A Hot New Breakout in “The Greatest Bull Market Ever”

This post A Hot New Breakout in “The Greatest Bull Market Ever” appeared first on Daily Reckoning.

He’s loud. He’s brash. And he knows a thing or two about how to pull money from the markets…

My colleague Alan Knuckman worked the trading floor in Chicago for years. Now he’s helping traders just like you rack up the gains every single week.

I’ve closely followed Alan’s plays since he joined the team in July. The moves I’ve seen so far are impressive. In fact, he was able to help his readers nail down a 63% gain last week in Newmont Mining Corp. (NYSE:NEM) in just two hours.

That’s why I caught up with Alan to pick his brain about some of the biggest opportunities on the market right now.

Here are the highlights:

Rude: Alan, as a former floor trader, what do you see is the biggest opportunity in the market right now?

Alan: I still think the markets have great opportunity to keep going higher, just because we’ve come a long way doesn’t mean we can’t go further.

That’s rule number one in trading, markets can always go a lot higher than you think and a lot lower than you think.

Novice traders make the mistake of trying to anticipate the turn – they want to “call the bottom” or “call the top.”

The problem is, that mentality can be very expensive not only financially but mentally as well.

There have been people talking about the top in the market since 2009 and it’s essentially gone straight up. Unfortunately, people factor in their emotions and factor in their own biases into their trading instead of letting the markets give them the clues to as where they’re going.

Will the market keep going straight up? No way. But as a professional trader, it’s not my job to predict when the next earthquake or shark bite is going to happen.

Right now you cannot ignore the fact that we are in one of the greatest bull markets of all time. That’s the opportunity in front of us.

Rude: Do you have any tips for our readers so they’ll know when they should start playing the downside?

Alan: When the market does turn, it won’t happen overnight. Don’t listen to anyone that says otherwise. It’s not going to be a straight down move. In fact it’ll happen in a very recognizable way…

The first step is we need to see sustained “sideways” action. In other words, we need to see a period of time where we don’t make new all-time highs. And, by the way, I don’t think we’ve gone more than a couple weeks at most, before making new all-time highs in the major market indexes.

After we see that sideways action, from a technical standpoint, what I’ll be looking for is if we do close below the 200-day moving average in the S&P (and this will be a recognizable mentality shift as well). You don’t have to make this any more complicated than it is… the 200-day moving average is just a technical situation that people pay attention to, if that happens for, say, a month, then the overall trend may be broken a bit.

So you see, a downturn won’t just sneak up on us! Professional traders don’t sit around guessing, they wait for a change in the trend and they act appropriately.

But in today’s market, I’m still a believer in buying any dips.

If you delve into the numbers, look at the dollars earned by these corporations and look at the earnings growth, the fundamentals remain solid.

Rude: What’s one of the specific ways you’re picking stocks in today’s market?

Alan: Two words: bullish divergence.

Traders know that term well – but since I think it’s important for everyone to know, let me explain it right now…

So far we’ve been talking about the overall market and that the trend is heading higher. But the overall market is full of stocks that are going up AND down.

Remember, since the overall market trend is up… for the most part I’m going to be a buyer.

But, one of the best places to find a great trade in after a stock has pulled back. Even hot stocks cool off for a little bit. Or some stocks fall out of favor from the overall trend. That’s a big opportunity if you play it right.

One of my keys is looking for bullish divergences when I’m trying to find something that’s been beaten up that I think is undervalued.

I will look for something that’s making new lows but the volatility is not making new highs.  That’s bullish divergence.

Rude: What’s your favorite breakout?

Alan: A few weeks ago, I was wandering around the Agora Financial office in Baltimore and I physically took a couple of people and I stuck their head in the chart to show them what was happening in gold.

In the trading pits everyone sees the action. In the real world, you have to really wave your arms to get folks to look.

Gold had been trading sideways — between $1,200 and $1,300 an ounce for all of 2017 — and it was telling us something was going to happen. Gold was looking for a breakout.

The charts don’t lie! Finally, gold broke out above $1,300 an ounce and now we’re seeing 2017 highs. That’s a classic breakout.

And what’s great about gold is there are plenty of ways to play it! The pick I recommended to my premium readers was with Newmont Mining. The special strategy we used ended up making over 60% in one day. That’s the power of the right trade at the right time.

That’s the biggest news of the week – the breakout and sustained follow through on gold because we’d been up to this level three times unable to push through it. That’s very significant market action.

Plus, when you look at what’s happening in the U.S. dollar it all makes sense…

We saw the dollar make new 18 month lows.

So, it’s not just gold, it’s a much larger currency play.  The major headwind facing gold in recent years was a strong dollar. That’s all unwinding now. And there’s no real strength in sight for the greenback.

We’re not raising interest rates any time soon at all. And looking at the numbers, to get to a 50% or greater chance of our next rate hike we have to go all the way out to March or June of 2018. So a rate hike is not even on the radar.

Simply put, if there’s no rate hike and the dollar doesn’t go up I think gold continues to breakout to the upside. I’m looking for that to continue.

Focusing in on the gold price, if we go way back to the all-time highs in gold at $1,900 down to the recent low around $1,100, we’ve got a solid short-term price target at $1,450-$1,500. That’s just getting us back to the halfway point of this recent five-year fall.

So there’s still a lot more upside in gold…

Sincerely,

Greg Guenthner
for The Daily Reckoning

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