  | Stock Power Daily is easily the best bang-for-your-buck newsletter I’ve ever seen.
For the ultra-low price of free, chief research analyst Matt Clark shares one (or more!) stocks that are worth buying (or avoiding!).
And you’re getting a ton of great recommendations because of it. Those following Matt’s callout of Super Micro Computer (SMCI) back in October must be happy about the 268% gain... or Axcelis Technologies (ACLS) from August, up 131%... or Preformed Line Products Company (PLPC), also from October, up 111%.
But of course, if you are in those stocks, you now have to consider the most difficult part of every trade, winner or loser… when to sell.
You should know, you get that kind of guidance you get when you graduate up to my premium research services…
Whether it’s Green Zone Fortunes, where we build a long portfolio for the long run, containing only the best of the best highly-rated stocks… Or Max Profit Alert, where we use momentum strategies to trade short-term moves and even profit from declining prices.
Knowing when to sell is equally important across both strategies, different as they are.
So today, I’ll make an exception for anyone who hasn’t yet joined up. I’ll share a bit about how I decide to sell on the upside and downside across both services, showing you simple but effective rules for each scenario…
 | Banks are in turmoil right now. But it’s much worse than people think. Which is why Adam O’Dell is sharing his latest research including how to help protect and grow your wealth. Go here for the full story. |
Lamenting Our “Biggest” Regional Bank Loss Contrary to the impression you’d get reading Stock Power Daily the past couple weeks… I haven’t always thought regional banking stocks were as toxic as they are now.
In fact, I recommended a high-quality regional bank stock to my Green Zone Fortunes subscribers all the way back in April 2021.
That stock was Preferred Bank (PBFC), a state-chartered bank based in Los Angeles, California. We saw a respectable 20%-plus gain while we held the stock – precisely what I’d expect from a regional bank stock before this year.
The stock rated 99 when I recommended it. And that’s why I believe it held up so well even once the bear market kicked off in early 2022. Even to this day, PFBC rates a “Strong Bullish” 82.
Despite this, we sold the stock on March 13, just as the bank crisis began. Why?
Because when facing a sector-wide crisis like banks were in (and still are), following a stop-loss strategy trumps any reason to buy the position in the first place.
Consider this … As of today, PFBC has lost nearly half its value since its January 2022 highs. If we were still holding it, we’d be facing a 30% loss.
But we’re not … because of our stop loss strategy in Green Zone Fortunes, we sold it on March 13 for just a 9% loss.
That is, to date, the most money we’ve lost on a regional bank stock in Green Zone Fortunes. And I doubt I have to tell you how badly other folks have fared in the sector – many losing as much as 80% or 90% of their investment.
That covers selling on the downside. But on the upside, too, we often employ a strategy of taking a portion of our profits off the table once we see a 100% gain. That way we have a risk-free or near-risk-free position to enjoy going forward.
You can use either of these strategies in your own account. When you buy a stock, decide right then and there how much of a loss you’re willing to accept. If that loss comes, sell and don’t look back!
I tell you all this because I want to impress upon you how important a “sell discipline” is – just like the one I recommend in Green Zone Fortunes.
We use stop-losses because we refuse to accept the prospect of a downturn getting out of hand. We want our losses small and our wins big. Holding onto dogs, and that also counts good stocks caught up in a crisis, has the exact opposite effect.
As I said, I don’t think the crisis in banking stocks is over, especially with inflation still hot and bank bond portfolios still deeply underwater. There will be a second shoe to drop in this shakeout. And that’s why I’m staying away from banking stocks for the time being.
As long-term investors, we have to place our chips in the places that are most likely to generate market-beating returns over the long run. For the time being, banks have no place in this kind of portfolio.
But that doesn’t mean you should ignore bank stocks completely…
Using a different strategy, they could be the source of your biggest windfall of the year.
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Sharing 3 Targets From Max Profit Alert That brings me back to Max Profit Alert…
There I use the simple trend and momentum algorithms I developed 15 years ago to identify the best trades — bullish and bearish — in any sector.
And since we can make money on assets that are falling in price, the strategy has been an absolute safe haven in this bear market!
Take last year, the most volatile time for the stock market since 2008…
I knew that small-cap stocks don’t perform well in bear markets. They actually tend to underperform their larger-cap peers, making them vulnerable to steep losses.
After confirming this with my momentum algorithms, I targeted the iShares Russell 2000 ETF (NYSE: IWM) and recommended a put options trade in early April 2022. By the end of May 2022, we had booked three separate gains of 104%, 213% and 107% — an average return of 143%.
Fast-forward two months, and I noticed a bearish technical pattern on the iShares MSCI Spain ETF (NYSE: EWP). Two weeks later, we closed out the first third of the position for 70% gains. Two months after that, another sell for 161%. And finally, one month later, the remainder for 181% returns. Altogether, an average gain of 138%.
Just a few weeks ago, I recommended a short trade on the SPDR S&P Regional Banking ETF (NYSE: KRE). After two weeks, we took partial profits of 76% on that trade while keeping the rest of the position open for more.
Finally, just last week, we opened a new bearish trade on a fragile sector, which has its own crisis brewing and is intimately tied to the regional banking crisis.
You’ll notice that we sell these positions in “tranches” of about a third each. Especially on short-term trades, you want to do this regularly so you can lock in gains and raise your odds of the trade being profitable overall.
I’m laying all these cards out on the table to help you understand the massive opportunity this market holds for betting against the market’s weakest stocks and sectors.
For more info, click here for a brand-new presentation focused on the crisis in regional bank stocks, and a related sector.
I revealed four major financial firms that are at supreme risk of falling further from here. Many people own these stocks, either directly or through an index fund. All four of these stocks are also potential profit-making targets in Max Profit Alert.
Even if you don’t think short-term trading is for you, or aren’t the type to bet against a stock, I urge you to learn the four bank stocks I believe could be the second, third, fourth, even fifth shoes to drop this year.
And regardless of your next move, be mindful of your sell strategy. You don’t want to let a great win slip through your fingers… or a mild loss turn into a severe one.
To good profits,
Adam O'Dell
Chief Investment Strategist, Money & Markets
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