Okay, now don’t start sending hate mail my way just because I think it might be time for a break in the run-up for technology markets.
I am a long-term bull, but there are times when I believe taking profits off the table can create short-term opportunities for those who know where to look.
And that’s exactly what I intend to do today.
Indeed, the trade I’m about to propose is going to provide a potential 200% return at an investment price that’s downright cheap…
Technical Indicators Say Techs Are Cheap
A lot of the pundits say that tech stocks are overdone, like an overcooked steak left on the barbeque grill…
But why listen to the TV pundits? They are wrong time and again but take on credence merely through repetition.
So again I ask why listen to them? Instead, let’s look at the real story.
I do believe tech stocks are oversold, and the accompanying chart shows you why.
Remember in our first case we simply bought 100 shares of QID, and at the current price of $36 per share that would equal $3,600 for 100 shares.
An 8% move higher (remember we are looking for an 8% drop in QQQ) would give us a target near the green resistance line of $38 per share. That would equal roughly a $2 move in the stock, or $200 on our $3600 investment.
But there is a more profitable way to play our hunch on QQQ…
Buying Calls on QID
Here’s where it gets interesting: if we buy a call (a bet on a stock falling) such as the one highlighted below, it should double in value, from $3 per option to $6 per option, if we get that 8% move in the QQQ (or QID respectively) as expected…
And the most you risk to us on this trade is the amount paid, which as of this writing is $300 per contract, or less than 10% of the cost of the stock or ETF trades!
If you are just a buy-and-hold type of trader, opportunity is nowhere to be found in a falling market.
However, for those stepping out of the box and looking at buying ETFs or calls on ETFs that rise when markets fall, opportunity is now here!