Dow Drop: What to Do When the Market Gets Crushed
A lot of investors and big traders were caught by surprise. It’s sad that most people who watch the major financial media see the dow drop big and freak out. As I write this, the markets are climbing back. We’ll see how it plays out.
Worried about the recent market troubles? Some of my top students and I aren’t. When the overall market tanks, you don’t necessarily have to run and hide.
So why is the market behaving this way?
Dow Drop, Geopolitics, Market Consolidation, and Mismanaged IPOs
There’s a lot of geopolitical uncertainty. There’s the trade situation with China. Will there or won’t there be a deal? How bad will the tariff situation get in the meantime?
Then you have Brexit. I just spent a few days in London and everyone is talking about it. Will there be a Brexit or not? And now they’re talking about a third option — a ‘no-deal Brexit.’
Consolidation in the Market Is Good
The recent pullback on the overall market is just consolidation. It’s a good thing. We’ve had a strong run up from the beginning of the year.
The uncertainty is helping the consolidation. You don’t get perfect run-ups that go forever.
Stay Away from What You Can’t Control
In any case, you can’t predict the outcome of the China trade situation. You can’t predict the outcome of Brexit. I try to stay away from things I can’t predict and have no control over. That’s why I stick with certain patterns.
The irony about the uncertainty in the market is that I see big-time traders complaining. They’re saying there aren’t any good trades on the long side.
Or they say it’s a quiet day. All I can say … What are you talking about?
Recent IPOs Are Laughable
Why are so many people glued to the horrible IPOs?
While the rest of the world hates on penny stocks and focuses on the likes of Uber (NYSE: UBER) and Lyft (NASDAQ: LYFT), my students and I are finding trades.
You want to see something funny? Here’s the Uber chart since their IPO:
Uber since IPO: 3 days of trading
That’s laughable. What a horrible IPO. Even with all the press, this thing smells bad. In the first two days, it went from $45 to below $37. It’s back up to $38 at the time of writing. So what!
Everyone is focused on this stock, but it doesn’t look good.
Do a Google search and look at the number of hits. It’s crazy. Even if you invested in Uber in the private market over the last few years, you’re down. And you know what? You can’t predict what will happen with this stock any more than you can predict the outcome of the China trade talks.
Short-term: it’s unpredictable and might even be dangerous to trade.
Lyft was just as bad
Lyft dropped from $88 down to $50. No thanks. Yet people are obsessed with these companies.
Stay away from China guessing games. Stay away from Brexit guessing games. Stay away from Uber and Lyft guessing games. But that doesn’t mean you have to stay away from everything.
What You Should Focus on in the Current Market
First, follow me on Twitter.
I tweet all kinds of alerts about my trades. I’m not saying you should trade the same stocks with the same setups as me. As a matter of fact, it would be stupid to try because it takes a minute for me to write up my trade description. By then it’s too late.
But if you follow along, you can learn my thought process. You’ll start to understand how I pick stocks and what my trade plan is. You can go study the charts and begin to build your knowledge account.
The Strongest Stock in the Market Is a Penny Stock
Uber is NOT the strongest stock in the market. Nope.
The strongest stock is one of those hated penny stocks, FOR EXAMPLE: Kraig Biocraft Labs, Inc. Kraig is a company that uses genetically engineered silkworms to produce spider silk. It sounds like science fiction. Apparently, it’s real.
People love to hate on penny stocks. But this is a company that’s kicking butt. Now it’s a $400 million company but still small by Wall Street standards.
If you’re thinking about chasing this — I wouldn’t. It’s overextended now. I keep waiting for the perfect morning panic.
And this isn’t the only game in town. Not even close. There are so many I don’t have the time to trade them.
This is what I teach my students: Yes, I teach them to be careful when the market is tanking. I tell them to be extra careful about holding overnight — especially longs. But the plays are there. And we’re crushing it.
Penny Stocks Are Hot
People just need to know what to focus on. Penny stocks are hot.
Believe it or not, Bitcoin has come back a little. I find it funny that these things everyone loves to hate are strong right now. Big traders moan about their lack of trades … While we find excellent trades with strong patterns.
Just because the overall market is trending down or there’s uncertainty about China, doesn’t mean there aren’t any good plays. You have to look for different kinds of stocks. You need to recognize the patterns.
The way I teach and trade — with complete transparency — makes it easy to see what I do. I show the patterns I trade, explain the rules, and give examples of potential plays.
I show my students when I nail plays AND when I’m wrong and take a loss. I show when I’m too early or too late.
Because every single trade is a lesson.
— Tim Sykes
Editor, Penny Stock Millionaires