Weekly Update: How to Spot A “Power Trend”
Weekly Update: How to Spot A “Power Trend”
Good evening, and welcome to this week’s edition of Stealth Trades!
Good evening, and welcome to this week’s edition of Traders War Room!
Here’s what most people don’t realize about the stock market…
It is only good about 30% of the time.
What do I mean by “good”?
I’m referring to a healthy, trending, bull market environment where the odds are stacked in our favor.
You see, the market only trends about 30% of the time. The other 70% of the time, stocks are moving down or sideways.
This is the S&P 500 index over the last two years (104 weeks):
The yellow boxes highlight periods of sustained uptrends. Out of 104 weeks, only 27 of them meet my criteria.
So, it is crucial to take advantage of these windows of opportunity.
The last few months have been phenomenal for us and our members.
In our Alpha Stocks service, we have caught huge moves from market leading stocks like Dream Finders Homes (+65%), Alpine Immune (+71%), Black Diamond Therapeutics (+64%), Eagle Materials (+48%), Bit Digital (+51%), Mohawk Industries (+38%), Interactive Brokers (+31%), and countless others.
In our FIRE Trader service which uses a precise pattern to identify low-risk entries into high-flying stocks we have bought stocks like SRRK which went up 82% in 43 days, ABSI that soared 113% in 14 days, and VKTX which is up 302% from where we bought it 7 weeks ago.
Heck, the last two stocks we recommended in the Insider Effect are up 44% (RLMD) and 65% (SANA) in less than a month!
Gains like this can only be achieved in a strong, trending market environment.
The strategies are sound. Our entry and exit tactics are proven. But the real magic comes when they are applied at the right time.
2022 was tough. It was a bear market. We had some good trades, we made a little money, but nothing like what we are seeing right now.
That’s just part of the game.
You must be willing to weather the storm when conditions are poor if you are going to have real success. Because make no mistake – another bear market will come.
These conditions will not last forever.
There will be times when the markets pull back or trade sideways for weeks or even months.
But when conditions are good, that’s when you want to step on the gas… to get full exposure and make big profits during these lucrative periods.
So, how do you know when conditions are “good”?
Allow me to introduce… THE POWER TREND.
The Power Trend is a concept developed by Mike Webster and Charles Harris during their time at Investors Business Daily, and it can be applied to any major index like the S&P 500.
Here are the rules that trigger a Power Trend:
- The low is above the 21-day EMA for at least 10 days
- 21-day EMA is above 50-day SMA for at least 5 days
- 50-day SMA is in an uptrend
- Index closes up for the day
Here is a look at what started the one we are in right now…
And this is where we are today…
Power Trends present some of the best money-making opportunities for traders. Even long-term investors, if they go back and look, will find that the vast majority of their gains come during these periods.
So when will the rally end?
I don’t know. But this is what signal the Power Trend is over:
- 21-day EMA crosses under 50-day SMA or
- Close 10% below recent high and below 50-day SMA
When one of those two things happens, I take my foot off the gas and cut down exposure or go completely to cash.
Until then… enjoy the ride.
Best wishes for your trading,
Ross Givens, Editor