With the markets flirting with all time highs, the question
is how do you trade in this environment?
Or should you even trade in this environment?
The markets have made quite the run since the major
bottom back in 2009.
In fact, this is the seventh year of the bull market.
Does this make me nervous? Absolutely and you should
The average bull market lasts for five years.
Does this mean you should pull out of the markets? Not
necesarily, but it does means you should throw caution to
I do think you need an edge to trade now. I will
address what I mean by that in a few moments.
But, another thought comes to mind. That is this.
What will be the signal or the cue that this bull
market is ending?
Could it be when the Fed starts to raise interest rates?
Traditionally, that type of activity has the potential
to be the killjoy.
That is why so many investors and traders will be
watching the release of the Non Farm Payroll
this Friday. They want to see if the numbers give
a clue as to what the Fed may do this month. Or
will they put off a rate hike until September?
Personally, I don’t see them hiking rates this month,
but I could be wrong.
But you need to be aware of what the market participants
are looking at.
Back to the edge.
I always like to have an edge when I am trading.
Let me define what an edge is. An edge could be
a company initiating a buyback program. Or it
could be insider buying.
Others edges I like are when companies up their
Or it could be an anylist upgrade.
Any of these types of activities are usually positive
for a company.
As you know from prior issues of this newsletter,
I especially like buybacks.
And why not?
Here are a few recent examples.
CTB announced a buyback of $200 million on
February 23rd of this year. At that time, CTB
traded for $35.62.
By April 7th, it was up to a high of $43.82.
That was a 23% move in just over a month.
The next day, DY announced a buyback of $40 million.
DY closed at $43.65 the day they made the announcement.
Last week, DY hit a high of $60.39.
That was a $16.74 gain in about three months.
Almost a 40% return in three months after they
announced their buyback.
I could show many more examples of positive
stock price movement after a buyback is
announced, but it is not necessary.
The point I am trying to make here is that it is
helpful to have a compelling reason to trade
a stock … and buybacks are one of those
Another compelling reason is insider buying.
I have mentioned AKS before and the fact that
back in January, there were a few insiders
picking up shares in the open market.
One insider was the Chief Financial Officer.
They were buying around $3.80 per share.
Just recently, AKS hit a high of $5.93.
So, if you followed their lead and picked up
shares under $4, you would be up around
50% since the end of January.
Do you just go in and buy these stocks when
thee types of announcements are made?
No, I don’t. I still want to enter off of a
technical set up.
There are a number of good tools to help
time the entry. Pick your favorite one.
But, with the markets are all time highs, stay
with an edge.
Best of success in the markets.