The idea was to buy into the stock market if it became extremely oversold.  Because we don’t know exactly where the low will be, we place a series of buy limit orders at staggered prices.  If the market drops to one or more of these prices, we will be buying at very oversold levels, from which a rebound or recovery is likely.

Shortly after we published the 3-13-20 blog post, the stock market continued its sharp decline, and on 3-23-20, TQQQ hit a low of $32.27 (see Figure 1 above).  Therefore, all buy limit orders at prices between $35 and $45 were filled, meaning that we established a position in TQQQ with an average cost in the $40 range. 

Then in late March and early April, the market turned up, and TQQQ started rising.  In our 4-8-20 blog post, we said to place SELL limit orders at prices of $56, $59, and $63, as a way to exit the trade and lock in a profit.  On April 14^th, TQQQ rose to almost $64, meaning that all these sell orders were completed. 

The exact return on the strategy depends on how many shares were bought and sold at each price.  By using three separate buy limit orders, we acquire some shares at $35, some at $40, and some at $45, then sell them at $56, $59, and $63.  In general, we want to buy more shares at the lower prices.  So the exact return depends on the number of shares in each lot, but the average cost was near $40 and the average selling price was near $60, for an overall return of roughly 50%. 

The bottom line is that by executing a strategy that we specified on this blog in advance, before it happened, we locked in a large profit of 50% in a month.  This was done in the midst of a very volatile market environment.  (Note:  using limit orders in this way is a technique that I learned while working as an independent trader.)

By comparison, most money managers would not have used this approach, because they believe that “no one can time the market.”

Yet in my opinion the type of situation that occurred in March 2020 presented a good opportunity to make outsized gains.  Entering the market when it is extremely oversold has a very good risk / reward ratio, so it is appropriate to do some buying, and in fact to use leverage, in these situations.  The downside risk is limited, because the market has already gone down dramatically by the time we buy into it.

TQQQ uses triple leverage, meaning it moves three times as much as the underlying index – for example, if the index rises by 5%, TQQQ will rise by 15%.  Also TQQQ is diversified among 100 stocks, which reduces the risk compared to buying a single stock.

Thus with a $1 million portfolio, we might have put at least 30% of the portfolio, or $300,000 into this trade.  The 50% gain would produce a profit of $150,000 in just a few weeks.  In fact in my blog post for the week of 3-13-20, I stated that we should use this strategy on multiple ETFs, just using TQQQ as an example.  So if we had also done similar trades with a few other triple leveraged ETFs, such as SPXL (for the S&P 500), we might have done these trades with a larger amount, say half the portfolio, or $500,000, thereby making a profit of $250,000.

Therefore, if high net worth clients do not have some portion of their assets managed by an advisor who is making these types of transactions, they may be missing out on some valuable opportunities in the market. 

Of course, in most market environments, we cannot expect to make such large returns in a short period of time. 

For normal market environments, my investment approach is based on the proven principles of leading investors such as William O’Neil, founder of Investor’s Business Daily.  I have studied the Investor’s Business Daily methodology in detail, and I can put this investment approach to work for you.

I have done extensive research on how to combine fundamental data with technical analysis to analyze the market. 

I know how to read the market and identify situations in which buying or selling should be done, based on practical, proven methods.  Ideally we want to buy stocks with good earnings and good chart patterns, which are in strong industry groups and sectors, and we also need to consider the condition of the overall market.

An example of a winning stock is shown in the following chart.  Take Two Interactive (TTWO), an electronic gaming stock, had strong earnings growth and other bullish fundamentals, and it formed a technical “buy” signal when it broke out to a new high in April 2017.

Figure 2   Take Two Interactive (TTWO)   Weekly Chart  –  formed a “buy” signal as of 4/21/17