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As we move into 2020, now is a good time to uncover the strongest trends in history – and jump on the ride.
You see, discovering market patterns is the smartest way to trade these days.
That’s because in order to be considered a pattern, something must have occurred multiple times in the past. That means patterns are reliable. Really, they’re the only way to predict what’s coming in the market.
There are some extremely compelling historic trends that point to high-probability opportunities for big profits in the coming months … 15 of them, to be precise.
To see these 15 patterns – and learn how to play them for the highest gains possible – read on…
Bank Big Profits in 2020 with These 15 High-Probability Trades
It’s that time of year again. Right now, many are taking the time to reflect on 2019 and wonder what’s to come in 2020. And this January, we aren’t only bringing in a new year. We’re bringing in a new decade.
Now, the concept of a “new year” is really just a man-made construct that’s been blown up by the media over years and years throughout history. But that doesn’t mean it’s bad. It actually lends itself to our trading success.
You see, our best guide for a new future is the past. History tends to repeat. We’ve talked before about Isaac Newton’s first law: Objects in motion tend to stay in motion… until acted upon by an outside force.
Let’s put that into perspective. A common new year’s resolution is to live a healthier life. The outside force in this situation could be a new book of clean recipes, or maybe a gym membership. But the reality is that 80% of people break their resolutions by February 1. Life settles in, and there isn’t time to run on the treadmill every day or spend an hour roasting broccoli after work.
It’s hard to introduce a lasting outside force. People will most likely resort back to their original path – and the same is true for stocks.
With trading, we want to find the stocks that are in motion that haven’t been hit by an outside force. And then, we hop on for the ride.
The following historic data reveals 16 high-probability, big-profit trades to kick off 2020:
- Longest Bull Market (10+ Years) in History
After bottoming in March 2009, the S&P 500 has risen from 666.79 to our recent high of 3,247.83, a 387% jump.
The Dow Jones has risen 343% from 6,469.95 to 28,710.66 since March 2009.
Over the same period, the NASDAQ grew from 1,040.41 to a recent high of 8,811.10, a 747% rise.
Talk about an object in motion. Although there will be a correction at some point, the most prudent course of action is to hop on the bull train for 2020.
- 2019 Was Extremely Bullish
The S&P 500 surged a whopping 29% in 2019 for its best performance since 2013. The Dow ended the year up 22%, the NASDAQ 35%.
And the good news isn’t over yet. History tells us that on years in which markets rise over 20%, most of the time the markets will rise again the following year.
According to back-tested data, the S&P 500 rises an average of 11.2% the year following a 20%+ gain. The Dow Jones and the NASDAQ tend to rise an average of 8.9% and 14.2% respectively the year following a 20%-plus gain.
The Play
Consider buying the market-following exchange-traded funds (ETFs) in 2020. These ETFs attempt to track the performance of the three major indices. If history repeats, you can reasonably expect the gains shown above.
S&P 500: SPDR S&P 500 ETF (NYSE: SPY)
Dow Jones: SPDR Dow Jones Industrial Average ETF (NYSE: DIA)
NASDAQ: Invesco QQQ Trust (NASDAQ: QQQ)
- Strongest Sectors: Tech, Healthcare, and Financials
The strongest sectors leading the pack during the last six months of 2019 were Technology, Healthcare, and Financials. The following three Select Sector SPDR ETFs attempt to track these sectors’ performance. Here are the strongest stocks from each sector – and how they did in the second half of the year:
Technology Select Sector SPDR (XLK: NYSE): +17.49%
Qorvo, Inc. (NASDAQ: QRVO) +66.56%
Lam Research Corp. (NASDAQ: LRCX) +59.14%
Advanced Micro Devices, Inc. (NASDAQ: AMD) +57.17%
Financials Select Sector SPDR (XLF: NYSE): +11.56%
State Street Corp. (NYSE: STT) +44.68%
JP Morgan Chase & Co. (NYSE: JPM) +23.98%
Bank of America Corp. (NYSE: BAC) +22.26%
Healthcare Select Sector SPDR (XLV: NYSE): +9.11%
Humana Inc. (NYSE: HUM) +40.01%
Bristol-Myers Squibb Co. (NYSE: BMY) +35.69%
CVS Health Corp. (NYSE: CVS) +35.33%
The Play
Above, we have a strong bullish market, the strongest bullish sectors, and the stocks leading the pack in each of those sectors. Sector analysis tells us that the best bet is to buy the leaders of each sector, shown above.
These sectors have the strongest bullish momentum going into 2020. To diversify and reduce risk, you could buy the ETFs in addition to the component stocks, or the ETF alone.
- Gold is White Hot
Despite a “risk on” (stock buying) environment, Gold rose 19% in 2019, its best year since 2010. Many industry analysts are forecasting a rise to the $1900-2000/oz. That’s a healthy increase from its current price range in the mid-1500s!
Now, the profit potential doesn’t stop there. You can increase your returns approximately 10-fold at a fraction of the cost of buying stock. All you need is a call option.
Consider buying in-the-money (ITM) six-month calls. If you want a longer play, you could buy January 20201 calls, referred to as Long-term Equity Anticipation Securities (LEAPs).
Supercharge your returns by selling monthly out-of-the-money 30-day calls. This strategy is called a diagonal spread, and it’s similar to covered calls.
These plays could be your key to a prosperous and joyous 2020 – but they aren’t the only ways to add profits to your pocket this year.
Tomorrow, I’m going to tell you about how to profit off of a traditional American industry that’s falling apart at the seams. This strategy is one of the only ways to take home cash on a falling stock. Keep an eye out…
Until then,
Tom Gentile
America’s #1 Pattern Trader
