There’s Money to Be Made… If You Look at THIS
In a snowstorm, everybody’s a weatherman.
At a concert, everybody’s a musician.
And, as you’ve probably noticed, during a pandemic… everybody’s a doctor.
But as the nation digs out of this avalanche and searches for the bright spot that lights the way to fresh air… everybody is becoming a trader.
And that’s very good news.
It’s especially good for our project aimed at getting new investors to take advantage of this deeply discounted market.
There’s big money to be made.
Who Lives… and Who Gets Rich
We found ourself taking sides in an academic debate about research this morning. It has to do with that damned bug in the headlines and how many folks it’s going to kill.
Just like when a snowstorm sweeps across the land, computer models are hard at work determining who lives and who dies.
By some ciphering… this will be little more than a squall.
By other math, though, we’re in for a blizzard that could bury us all.
The massive gap between the two is a grand lesson for investors. It has to do with something we’ve been studying our whole career – volume.
With the coronavirus, volume is everything.
The notion of “social distancing” is little more than a tool to reduce volume. And without volume, we don’t have much of a trend.
If you can understand that concept, you can be as good of a trader as anybody on Wall Street.
We’ll repeat it so we’re all clear.
Without volume… we don’t have a trend.
That’s key. Every sale has a buyer and a seller. Each of them wants to get the best price possible. But like any battle, the more folks on the other side… the bloodier the day.
That’s why it pays not to give so much attention to how much somebody paid… but how much they bought.
We’re living through a rich learning opportunity.
Take South Dakota, for instance. Its governor is taking a lot of heat, as she is refusing to lock folks in their homes to slow the spread of this virus.
Why take away freedom, she asks, when there are few folks in the state and most are already far apart?
She’d be a good trader. She knows that when there aren’t many folks willing to buy… a stock is not going anywhere.
In New York City, of course, the virus is much more bullish. It’s got 8 million folks to cling to. It just needs a fraction of them to “buy,” and the toll will begin to rise.
It’s no different with stocks.
Don’t let anything make you think it needs to be any more complicated than that simple idea.
Take Carnival (CCL), for example. The cruise line has seen its share price plunge from more than $50 in January to just $7.50.
But last Thursday, volume flat-out exploded. It was the biggest trading day of the year.
Most folks missed it though. Share price barely budged.
That changed on Monday.
Volume surged again (but not quite as much) after it was announced that Saudi Arabia’s sovereign fund just bought 43.5 million shares of the adrift cruise line.
Folks wise enough to track volume saw the move coming.
But it’s not just individual stocks that move based on volume. We use it as a key sentiment tool that helps determine the market’s near-term direction.
Take this week’s rocket ride higher.
It’s great. Trading volume surged, but it was still nowhere near as strong as some of the big down days we’ve had of late.
That’s a strong clue that the market’s equilibrium is still off.
The whipsaw action will continue, and we could give up those gains just as quickly as we made them.
So here’s our plea.
If you’re serious about using this downturn to get rich or to rebuild your portfolio… challenge yourself to not look at the market’s price tag over the next week. Instead, look only at its volume.
We bet you’ll learn a lot… and even make a buck or two.
Tell me what you’re seeing with an email to email@example.com.
We’re all armchair docs these days… Now let’s be real-world traders.
There’s money to be made.