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Tuesday, March 11, 2014
In my True Wealth Systems letter, subscribers are up 448% on biotech. Amazingly, we have more gains to come... starting now.
So how do you make 448% gains in a trade?
First, you have to change your thinking...
For example, most people are looking for a reason to pocket a winner. But you can't sell at the first sign of success... If you want to make 448% gains, you can't sell when you're up 20%, 50%, or even 100%.
Instead of looking for a reason to pocket a winner, you have to look at it the other way... you have to look for reasons to stay in the trade... You have to think, what could cause this trade to continue to move higher?
For example, in True Wealth Systems, we bought into biotech in January of 2012. After a year, our systems kicked us out, but then said to buy back in just one month later. We could have ignored the signal because we'd made so much money on the first trade. But we didn't look at it in terms of how much we had already made – we believed we still had upside potential. So we got back into the trade as an official recommendation. Take a look at how it has worked out:
You might think that – with such big gains – we'd be looking for the exits. Nope...
We continue to ask, "Can this move higher?" And the answer today is, "Yes!!"
Lately, investors have been betting against biotech. Interestingly, over the last year, every time investors have started betting against biotech, biotech stocks have shot up higher.
The chart here tells the story – whenever the blue line falls, the black line (biotech stocks) goes up. Take a look:
The blue line has fallen to an extreme low lately. So if recent history is right, biotech stocks could take off again from here.
What does the blue line tell us? It shows the amount of bets in favor of biotech, versus the amount of bets against it.
Specifically, it is a ratio of the assets in the ProShares Biotech Fund (BIB) versus the assets in the ProShares UltraShort Biotech Fund (BIS).
I have to credit my friend Jason Goepfert of www.SentimenTrader.com for pointing this out recently. (His site is my "go-to" site for research on sentiment.)
This situation in biotech is a "short-term positive" for biotech stocks, as Jason described it.
Don't get me wrong... I am not saying that biotech stocks are a screaming buy today. I am not saying that biotech stocks are about to go up another 448%. I am not saying either of those things. (In fact, in my True Wealth newsletter, we have a "hold" on our biotech trade right now.)
My point today isn't about biotech... It is about changing how you think to help you make big gains.
Most people would love to make 448% profits on something they bought in the stock market. But most people will never do that... typically because they sell when they see a profit of 20% (or 50%, or whatever).
If you want to make 448%, then you need to stay in a winning trade as long as possible... You can't bail when you first start making some real money.
No matter who you are, you only get a few BIG winners in your investing life. And those few winners are where your lifetime outperformance comes from. I'm serious.
So please, don't sell something because it's up 20% – only to miss out on a 448% winner.
Don't cut your winners early. Instead of looking for reasons to bail, look for reasons to stay in your trade...
In the long run, staying in your winning trades will be the difference in whether you'll make average returns or extraordinary ones...
"The market is up big over the last few years," Steve writes. "But I strongly believe stocks could soar another 63% in the next two years." Here's why...
"After such a huge run, it's only natural people are starting to say biotechnology stocks 'are in a bubble,'" Brian Hunt writes. "I don't think biotech stocks are in a bubble." But what should you do if something you own is in a bubble? Find out here.
A TALE OF TWO GAMBLING STOCKS
Today's chart displays an interesting set of stock market gains... which involves two sets of gamblers.
Over the past few years, we've run many charts showing big uptrends in casino operators and stock brokerages. Both sectors are soaring right now. Both sectors owe their uptrends to similar factors. The Federal Reserve's "E-Z Credit" policies have people hitting the tables and hitting "buy" buttons with their online brokers.
You can see an interesting facet of this trend by comparing stock returns in E*Trade (ETFC) and Wynn Resorts (WYNN). E*Trade is one of the largest and most popular brokerage stocks. Wynn Resorts is one of the largest and most popular casino stocks. Both firms benefit when Joe Public feels like rolling the dice.
Today's chart shows just how similar the benefits are. It displays the return of E*Trade (black line) and Wynn Resorts (blue line) over the past two years. As you can see, both stocks tend to rise and fall with the same rhythm... and they've produced the same gains (around 130%). It's no coincidence these stocks are acting so similarly...