Here we go…
After a wave of earnings reports from America’s top tech companies, a small selloff ensued. The Nasdaq, S&P 500, and the Dow… they all fell Friday morning.
A selloff right before the weekend.
The average investor sees this downturn and has their finger on the sell button.
But not me.
This week, we’ve talked about ways to manage loss aversion and the temptation to jump in and out of stocks. Cognitive bias leads to underwhelming returns. It also leads to missed opportunities.
Even if we do see a selloff next week – and there’s always SOMEONE predicting a selloff “next week” – I’m not worried.
In fact, I’m using TradeSmith to identify buying opportunities…
Let’s talk about the right way to trade and invest moving forward.
Don’t Make This Mistake
The markets are back at all-time highs.
But here come the “fearful headlines” once again.
Europe is back in a double-dip recession.
Analysts are raising alarms about semiconductors, chicken, corn, meat, MacBook, and other shortages.
Blah. Blah. Blah.
The last time I remember this much noise it was about a week from the November 2020 election.
Concerns about COVID, the election, economic growth, and more weighed on the market. A selloff started the week of Oct. 12.
Market momentum went NEGATIVE the week of Oct. 26.
Panic selling ensued. You can see it in the chart. The S&P 500 tanked in the weeks ahead of the election.
[alt: TradeSmith charts showing October 2020 performance of S&P 500]
If you sold out at that point – you likely didn’t get back in.
And then the market absolutely ripped through March.
[alt: TradeSmith charts showing early 2021 performance of S&P 500]
This recent rally is evidence of why you HAVE to ignore the noise.
If you’re a “buy and hold” investor, you need to set aside your emotions.
TradeSmith helps you do this. We give you custom trailing stops upon entry of any position. And we tell you exactly when to buy, hold, and sell based on our Green Zone, Yellow Zone, and Red Zone system.
If you don’t yet follow the signals of TradeSmith and would like to learn more, click here.
In the meantime…
Are you looking for a long-term trade after this week’s earnings report, in spite of Friday’s downturn?
I have one for you.
This Tech Giant Has Entered the Green Zone
The attention this week centered on Apple, Amazon, Facebook, Microsoft, and Tesla.
All five of these companies have sat in the Green Zone on TradeSmith for months. And all five generated massive profits and revenues during their earnings reports.
But we are always looking for fresh ideas.
Four days ago, TradeSmith signaled a buy on one of the world’s most iconic semiconductor firms.
That company is Qualcomm (QCOM).
According to the Ideas by TradeSmith screener, Qualcomm reentered the Green Zone before earnings.
And on Thursday, the firm shattered earnings expectations. Shares of QCOM popped as high as $145 after a mind-blowing report.
The firm reported a 52% increase in quarterly revenue. The reason? Qualcomm is a major provider of chips and technology linked to the ongoing 5G boom.
Qualcomm beat Wall Street reports by a mile. Their earnings of $1.90 per share topped forecasts of $1.67. The firm cited strong sales of chips for smartphones across China and the United States.
In China alone, revenue increased by 63%.
Qualcomm is benefiting from the big 5G trend. It said that the ongoing deployment of these advanced networks will be a boon for semiconductor demand in the year ahead, especially as people start to travel more and the economy reopens.
Now, keep in mind, Qualcomm was a beaten-down stock. Before the firm reported earnings, shares were off by double digits, while the S&P 500 was up 12%.
And for weeks it wasn’t considered a buy.
But TradeSmith recognized it as a great idea heading into earnings.
And after earnings, it remains in the Green Zone.
In fact, TradeSmith recognized the upside potential before Wall Street analysts. The stock entered the Green Zone on Monday.
Wall Street analysts issued gushing praise and increased price targets on Thursday. One analyst at Raymond James projected an upside of $190 per share. Another at Canaccord Genuity said $188.
Twelve analysts issued price targets. Only one (a Goldman Sachs perma-bear who got Apple’s performance wrong) cut his target. Everyone else expects the stock to move higher, a signal of positive conviction for the stock.
Now, Qualcomm might be a little volatile; TradeSmith rates it at a medium risk with a VQ score of 29.04%. That’s the nature of the technology sector, which attracts massive sums of capital.
And because it can be volatile, our algorithms account for historical price movements. This enables a custom trailing stop that can help you better manage the stock if it sits in your portfolio.
Remember, there is a lot of noise in the market. But TradeSmith continues to generate great ideas and great trades BEFORE Wall Street.
Qualcomm is the latest proof.