How can we find big winning trades?
It’s the eternal question. And it’s vexed traders for ages.
But there is an unconventional way to find potential huge winners:
Just pick out a major company that’s fallen on hard times.
The bigger the name and the harder the fall, the better.
Take Ford, for example.
Ever heard of Ford (F) motor cars? Who hasn’t?
Well, in 2020, F got hammered.
- Was Ford going to zero?
- Was it going to cease to exist as a company?
- Were there no longer any Ford cars on the road?
No, no, and obviously yes.
That could have put us on alert.
Then all we’d have to do is pull up a Monthly chart and wait for 2 consecutive closes above the 12-month simple moving average.
And we got that setup in August 2020. What happened next?
An exit on a close below our moving average would have been a 100% gain.
And just a few months later, F created the same setup and the stock went from $14 to up around $25.
A boring old company acted like a tech stock once we got a good entry.
And guess what?
F has fallen like a rock lately.
It could be a big winner in the future once again.
— Scott Welsh