Do NOT Touch This Stock
Some people will tell you that you have to get the market direction right to make money trading stocks. Like, you don't wanna own a bunch of stock when the market is dropping.
This is the basic “a rising tide lifts all boats” strategy. And while it's true that there aren't many stocks that can manage to buck the overall market's trend, simply buying any old stock because the market is in rally mode is not a formula for success.
I mean, yes, market direction is definitely important. But what if you'd bought GE (NYSE: GE) two years ago? Or Ford (NYSE: F)? You'd be watching other people roll in the dollars from an epic bull market... and you might even be thinking that you don't have what it takes to make money in the stock market...
But the truth is, picking the right stocks to trade is a pretty easy fix. And I'll tell you exactly how you can zero in on the big winners in a minute. First, however, I want to talk a little more about stocks to avoid.
Right at the top of my “Do Not for Any Reason Risk Any Money on This Stock Ever” list is Tesla (NASDAQ: TSLA).
Long or Short, Tesla Will Destroy You
From a fundamental perspective, Tesla looks like one of the greatest short opportunities there ever was. It's like Enron times 10. Two years ago, CEO Elon Musk said Tesla would be making 5,000 of its Model 3 cars a week. Today, it is making maybe half that. And the stock is within ~10% of all-time highs...
Oh, and those $35,000 cars will actually cost you over $50,000...
Musk said he was taking the company private in his now-famous “funding secured” tweet. This was basically a lie, and the SEC just sued him for it...
Musk smoked pot openly during an interview...
At the same time he's supposed to be running a car company, he's sold flamethrowers and mused about starting a cookie company...
He brought ridiculous subs to Thailand to rescue those soccer kids stuck in a cave, was told his idea was dumb, and accused one of the divers of being a pedophile... He's being sued for that, too.
Tesla loses money on a grand scale. It will need to raise more money soon. The SEC forced Musk to step down as CEO.
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Through it all, the stock has managed to stay up around $300 a share. It's truly amazing.
The SEC just laid down its lawsuit about the “funding secured” tweet last week. Musk said he would fight the charges. I saw a lot of very savvy traders on Twitter say this marked the beginning of the end for Tesla. Who would lend the company more money when the CEO is an egomaniac wing nut criminal? The stock was down like $45...
But then over the weekend, Musk settled the suit, and the stock launched $45. Traders looking for more downside got hammered. Next move? Logic would say the longs who think the settlement is a green light for the stock are about to get whacked. But who knows? There is absolutely no way to get any kind of reliable feel for Tesla stock. It is 100% drama.
And if you've made any money on the stock, thank your lucky stars. Because it was luck. Fortune smiled on you that day, but if you stick around, fortune will frown.
I will admit I have been tempted to buy put options on Tesla (put options are a cheap way to make money on a downside move for a stock). I was tempted last week when that SEC suit was announced. But I didn't. Because I listened to my trading rules, which include the “Do Not for Any Reason Risk Any Money on This Stock Ever” list.
Check Your Ego at the Door
I have no idea why Tesla stock acts the way it does. And you know what? I'm fine with that. I have no need to explain, understand, or anything else about Tesla stock. There are plenty of other fish in the sea...
Over the years, I have learned how to check my ego (two kids and a divorce will do that). At least I've learned to check my ego where stocks and trading are concerned. I don't feel better about myself when a trade goes right, and I don't feel like an abject failure when a trade goes wrong.
Most of all, I just want things to be simple. I'm over 50, and I don't need any more complications than I already have. And so I make sure my trading stays simple. For instance, I don't spend hours and hours finding new stocks to trade. I don't have to. They come to me. Seriously. Pay just a little attention to what's moving, and you'll see what I mean. It takes maybe 15 to 20 minutes a day to get a handle on where the action is.
Plus, I keep a small stable of reliable stocks to trade, stocks I understand. I know their patterns. Again, simple. I can get a signal on one, ride it, and when I'm done, another one is usually ready to roll.
In my Options Trading Coach service, we've only traded 11 different stocks this year. But we've completed 38 trades so far. And we have a 25% average gain on every single one of those 38 trades (I'm not counting the current open trade on Cisco, which is up a little better than 50%).
Now, 25% may not sound big. But if you can make 25% on your money 38 times, well, now you're talking. If you put just $5,000 into each of my trades this year, you'd have $47,500 in profit. That's a solid second income you could earn while working 20 minutes a week.
By the time 2018 is over, I'm expecting to have around 50 completed trades. Total profit (assuming $5K on each) should be around $62,500. There's still time, if you want some of that action. Here's how.
Until next time,
A 21-year veteran of the newsletter business, Briton Ryle is the editor of The Wealth Advisory income stock newsletter, with a focus on top-quality dividend growth stocks and REITs. Briton also manages the Real Income Trader advisory service, where his readers take regular cash payouts using a low-risk covered call option strategy. He is also the managing editor of the Wealth Daily e-letter. To learn more about Briton, click here.
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