing robust economic growth and hiring, the FOMC indicated that the Fed's interest rate would push toward 3.1% by the end of next year.

These predictions sent the Dow Jones tumbling into a correction in October. Higher interest rates make borrowing money more expensive, which makes it harder for companies to finance growth. And after a decade of low interest rate--fueled growth, more rate hikes could signal the end of the record-long bull market.

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However, the Fed's aggressive approach has softened since October.

At an economic research summit last week, Powell said in spite of the "favorable picture" the Fed has endorsed over the last year, there have been significant "cross-currents in recent months."

He went on to say, "the Committee has adopted a patient, wait-and-see approach to considering any alteration in the stance of policy."

Expert Fed watchers have changed their predictions over the last few months too. They were all but certain the Fed would hike rates in 2019, but now they've completely reversed themselves.

Take a look at how quickly they changed their minds in the chart below...


The Fed's new dovish approach has been great for stocks. Since Powell changed his tune in January, the Dow Jones has rebounded a robust 1,184 points.

Next week's confirmation of a more cautious approach to interest rates is likely to add more jet fuel to this rally and send returns even higher.

However, it's important for savvy investors to look at Powell's comments in the bigger picture.

You see, Powell is suggesting he sees something wrong with the nation's economy.

And it looks like he's on to something.

Last Friday (March 8), the Labor Department released February's job report.

Contrary to expectations, the report showed that the nation only added 20,000 payroll jobs in January - well below the average estimate of 180,000.

Although February's report still adds another month to 101 months of job growth, the sudden slowdown in hiring suggests that the decade-long run of economic growth is losing steam.

Combined with ongoing Chinese trade tensions, overextended tax cuts, and weakening growth around the globe, last week's jobs report suggests that there's a perfect storm of economic upheaval on the horizon.

And even if the Federal Reserve does surprise the market and raise interest rates tomorrow, that isn't a sure sign that the American economy has room to run.

In fact, a rise in interest rates next week would likely spark the sell-off that is increasingly likely due to worsening economic conditions.

It's a catch-22 for investors. Low interest rates are better for stocks, but the Fed's sudden reversal on hiking rates means it thinks the economy is weakening. And while an interest rate hike might mean the Fed is content with the economy's strength, higher rates will put a lid on stocks.

That means it's a good idea for investors to make sure their portfolios are protected from the worst-case scenario...

Your Financial Future Is at Stake (Are You Prepared?)

If you're like most Americans, you've felt a sense of market turmoil ahead. We could be in for another white-knuckle ride... a "Great Reckoning," if you will.

The vast majority of folks don't see this coming, and those few who do are not preparing properly... nor profitably.

So ask yourself, right now: Are you where you want to be financially?

If the answer is yes, that's great.

If the answer is no, then understand that you are not alone - and you need to click here now...

Follow Money Morning onFacebook and Twitter.

About Money Morning: Money Morning gives you access to a team of ten market experts with more than 250 years of combined investing experience – for free. Our experts – who have appeared on FOXBusiness, CNBC, NPR, and BloombergTV – deliver daily investing tips and stock picks, provide analysis with actions to take, and answer your biggest market questions. Our goal is to help our millions of e-newsletter subscribers and Moneymorning.com visitors become smarter, more confident investors.To get full access to all Money Morning content, click here.

Disclaimer: © 2020 Money Morning and Money Map Press. All Rights Reserved. Protected by copyright of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including the world wide web), of content from this webpage, in whole or in part, is strictly prohibited without the express written permission of Money Morning. 16 W. Madison St. Baltimore, MD, 21201.]]> Thu, 14 Mar 2019 17:02:43 +0000 https://moneymorning.com/2019/03/14/chart-the-fed-wont-hike-rates-next-week-thats-a-catch-22-for-investors/ Here's Your Chance to Take Short Sellers' Money https://moneymorning.com/2018/10/02/heres-your-chance-to-take-short-sellers-money/ Readers of my columns know that one of the guiding principles of my trading is to follow short interest. In fact, one of my 10 Trading Commandments (No. 6, to be precise) is "Short sellers are usually a bull's best friend."

Why have I been so successful using short interest? It's all about the "squeeze" that happens when a heavily shorted stock starts to rise.

That's when short sellers are forced to "cover" their losing positions on a stock. This results in unusually strong buying volume that drives a stock price higher.

I filter the bi-weekly short interest data from the exchanges to identify stocks with unusually high short interest.  What's unusual?  My Best in Breed (BIB) model searches for short-interest ratios (short interest divided by the average daily trading volume) above 6.0.

In addition, the model searches for increasing short interest, indicating that the shorts are adding to their bets against the stock.

Today, my BIB model told me that biotech is the most heavily shorted sector in the market right now. In fact, the SPDR S&P Biotech ETF (XBI) is the only ETF with a double-digit weighted component short interest ratio.

The current ratio of 10.7 is rare among ETFs, so I drilled down on the sector to look at individual stocks that are contributing to the elevated short interest.

While there are several stocks with high short interest, I filtered the results for those in a strong technical uptrend as defined by trading above their rising 50-day moving averages.

My models show that the odds of a stock moving higher double when the 50-day moving average is trending higher.

It's this combination of high short interest (bearish sentiment) and bullish technical strength that creates a short squeeze situation and gives me the "best of the best" bullish stocks.

Running the filter produced two names that stood out, so let's take a look at each one...

After Its Initial Jump, This Stock Hasn't Looked Back

First up is Exact Sciences Corp. (NASDAQ: EXAS), which develops diagnostic tools for detecting various cancers, most notably colorectal cancer and precancer.

Founded in 1995 in Madison, Wis., the company has a market cap of just under $10 billion.

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Exact Sciences is up around 50% for the year, mainly because of an agreement it entered in mid-August with Pfizer to co-promote Cologuard, its colorectal screening test. The stock jumped sharply in the week following the news and has been climbing since.

Exact Sciences gained 5% in September, using its rising 20-day moving average for support and setting a series of all-time highs. Note that the 50-day moving average is also trending higher.

short-sellers

Of course, Exact Sciences is on my radar because of its short-interest ratio, which more than doubled to a robust 9.4 in the latest data report.

With the stock trading just below record-high territory, the prospects for a short-covering rally are highly likely.

What's more, last month several analysts raised their price targets for the stock, suggesting to me that Exact Sciences is in for a strong fourth quarter.

To be fair, let me add that last week one research company called Exact Sciences its "best new short idea," which caused the shares to drop 3% in one day. But the stock found strong support at the 20-day moving average and regained the loss in two days to reiterate the stock's underlying strength.

With the company reporting earnings in late October, the Nov. 16, 2018 $80 call allows plenty of time for a short squeeze to propel the shares to new highs.

This Year Saw This Beast of a Stock Double in Value

The second stock on my radar is Sarepta Therapeutics Inc. (NASDAQ: SRPT), which develops gene-based treatments for neuromuscular diseases. Sarepta has gained more than 160% after doubling in 2017.

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Other than a pullback in June and July, which was well supported by the 50-day moving average, it's been all uphill for Sarepta for more than a year. Now, the 20-day moving average is doing its part to keep the stock's strength intact.

Money

Despite the monster rally, short interest has been going up, as well. In fact, the short-interest ratio has been steadily advancing since July 2017, a period in which the share price has exploded more than four-fold.

With the current ratio sitting just below 9.0, there's plenty of shorted shares to fuel a covering rally.

biotech

There's no doubt that biotechs involved in high-level research and development are constantly walking a regulatory tightrope.

All it takes is one negative FDA ruling to send the share price tumbling. Perhaps that's what the shorts are banking on.

But the company has navigated these dangerous waters so far, and so long as you keep your position size small, it's a risk worth taking... especially with so many doubters betting against the stock.

Option prices are not cheap on Sarepta and bid/ask spreads are on the wide side. Nevertheless, look at the Jan. 18, 2019 $150 call as an intermediate-term bullish play that should accommodate some short covering.

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About Money Morning: Money Morning gives you access to a team of ten market experts with more than 250 years of combined investing experience – for free. Our experts – who have appeared on FOXBusiness, CNBC, NPR, and BloombergTV – deliver daily investing tips and stock picks, provide analysis with actions to take, and answer your biggest market questions. Our goal is to help our millions of e-newsletter subscribers and Moneymorning.com visitors become smarter, more confident investors.To get full access to all Money Morning content, click here.

Disclaimer: © 2020 Money Morning and Money Map Press. All Rights Reserved. Protected by copyright of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including the world wide web), of content from this webpage, in whole or in part, is strictly prohibited without the express written permission of Money Morning. 16 W. Madison St. Baltimore, MD, 21201.]]> Tue, 02 Oct 2018 20:35:59 +0000 https://moneymorning.com/2018/10/02/heres-your-chance-to-take-short-sellers-money/