Three High-Growth Trades to Make on the Next Pullback
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My generation (late-ish millennial) placed a strange value on this sort of thing when we were coming up. If you liked a musician before they got famous, so it went, that earned you a bit of credibility.
The investment world, though, is immune to this. Nobody cares whether buying trends before they’re trends is “cool.” We’re rightfully more concerned about whether it makes money.
And boy, does being right on trends make you a ton of money.
It’s not easy. It’s never comfortable. But when you can see the writing on the wall and make that move early on… it creates a surge in your net worth like little else can.
I’ve been lucky, or prudent, or somewhere in between enough to do this a few times throughout my career.
I bought the cryptocurrency Ethereum at under $10 back in 2016. Exxon Mobil (XOM) while oil prices were negative. And while this particular trade is still playing out, I bought Argentinian stocks not long after I first saw Javier Milei’s over-the-top libertarian antics earlier this year.
These kinds of trades are everywhere, if you know how to go against the grain and find them. I want to share a few of them with you today.
Some of these we’ve talked about before. Some are brand new. But all of them, I believe, offer a more compelling growth investment for 2024 than the benchmarks or the Magnificent 7.
Only thing is, right now is NOT the time to buy.
But today, I’ll get you ready to make your move when the times comes…
Get Excited (But Not Too Excited)
- Bitcoin miners just heard the starting gun…
Back at the end of October, I told you I was starting to buy bitcoin.
That turned out to be the right call. Bitcoin prices are up about 27% since then.
But for my money, the bull market in bitcoin has barely just begun.
You see, Bitcoin is about to enter a new halving cycle — when the incoming supply of bitcoin created by miners is cut in half.
In its relatively short history, bitcoin has gone on to make monumental price gains after every single halving. See the chart below, with halving dates marked by white lines, for the proof. (Note: chart is in logarithmic scale, which normalizes exponential price action.)
I don’t see any reason for this time to be any different.
But if you really want to make money on bitcoin, look at the mining stocks.
Marathon Digital (MARA) is up over 124% since I put it on your radar at the end of October. Riot Platforms (RIOT) is up about 72%.
These companies are acting as a leveraged play on bitcoin — doubling and even quadrupling bitcoin’s return over the same time frame.
If bitcoin knocks the lights out as I expect it will next year, the gains we’ve seen in bitcoin mining stocks so far could prove to be a drop in the bucket.
But wait for them to pull back. MARA’s Relative Strength Index (RSI) recently notched its highest level since the peak of bitcoin mania in late 2021.
And RIOT, though it’s trailing MARA, is showing a bearish RSI divergence (the RSI made a lower high while the price made a higher high) on its daily chart.
Like I said, a cooling-off period is in order. But be ready to scoop up shares of quality bitcoin miners once it hits.
- Indian stocks are well worth watching…
I’m not personally in this trade yet myself, but I am strongly considering getting involved on the next pullback.
India’s stock market has been on a tear recently, with the iShares MSCI India ETF (INDA) up 14% from the late-October low. As I write Tuesday morning, it’s set to open at its highest level since 2021.
India reported a better-than-expected GDP growth of 7.6% overnight on Monday, following the same reading the quarter before and 7.8% in the first quarter. This is a stunning quarterly growth rate for India, outpacing both the four countries larger than it — USA (5.2%), China (1.3%), Japan (-2.9%), and Germany (-0.10%) — and also, impressively, countries like Canada whose nominal GDP is two-thirds its size… and shrank (-0.27%) last quarter.
India is quickly cementing its place on the world stage as a technological and economic powerhouse. It now houses the world’s largest population at 1.42 billion people, recently surpassing China. It’s one of the most exciting emerging-market-turned-developed stories in the world.
Bullishness aside, though… we should exercise some caution on this one. Take a look at this chart of INDA…
I’ve included the RSI on the bottom of the chart. When RSI gets above 70.00, it’s a signal that prices are in “overbought” territory. The India ETF has surged all the way through 75.0; in fact, it’s at its most overbought level since 2021. Should the RSI pull back here along with prices, it’ll cross the yellow moving average line and flash a sell signal.
Most stocks, India’s included, need to take a breather here. But strong emerging-market growth stories like this are key to watch. - Nuclear energy stocks skipped the summer lull…
Remember August through October of this year? That sure sucked, huh?
Most stocks were sliding lower and lower, catching small, brief bids higher only to get smacked down again.
But one asset class, one I’m supremely bullish on, basically skipped this downturn entirely and is on the cusp of breaking out to a nine-year high.
Yes, I’m talking about nuclear energy stocks again. And I’m going to keep talking about them — because the trade is still early, and any investor interested in growth needs to be a part of it.
The latest catalyst in the nuclear energy bull market was the passing of the National Opportunity to Restore Uranium Supply Services in America Act (or the “NO RUSSIA” Act) in the U.S. House of Representatives.
This bill’s primary goal is to enrich the U.S. uranium business, enabling it to support both domestic energy production and military needs. But it aims to do it by banning the import of low-enriched uranium from Russia — the same kind used in nuclear reactors.
This is a big deal. Russia is the U.S.’s No. 1 foreign supplier of enriched uranium. If we’re stopping that supply, the industry will demand a huge amount of investment.
The bill hasn’t become law yet, but it’s still driving a monster bid in U.S.-based nuclear energy stocks. Let’s take a look at the chart of the Global X Uranium ETF (URA).
Here again we see that same RSI divergence that we saw in the chart of RIOT above, where the price is still climbing — but relative strength is starting to trend lower. In other words, the momentum behind the uranium ETF is fading.
So, bullish as the future of nuclear energy is, the trade does look like it’s gotten ahead of itself. A retrace is in the cards for URA and nuclear energy stocks over the next several weeks.
While all of these trends are early on a long-term basis, they’re all overstretched in the short term. Patience will pay here. Wait for lower prices and enjoy even bigger gains as the trends hit the public consciousness next year.
To your health and wealth,
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Editor, TradeSmith Daily