Stock Market Timing

The holy grail of making money in the stock market is knowing when to buy and sell. I have recently discovered a couple of charting techniques that could come close to solving this mystery. I will also give some stock examples and charts to illustrate this. After you sell the stocks according to this timing scheme, it will be imperative to keep the trading money in cash until the next buying signal. This is to protect profits. If you can make 20 to 30% a few times each year from this plan, you will eventually see the value of sitting in cash sometimes.

If you want to know whether we are in a bull or bear trend, just look at a chart of the S&P 100 percent of stocks above the 50 day moving average. If the successful stocks total line is above the 50 day line, then it will be safe to own stocks. You could sell whenever you are up 20% or whenever the S&P 100 bullish chart falls below the 50 day average. One specific stock that you could own to go along with this plan would be SSO, the leveraged S&P 500 ETF.

Another chart plan for buying and selling involves the slow stochastic signal line and the MACD signal line. Pick a popular stock like AGQ, which is leveraged to the price of silver. Whenever the slow stochastic signal line crosses over at the bottom, you should buy AGQ. Then, whenever the MACD signal line crosses downward from the top, you should sell. Buying with the slow stochastic signal will get you in the trade at the best time, and holding on for the MACD downward crossing before selling will smooth out false signals that appear on the upper slow stochastic signal line.

Sell Silver Stocks

With the Dow getting close to 12,800 we are at an intermediate stock market top, and institutions will soon be taking profits. The European debt situation will also jump to the news headlines in the next two months, and this will send the stock market down again. Another factor in selling silver stocks now is the chart of silver futures at Barchart.com on the futures performance page.

I am planning to sell the leveraged silver ETF, AGQ, on Monday morning. I will be banking a profit of around 17% for being in the stock for less than two weeks. If you can make 17% every two weeks, you could be rich in a short amount of time. Unfortunately, it is not that easy. You are not always able to buy low, and everyone also makes losing trades sometimes.

I believe the long term trend for silver is up, but it will go down whenever the general stock market declines. I plan to buy AGQ again when it drops to $46 per share.

Going back to the futures chart at Barchart.com, this is a great website to monitor whether you should be in or out of commodities or VIX (volatility) stocks. Silver is still positive in the charts, but it has dropped some. It needs to be sold while it is still positive. If you will notice VIX at the bottom of the futures chart page, it has gotten less negative just since Friday. This is the time to buy TVIX, a volatility ETN which tries to leverage whatever VIX is doing on CBOE. I believe that volatility will be rising again soon, and TVIX will be a winner probably during the next month or longer.

Buy Cheniere Energy

You could have made almost 100% in capital gains if you had bought Cheniere Energy (ticker symbol CQP) a year ago. On top of that, you would have made 8% in dividend payments. I am one of the people who has owned Cheniere in the past, but I did not hold on this past year to reap the big monetary gain.

Conditions at Cheniere changed tremendously in the fall of 2011. They picked up three big contracts worth billions of dollars. They can easily stay in business and do great now. I am buying the company again the next time the stock market opens. The company price may not immediately rise higher, but you will be paid over 8% to wait. I also think that Cheniere could double in price in the next two to three years. This will be a lot more than you can make in a stock market that is only drifting slowly higher.

The Great Crash Ahead

Harry S. Dent has written a fascinating book on the economy and the stock market entitled The Great Crash Ahead. The book contains numerous charts and tables to explain why the stock market is heading down in the years ahead. The era of easy money is over, and society will never go that way again.

The stimulus plans have failed. On page 239 of the book, the author suggests that the Dow could fall to 5600 by 2014. This is a bitter pill to swallow, but it is more realistic than you might initially think. The baby boomers are retiring, and they will not be putting additional money on the line in a dubious stock market. They will also be selling their investments and using the cash for their retirements. In addition to individual cash-outs, the U.S. government will have plenty of financial problems along with the European nations. These factors will lead to many down days in the stock market. The best way to play this scenario is to buy a volatility index like TVIX for around $15 and sell it at $22. This pattern will also be repeatable for years to come.

2012 Stock Market Strategy

This past year was very disappointing in the stock market. Historically, it should have been a good year because it was the third year of the presidential cycle when the stock market usually does well. However, the debt problems here in the U.S. and Europe got to the point where they could no longer be ignored. 2012 will be another treacherous year in which the stock market will go up sometimes, and it will pull back at other times. Since we still have the debt problems, there will be many down days where an investor could make a profit by shorting the stock market or by going long with a volatility index.

In this context, the bulls will also be exerting force in the new year because people are always adding money to their 401K plans in one way or another. Money does not sit idle. Those who have it will be seeking to make more money from investing although it will be a mistake on their part because the gains will be small, and profits must be taken quickly. Since this is an election year, the Republicans will add more fuel to the bull fire since it will be perceived that they can do a better job than the Democrats.

The net result in all of this is another volatile year in the stock market where the spread between the highs and lows will be large. TVIX, the double volatility index ETF, is the best way to play the 2012 scenario. If you can buy TVIX for less than $16 per share, there will probably be several times in the coming months when you will be able to make a profit of 10% of more on stock market down days when volatility will spike. Be certain to take profits when you are up, though, because the bulls will always come up with a story of some kind to keep the stock market alive.

ATP Oil and Gas

ATPG has a lot of oil and gas in the Gulf of Mexico that they will be able to monetize sometime in the future. This company is probably worth $20 or better. If we have trouble getting oil from the Middle East due to Iran, ATP Oil and Gas may be catapulted in price by 200% sooner rather than later.

The company has been trading in a range near $6 to slightly over $7. You could accumulate the stock whenever it drops near $6, and if you want to trade it out at $7.15, you would make 16% on your money during each cycle. It might be worth holding onto a core amount of stock for whenever it moves toward $20 per share, though.

Investing Strategy

We are living in a dangerous investing world due to several factors. We have the financial problems of Europe as well as the U.S., we have high unemployment, and we have a bad housing market. Certainly we have seen some improvement recently in these situations, but we have a long way to go before a bull market in stocks can be declared.

Essentially, we are in a bear market, and the only way to succeed is through short term trades. Also, since sometimes the bottom is not clear on certain stocks, it is a good idea to enter trades with multiple buys rather than going all in when the stock could drop further. A classic example of this is GMCR, Green Mountain Coffee Roasters. It looked like the stock had formed a bottom in the first part of November 2011 when the price looked stable in the mid $60 range. They had already fallen around 40% from their annual high of over $100. However, when they narrowly missed earnings, the stock price fell off a cliff all the way down to $42 per share. If you had bought all your shares at $67, you would have experienced a devastating 37% loss in a day's time. If you had only bought $1000 worth of GMCR at $67, you could have bought the rest of your shares after it dropped to $42, and when the stock went back to $56 by December 2, you would have made a substantial profit instead of a big loss.

If you have a moderate portfolio of $50,000 and you limit your buys to $1000 initially, you will only be risking 2% of your portfolio until you see how the stock is going to perform. This small trade amount will also allow for significant diversification to add more safety. Then, if you can make $200 on most of the $1000 trades, those 20% gains throughout the year will probably amount to doubling your portfolio money each year!