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A Stage One Stock To Consider And A Stock To Avoid – Mike Swanson (01/21/2019)

Last week’s move up in the market pushes out the next major drop in the market a bit out in the future. I gave my targets of where the S&P 500 is now likely to top out and when in Sunday’s private Power Investor update.

But with market bounce that began after December gaining steam people are now looking for stocks to buy.

Let me show you three stocks and talk about actual strategies with them. I know on CNBC they are basically yelling buy this and that popular stock – but all buys must be done with a strategy that takes into account the overall trend that a particular stock is in.

There are some stocks that are now only good for short-term trades and others that CAN be bought for a long-term time frame if they are in the right sector.

Here is one stock poised with a positive triangle breakout pattern.

This is a stock trading above its 150 and 200-day moving averages – which is good – while almost all of the popular stocks still remain steeply below them.

However, this type of pattern is for short-term trading so if it were to trigger with an upside breakout you’d be looking for the $25.00 area as a sell target.

For buying something that you can look to hold for months or longer you need to do it in a sector outperforming the market and with a stock coming out of a stage one base.

Here is one such stock.

USDP has been basing for almost two years with resistance at $11.00 and support now at $10.00. If it breaks out it will breakout of a LONG-TERM resistance pattern that would suggest that it would be a great performer for the rest of this year.

Notice that this stock barely fell when the US stock market dumped this past Fall.

The stock also pays a dividend over 13% – and has a nice balance sheet so the dividend is real and sustainable.

CNBC won’t talk about it. On Robinhood only 197 people even own it.

What is this stock?

It’s a railroad terminal and fleet company. That’s why the dividend is so big and sustainable and why it’s been doing better than the stock market since last September.

It’s a defensive stock in a defensive sector – which are the sectors now leading the market. It’s also not in a stage three top or stage four decline so it can be bought for the dividend alone.

And it can be held as an investment as it’s still in a stage one or early stage two cycle.

But CNBC won’t talk about this stock, because it isn’t Apple or Facebook or NVDA or one of the few dozen popular stocks people like to hear about, because they already own them.

So how do we buy Apple now since that is the most popular buy recommendation that will be made this week every day on CNBC?

Take a look at the chart.

Apple is in a stage four decline trading below its 150 and 200-day moving averages and is now one of the worst performing stocks in the entire S&P 500. It’s barely even bounced since December.

So if you buy it you have to hope for a bounce up to $160 or $170 where the 50-day moving average is and then just sell.

And if it does bounce it might not even get up to there as that is the problem you face when you buy anything trading below its 50-day moving average.

So if you buy Apple now in this situation its like gambling against robots.

Personally I just avoid Apple as I think you might make money or you might not buying it now and it might not be much if you are lucky.

But if you buy something like USDP you can look to make 13% in dividends and maybe even 20-30% in the stock over the course of this year no matter what the stock market does as it’s in a defensive sector and in a good spot in its cycle of bull and bear stages.

You might want to look into USDP more. I don’t own it now yet myself as I just found it this weekend.

If you own Apple you might even want to sell it and buy USDP with the proceeds.

If you want to learn more about how to buy and sell stocks and understand how to use stage analysis grab my book Strategic Stock Trading as I’m running a limited special offer for it this month so you can get it practically for free and use it alongside me.

To get it click here.