By Kris Sayce, editor, Casey Daily Dispatch
Are you nervous yet?
Can you cope with the ups and downs?
So far, the market is moving according to the script.
September is historically the worst month of the year for markets.
No other month comes close.
The question is whether you have the stomach to stick with it…
Or whether you’ll let the ups and downs scare you out of the best potential gains.
To help, let’s show you a strategy that will make sure you stick with it. Read on…
If this is your first time reading the Dispatch, welcome. If you’ve been here before, welcome back.
At the Dispatch we have two goals:
To introduce you to the most important investing themes of the day, and
To show you how to profit from them.
We do this by showcasing ideas from our in-house investing experts: Dave Forest and Nick Giambruno. And from the founder of our business, Doug Casey.
Today, we’ll continue to guide you through the market’s worst investing month.
A Little Help From Patience and Compounding
By the way, we get it if you’re worried about stocks.
It’s human nature to worry… and wonder if maybe you’d be better off sitting things out for a while.
But in our view, that’s a bad idea.
As we wrote to you recently, if you can stick with it, stocks are a great way to compound wealth over the long term.
You just need patience… and a little help from the compounding effects of reinvested dividends.
[Note: Compounding in this sense means taking dividends you earn from your stocks and using them to buy more stocks. And with zero-dollar brokerages, you can reinvest those dividends at any time in any stock!]
Even so, it’s hard to stick with it when it feels as though every other investor is selling. And it’s even harder to put new money into the market.
Look, we get it.
It’s easy for us to write to you, telling you why now – based on historical data – is a great time to put extra cash to work. But you’re the one who has to actually do it.
And that’s not always easy to do.
So what are your options?
All the Gains Without All the Risk
If you’re a regular Dispatch reader, you’ll know we’re big fans of a little-known type of investment called “warrants.”
Without going into all the details, warrants are like call options. They give you the right to buy a stock at a set price for a given period of time (usually a much longer time until expiry than options).
Plus, warrants are actually easier to buy than options… as you generally don’t need to get a special approval with your brokerage account. That, among other reasons, makes a volatile market like this… especially one where you’re worried the market could fall… perfect for warrants.
Warrants allow you to invest in a company, getting access to the full gains of the stock price, but without investing as much as you normally would in the actual stock.
Let’s use a chart to explain. That will make it clear.
The chart below compares the Blink Charging (BLNK) stock price with the Blink Charging warrants (BLNKW) price.
This is one of the best-performing trades in the history of Dave Forest’s Strategic Trader service. He closed the trade last November for a 2,805% gain.
Here’s the chart:
This time last year, the market had a similar feel about it. The S&P 500 fell around 8% in September. Investors were nervous, there wasn’t yet a COVID-19 vaccine, and people were scared about the “second wave” of the virus.
But that’s why then, as now, was a perfect time to use warrants. Instead of investing a full allocation into a stock, the warrants investor can invest less money… yet still get the same exposure.
See the returns on the chart above? From September to late November 2020, the Blink Charging stock price gained 455%. That’s a nice return by any measure.
But remember… investors were nervous. As the market fell through September, it may have scared investors with a large exposure to the stock into selling.
Now look at the return of the Blink Charging warrants. Same timeframe, bigger return. Instead of 455%, it gained 865%. (Many of Dave’s subscribers had far larger gains – 2,805% or more – throughout the entire length of the trade.)
That means at a time when you may be nervous about putting more money into the market, warrants allow you to take part in the full stock gains… while investing a fraction of the usual amount you might put into a play.
An Easy Way to Bet on a Market Rebound
Of course, with any leveraged play, there’s the downside. When markets fall, typically, warrants’ prices fall further. But remember, you’re investing less money to begin with.
So even in a bad-case scenario in which the warrant price falls by half, if you only invest one-fifth or one-quarter of your usual size, it’s not such a big deal.
This is why warrants plays are so useful. Not only can you amplify your returns when the market booms, but they can also give you some peace of mind and confidence to invest when the market goes through a rough patch.
And this is why we show you ideas like warrants. We know it can be hard to make the most of great buying opportunities. It’s hard when you see scary headlines and falling stock prices.
But as scary as it may seem, buying into the market now is exactly the trade to make.
Plus, warrants give you access to the gains if we’re right about the market going higher. But they limit your risk if we’re wrong and stocks continue to fall.
And the best news about using warrants now is that it’s easy to do in most brokerage accounts… especially when you have an expert – like Dave Forest – guiding you every step of the way.
Bottom line, if you haven’t already done so, we recommend checking out the full details on warrants right here.
Editor, Casey Daily Dispatch
P.S. Dave Forest created the first of its kind Five-Video Warrants Master Course. It’s the quickest and easiest way to get in on this fantastic asset class. Get access to it here.
Welcome to Casey Daily Dispatch’s Chart Watch. We’ll look at the best technical opportunities in the market. You’ll see that chart analysis is a very powerful edge that every investor should have in their toolbox.
Our mission is to simplify price charts. We remove all the clutter and the noise, leaving you with a crystal-clear view of the markets.
Is It Time to Buy the King of EVs?
By Imre Gams, technical analyst, Casey Research
In today’s edition of Chart Watch, we’ll analyze the current king of electric vehicles (EVs), Tesla. And following Kris’ theme of buying into September price weakness, we’ll look at if this is a stock worth buying now, while it’s still trading below its all-time high.
It seems like forever ago that Tesla went on a 1,184% run… going from $70 in March 2020 to an almost unbelievable price of $900 by January of this year.
I’ve seen a lot of crazy stuff in my career… and this melt-up in Tesla must be one of the craziest.
After putting in that January top of $900, however, talk of Tesla stock dropped off the mainstream radar.
With a sharp selloff down to $539, this makes sense… a 40% correction is a big drop…
Now, the electric automaker is making headlines once again… but for all the wrong reasons.
The National Highway Traffic Safety Administration (NHTSA) has opened a formal investigation into Tesla’s Autopilot system after reports of 12 collisions involving parked emergency services vehicles.
The market initially reacted negatively to news of this probe by the NHTSA. So does this mean there’s more downside ahead for Tesla?
Let’s look at the price chart to see what the technicals have to say…
There are two key features to this price chart:
The 200-period moving average offering support around the $660 level.
The $762.32 key level, which is also the high from April.
As long as the price remains above the 200-period moving average, the technicals argue for further price appreciation.
But overhead is the $762.32 key level. This could cause resistance for the stock. But if it takes out this level, it will open the door to a new all-time high in the stock price.
The next several trading days should confirm whether Tesla is ready to go on another run.
Keep a close eye on $762.32…
Waiting for confirming price action is so important. By letting the market prove to you that it’s ready to run, you will stay out of trouble far more often.
Trading capital is hard-earned. Don’t waste your bullets by shooting when the target is hard to hit…
Wait for the right conditions and pull the trigger when the target is so big it’s hard to miss.
Until next time,
Technical Analyst, Casey Research