Last week I pulled a rabbit out of a hat for my Zenith Trading Circle subscribers.
Truth be told, we’ve seen more than just a few tricks like that over the past year.
Last week’s huge winning trade was a record for me, and it was a record for the financial gurus that are part of the famed Money Map team.
The gain was a 1,156% return on half of a call option position on Fossil Group (NasdaqGS:FOSL) we got into on January 31, 2018, only two weeks earlier. We took off the other half of the position a day later for a 1,140% gain.
And that record I crushed was set by a 995% gain last year… By me, for my Zenith subscribers.
In truth, the way I pick my trades isn’t magic. The rabbit was always in the hat, I just know how to find it time and time again.
It’s Not Just Sleight of Hand
Making money in the market isn’t a random walk; it’s about having a track to run on.
It’s about understanding the ups and downs of that track and about anticipating its twists and turns so you can ride its difficulties as profit-making opportunities.
The track we run on in my Zenith Trading Circle research service has mostly focused on retail. The “retail ice age” and the “Amazonation” of America has changed the sector drastically and has opened up the potential for hugely profitable plays. It’s about how consumers’ buying habits have changed, how we shop, where we shop, when we shop, and even why we shop.
The track we run on is all about how to make money from all the changes that retail is going through.
This idea of a “track” is an investing theme. It’s a way to look at a slice of the market – what’s in that slice, what’s impacting companies in that sector, who’s leading, who’s following, who’s failing, why it’s all happening, and what to look for next.
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When I look at an industry, a sector, or any slice of the market, I look at each of the companies in that slice that can be traded.
For me, I only follow liquid companies. That’s because I’ve been an institutional trader and used to throw around huge chunks of capital (still do for myself), and have to be concerned about my readers getting into and out of positions in “size” because I have a sizable group of folks who follow me.
That means the stocks I target trade on good volume; which, for me, is an absolute minimum of at least one million shares a day. However, on average, the stocks I usually target have daily volume in the multi-millions of shares – the more, the better.
The problem with thinly-traded stocks is you might be able to get into a position easily, but getting out, especially when you want to – or worse, when you need to – can be costly to the point of eating up your profits or adding to your losses.
This Track Doesn’t Come Without Its Hurdles
Thematic investing, using the track metaphor, means looking at each of the companies in your themed space as running in their own lanes.
I look at them individually as they “run.” How fast or slow are they? What are the mechanics of their movement, meaning how do they operate and make money? What are investors’ and analysts’ expectations for a company’s and a stock’s performance?
And I look at them running against each other – how they’re affecting and reacting to each other, as opposed to looking at each company. I look at how each stock is doing its own thing.
Translating that into the retail space, everything’s been upended by Amazon.com (NasdaqGS:AMZN) and online advertising, marketing, and selling.
That’s given my Zenith Trading Circle readers the shot at a lot of big winners from betting on who isn’t in the online selling game, who can’t compete, who has too many stores, too much inventory, too much debt, and who’s going out of business.
But there are survivors to play. There are hangers-on who are in consolidation mode, upping their game, pushing online, increasing sales, and making money.
Some are making money just because it was a great holiday selling season. We’ll be targeting them for their next leg down; for some, that will be all the way down to zero.
And some companies, because they are making the right kinds of long-term investments, are raising capital conservatively, and applying it smartly, will survive and thrive.
We’ll be targeting them all, buying the ones on the way up the track and pounding the ones sliding down.
One odd phenomenon we’ve made a lot of money on is the tendency for beaten-up, left-for-dead retailers to see their stocks skyrocket.
In fact, that’s exactly what we did with FOSL.
It Could Go the Way of the Dinosaurs, But Not Before We Profit
In my profit alert for Zenith subscribers, I said…
“It’s a gutsy play, and we’re going in on it. We’ve had some big winners before doing exactly the same thing, and with holiday sales so strong, this play could be a homerun. I don’t want us to get too greedy on this one. I hate Fossil for good reasons, and I still believe that they will crap out in the long term. But it’s a smart risk-reward bet, so we’re taking it.”
We bought the March $10 calls for $0.50. That’s right, 50 cents.
When FOSL’s earnings came out, easily beating consensus estimates as we had predicted they would, the shorts had nowhere to go but to buy stock at whatever price was available to cover their losing bets. They drove Fossil shares up 87% in about a New York minute.
That’s when we sold half of our position for $6.28 for an astonishing 1,156%.
The next day (because we’re not greedy and we were sitting on a huge gain), we sold the other half of our trade for 1,140%.
All we’ve done is run on our track, where we know who’s in which lane and what they’re doing. We know what investors’ and analysts’ expectations are, and we play those stocks on the way up, on the way down, and up again – as in the case of FOSL.
Like I said on Saturday, these are the situations I target, over and over again, in order to bring massive profit opportunities my members. In this case, it was an opportunity to make eleven times their money… That’s the chance to turn $10,000 into nearly $114,800 in less than two weeks.
And believe me when I say that I heard the response from my members loud and clear…
Joe H. wrote in shortly after I sent out a profit alert to say, “I was close to 2,000% on FOSL. Thanks!! Let’s do this again!”
Mark W. sent a note saying, “I’ve gained more confidence with trading. Looking to go into next recommendation with my profits.”
Messages like that are why I am always tirelessly looking for the next big opportunity. At this point, I believe it’s only a matter of time until I break my record again, so I have to ask… Are you going to be with me?
On Friday, I’ll be answering Insights & Indictments reader questions about the FOSL trade. You can reach me here with any and all questions.
I look forward to hearing from you.