Today, I’d like to continue our discussion on my colleague Chad Shoop’s Profit Radar.
The economy is always at the forefront of public consciousness.
Unemployment numbers, inflation data, consumer sentiment…
No matter what rung of society you’re in, it’s likely you have at least a vague picture of how the economy is doing.
That’s why it’s always in the news. The health of the economy affects almost everyone.
This has been recognized for thousands of years…
Early civilizations experienced booms or busts based on the economy. But back then, their fate was more specifically tied to weather.
If the weather cooperated, crops prospered and so did the economy. In bad years where the weather didn’t, the result was hunger. Hunger and often war were tied to a bad economy.
The close tie between the weather and the economy led many to think of the two in similar terms. As the economy grew more complex, early theorists explained principles in terms of the weather. They viewed both as cyclical to some degree, and so the business cycle became a guiding principle in economics.
Like all cycles, the business cycle has peaks and troughs. Peaks are the “good economy,” where unemployment is low and investment is high, and troughs are times when unemployment is high, and businesses suffer.
Economists have long sought to tame the business cycle. The goal is to at least lessen the pain of the declines in the cycle. Policymakers at the Federal Reserve has used interest rates and monetary policy in pursuit of this goal for more than 100 years.
Traders have also noticed the importance of the business cycle. They saw that some sectors do better in a strong economy while other sectors do better in a weak economy. You can see this pattern in the chart below.
It’s a complex chart but it shows, for example, that the industrial sector does best as the economy begins to expand and suffers the most when the economy contracts. Consumer staples do best in worse economies, and so on.
Every sector, except financials, has a clear bullish and bearish point in the cycle.
You could use this approach to guide your investments, and many traders do. Buy industrials stocks when the economy improves, and sell them for consumer staples when the economy worsens. This is textbook macro trading.
But Chad Shoop improved on this idea significantly, allowing it to work on a much more micro scale, and with much larger short-term results.
How the Profit Radar Tracks Stock Cycles
Rather than focus on tendencies and history, Chad looks at what the market is doing right now. He understands there will be winners and losers among the different sectors at any given time. Smaller cycles constantly play out in the markets.
So, he developed his Profit Radar to identify the top-performing sectors, relative to larger indexes, at any given time. Rather than longer-term business cycles, Chad discovered a way to track much shorter-term “stock cycles.”
Chad could have stopped here. That’s really all the information needed for a profitable trading strategy. But he went one step further…
He realized the best stocks in the best sector are likely to be the biggest winners. And he uses his indicators to zero in on the right stock for the current point in the business cycle.
This isn’t a theoretical approach like the one that economists favor. This is a time-tested trading strategy that has demonstrated its ability to beat the market.
Boosting the Profit Radar With Options
In a back test conducted from 2010 to 2020, for example, Chad’s Profit Radar strategy outperformed the Dow Jones Industrial Average — remember, industrials are key in good economies — by more than three times. That’s counting both wins and losses. And without even using options.
Chad’s Profit Radar is based on the same underlying principle that guided the economic life of ancient civilizations. They tracked the weather to understand their short-term prospects.
What’s even better is, Chad is an options expert. With the knowledge of which stocks are likely to move the fastest, he can also pick the perfect option to leverage that move into much larger gains than if you’d just held the stock.
It’s how he was able to spot gain opportunities of 246% in one day, 269% in five days, and 308% in eight days.
Now, Chad’s only opening his Profit Radar up to 500 people to start. And since we went live yesterday, we’ve already seen quite a bit of interest.
So if this sounds like something you could use, you’ll want to learn more about it here while there are still slots available.
Michael Carr, CMT, CFTe
Editor, One Trade
Chart of the Day:
Gold Bugs Are Showing Up
I gotta hand it to the gold bugs, here. They’re showing up to play.
Gold prices have broken through two key downtrends, the white and blue lines above. We just got a bullish cross on the MACD. The RSI isn’t even close to overbought. And gold prices, while down on the week so far, are currently retesting that breakout.
Note that this is a weekly chart, too. Patterns on weekly charts tend to last several months.
Folks, this here is a trend change. Not only did gold pop nicely on the CPI number last week, it actually held on to its gains and added more — unlike bitcoin, which is floundering.
There’s major resistance for gold up at $1,900, but after that, we could easily see gold prices reach the $2,000 handle yet again. You want to be long gold and silver here.
Managing Editor, True Options Masters