| Risky Behavior |
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| August 14, 2007 |
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I wish I could tell you something was different about the market. Instead, it’s still acting up, giving us plenty of reason to remain queasy.
It’s really starting to move faster and faster both to the upside and downside.
Most people reading this have most likely not gone though the volatility that we’ve been seeing the past several weeks. For those of you who are having a tough time of it, I just want to tell you that a lot of what you have been hearing in the news is nothing new to Trending123 subscribers. We have been the kings of “RISK” in this market.
And I can assure after spending months of pounding the table on RISK, we aren’t about to throw caution to the wind now. It’s not our fault Wall Street rides the short bus to the trading pits and claims they didn’t know! (‘Cause we sure did!)
That said, now that everyone knows what we know it’s likely no longer worth knowing. (Sorry about the tongue twister!)
So now, how do we profit off the “Johnny Come Lately” traders?
My first piece of advice: DO NOT PANIC! There’s a reason I call these types of market situations the “nut hut.” It drives traders bonkers!
So while other people are scrambling to make the right choices in this frenzied market, our main focus is on how to capitalize from this volatility. After all—and I hate to tell you this—the volatility that we’re seeing is only going to INCREASE from here.
But if you are prepared for what’s to come, then you are already way ahead of the crowd.
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If you are in a stock that goes up and down at least 20% within one week — you are in a high beta stock. That kind of volatility can drive some people over the edge. But if you can handle it, you can end up with some massive profits. That’s why the Trending123 portfolio includes some particular high beta stocks right now.
 Zoll Medical Corp. (ZOLL)
A counter-trend stock, ZOLL did a little re-test last Friday, which caused some traders to panic. But let me assure you, there is no reason to freak out. ZOLL is currently on its way to breaking out of the ascending triangle pattern — nothing bearish about it.
Electro Scientific Industries, Inc. (ESIO)
A chip stock, ESIO is a perfect example of a volatile stock. It is a liquid stock yet it’s trading above the 80 EMA (Exponential Moving Average). And it made 52-week highs last week. If you can handle the bumpy ride, now would be a good time to get in as it is trading below my buy under price.
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Stay strapped in — no flailing arms and legs outside of the car — as I’ve been saying this market ride is bound to get even bumpier.
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High Beta 1-2-3
If the term “beta” sounds like Greek to you—well, it is. “Beta,” or β, is the second letter of the Greek alphabet, and it is used by investors to denote the ratio of the historical volatility of a stock in relation to that of the overall market. Let’s take a look at the meaning of different values of beta:
- Beta of 1: This is the volatility of the index against which the stock is measured.
- Beta greater than 1: The stock is more volatile than the market.
- Beta less than 1: The stock is less volatile than the market.
For example, a beta of 1.5 means a stock has been one and a half times as volatile as the stock market. So if the stock market moved 10%, the stock moved 15%, and if the stock market moved -10%, the stock moved -15%.
So what’s high beta? Well, last week, ESIO hit a low of $20.00 and closed on Friday at $24.01. That’s a total move of 20% from the low—very volatile. Similarly, ZOLL’s low on Friday was $22.00, but it closed at $24.89, a difference of 13% in just one day. There’s nothing bearish about that—it’s just volatile. And there’s nothing wrong with volatility, either, as long as you know ahead of time. That’s what Trending123 is here for: Join now for sneak peeks at more high beta trades with big profits.
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Stick with me at Trending123. It’s my job—and my pleasure—to help you through these trying trading times!
Sincerely,
John Lansing
Trending123
P.S. I am there for my Trending123 members throughout the day. They can join me in the chat in the trading room daily (or read the transcript if they can’t make it), ask questions on the message boards or just check my latest daily updates and alerts. Trending123 is truly a full-service solution to all your trading needs. Join us today and save $50!
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