Beyond daily gyrations, the U.S. stock market is still positive.
The momo (momentum) crowd is bullish and aggressively buying shares. (The momo crowd controls this market.) Bears are at a loss as to how the market can rise despite a range of problems, from a slowing economy to the huge federal budget deficit.
At a time like this, is it likely that the Dow Jones Industrial Average DJIA could keep rising, even as much as 30% in a short time? There is a strategy that can potentially return up to 30% in three months, but to take advantage of that, investors would need to start now. The strategy is called the January Effect. It is a time-proven strategy. But there are special risks.
The strategy is based on a phenomenon that makes prices of certain stocks get depressed late in the year and rise more in January than broad-based ETFs, such as S&P 500 ETF SPY and Nasdaq-100 ETF QQQ. Stock market highs may give an extra boost to the January Effect strategy this year.
Over the past 30 years, we have made money from the January Effect about 75% of the time, broken even about 10% of the time, and lost money about 15% of the time.
To take advantage of the January Effect strategy, investors ought to get ready now to have their finger on the trigger. For 2019, The Arora Report has published a list of 46 stocks with buy zones and recommended position sizes to profit from the January Effect. Let’s illustrate with two very different examples.
Please click here for an annotated chart of the stock of Uber UBER.
Please click here for a chart of the stock of KushCo Holdings KSHB.
Note the following:
• Almost everyone knows Uber. Many people use Uber’s service, and Uber has been a popular stock. In contrast to Uber, not many have heard of KushCo, and not many hold KushCo stock.
• KushCo has a market cap of only $151 million. Uber has a market cap of $56 billion.
• KushCo is a pick-and-shovel stock for the marijuana gold rush. In the California gold rush, many miners went bankrupt, but the companies that made picks, shovels and machines prospered.
• While most investors have been focused on popular marijuana stocks such as Canopy Growth CGC, Tilray TLRY and Aurora Cannabis ACB, KushCo has been providing packaging, bottles, supplies and accessories to the marijuana industry. For the marijuana business, this is the equivalent of picks and shovels in the gold rush.
• The chart of KushCo shows that there has been some selling on high volume. In contrast, a chart of Uber does not show significant selling on high volume. The inference is that more selling in Uber stock may be ahead.
• The relative strength index (RSI) shows that both KushCo and Uber are overbought.
• The charts show that most buyers are sitting with big losses on both Uber and KushCo.
• The Uber chart shows the Arora buy zone. The KushCo chart shows the Arora buy zone….Read more at MarketWatch.
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