Getting In, Getting Out

Some trends persist.

Some reverse.

And while it can sound like a gross oversimplification, the key to consistently profiting in the financial markets is the ability to ride trends as they persist, then exit just before they reverse. Basically it’s about getting in (at the right time) and getting out (at the right time).

Sure, it sounds easy. In practice it’s rarely that cut and dry.

Yet it can be done, and the utilities sector provides a great example of how. In fact, subscribers to my Cycle 9 Alert trading service were able to pull off this feat earlier this year.

Here’s the chart I want to share with you today. But before you look at it, it requires a little orientation…

On top of the chart, I’ve displayed the year-to-date percentage gains of the S&P 500 and its nine sectors. The utilities sector (XLU) is meant to stand out in bold orange.

On the bottom of the chart, I’ve added the iShares 7-10yr Treasury bond ETF (NYSE: IEF) in yellow.

I’ve also marked three dates with vertical lines (white, green and yellow), which I’ll explain below.

Now look at the chart…

See larger image

The white vertical line, on the left of the chart, marks March 5, 2013, the date on which I sent a trade alert to Cycle 9 Alert subscribers recommending a particular utility stock. My analysis showed the utility sector’s momentum was outpacing that of the S&P 500, so outsized gains were likely to follow by investing in utility stocks.

The green vertical line (middle) marks April 23, 2013, the date on which I sent another alert to Cycle 9 Alert subscribers recommending they exit the position to lock in a 50% gain. At that time my analysis showed that the sector’s strength was waning and that we’d better take our profits and reinvest in a new, stronger sector.

The yellow vertical line (last from the left) marks May 1, 2013. This date proved to be a major turnrning point for utility stocks and interest rates alike.

As you can see by the bold yellow line at the bottom of the chart, bond prices (via IEF) fell more than 7% from May through September (meaning interest rates were rising).

Likewise, the utility sector, which is notoriously sensitive to interest rate movements, began a steady decline in May.

On May 1, the utility sector had posted the market’s strongest year-to-date gains. Yet today, the sector is the worst performer this year, up just 6.7% against the S&P 500’s 18% gain.

The takeaway is this: The “get in and get out” approach beats the “set it and forget it” in today’s market environment.

If you’re interested in learnrning more about Cycle 9 Alert and how it can help you grow your investment gains, click here.

Adam O’Dell

Using his perfect blend of technical and fundamental analysis, Adam uncovers investment opportunities that return the maximum profit with minimum risk.