Tops fail, continuation patterns resolve higher, and a growing list of stocks complete reversals. This is what bull markets are made of.
It’s also what’s happening now.
So, I’m looking to add exposure to the best setups.
Over the years, I’ve developed a system for this. It’s more of a portfolio sleeve than anything.
I call them kickers. I think of these trades like the cherry on top of a perfect carvel sundae. You don’t need it, but it makes it that much sweeter.
Let’s talk about what I’m talking about…
Robinhood completed a textbook trend reversal earlier this year. It hit a target or two, and then it started ranging.
In my long-term account, I’m longing common stock as soon as I see a valid reversal. This happened in February and is shown on the chart.
But I want to make as much money as possible during bull markets. And I know, as a former derivative specialist on Wall St, that common stock isn’t the way to do this.
My favorite patterns are rounding bottoms and flags.
Bottoms are for longer timeframes, so I buy them in my IRA, like the HOOD reversal above.
On the other hand, flags are for the traders, so I buy those in my options account.
A special situation arises when I get to buy both. This is the kicker. It’s the cherry on top.
I like it when stocks have just entered new primary uptrends and are coiling tightly in consolidations.
I know the primary trend is my friend, and I know this is the most explosive pattern according to the textbook.
We already talked about what HOOD looks like when it gets added to the long-term account.
Here is what it looks like when we buy the kickers in the short-term account. The primary trend has reversed. Targets have been hit. We know the base is legit.
Now, we want to lean into this leader, anticipate a breakout, and add leverage as it makes its next move higher.
Look at this continuation pattern and false fail in HOOD over the past few months. It is breaking higher from a 4-month consolidation. We expect a swift reaction rally out of this range.
We got long this coil last week and are selling half of our position now at roughly a double.
What we achieved here is a free lottery ticket into earnings in a few weeks.
HOOD has beat earnings for the last six quarters. More importantly, the earnings reaction has been positive following each of those reports. We expect this earnings trend to continue.
We own exposure with unlimited upside and zero cost into their next report. That is what kickers are all about. We’re looking for home runs, and HOOD is set up to deliver one for us.
Speaking of home runs, I’m rooting for the Miracle Mets tonight.
