This Total Wealth Tactic Crushed It When the Market Tanked Monday – and You Can Use It Right Now
Not all investors lose money when the markets get carried out feet-first. There are a savvy few who pocket some really terrific gains by capitalizing on chaos… and they don’t even have to time the markets to do it.
Not if you understand how to use one of my favorite Total Wealth Tactics – the Lowball Order. A great choice under normal market conditions, it’s ideal at the moment.
We’re going to talk about what a Lowball Order is today and how you set one up ahead of time. Then, as always, I’m going to give you a few recommendations covering several of today’s most popular stocks.
I think you’re going to be thrilled by how easy Lowball Orders are to use, especially when you realize that you don’t have to sit in front of your screen all day to bank the big bucks with the best of ’em.
For lack of a better term, Lowball Orders are like a “profit-trap” you lay in advance.
Do This Now to Capitalize on the Next Crash
Monday’s trading wiped an estimated $5 trillion around the world off the proverbial map. The headlines reflected panic, and investors were certainly up in arms over the prospect of a 1,000-point drop in the Dow less than 30 minutes into trading.
No doubt I felt the angst building, too. In fact, I said as much on Fox Business Network’s Varney & Co. when asked about it a few minutes before the opening bell. But I didn’t go overboard, nor did I let my emotions take over.
I knew the selling would run its course eventually and, more importantly, I had a plan.
It’s one I’ve already shared with Money Map Report readers, and hundreds of thousands of subscribers have had the opportunity to profit over the years by following along.
Now it’s your turn.
If you’ve never heard the term before, a “Lowball Order” is one of the simplest, yet most powerful orders available today, especially in volatile market conditions like we have right now.
They’re great for at least three powerful reasons:
- You can place them in advance
- You don’t have to be at your computer to actively manage your money
- You control your risk by waiting to make your move until the stock you want to buy meets YOUR risk reward criteria.
Here’s how a Lowball Order works.
First, you line up with one of the six Unstoppable Trends we’re following – Medicine; Technology; Demographics; War, Terrorism & Ugliness; Scarcity & Allocation; and Energy.
Second, you select a stock that’s been beaten down or is otherwise out of line with long-term expectations, fundamentals, and earnings potential. Ideally, this isn’t just any old stock. It’s one that you’d buy if it ever went “on sale.” Great examples include Netflix Inc. (NasdaqGS:NFLX) at $60, Apple Inc. (NasdaqGS:AAPL) at $75, Gilead Sciences Inc. (NasdaqGS:GILD) at $70, or even Alibaba Group Holding Ltd. (NYSE:BABA) at $45. Your list may differ, but my point is that you have a list… at all times.
Third, you pick a price – to the penny – that matches your individual risk tolerance, your investment objectives, and your belief about what the company is really worth. You can do that using fundamental measures like the “price to book” or intrinsic valuations, a la Graham and Dodd.
Or, you can also simply pick a technical point at which there is logical “support,” or even previous lows depending on your time frame. There’s no hard-and-fast rule here, but many traders find 10%-15% below recent 30 day lows to be fertile hunting in choppy markets.
Fourth, you place your order to buy “XYZ at $___ per share or less, GTC” – meaning good till cancelled.
Then, you sit back and wait for a price dip. Why and when really doesn’t matter. The markets can react to all sorts of things – bad news, headlines from China, a misguided Fed.
What you’re hoping to catch is exactly the type of move you saw Monday when the markets dropped catastrophically and traders caught up in the moment started making mistakes. Your goal is to buy at impossibly low levels. My experience is that you’re in the neighborhood when people tell you as much.
To be clear, this is NOT timing the markets.
What you’re doing here is laying a “profit-trap” in advance of conditions that you know favor your money rather than the institutional traders who would otherwise take it from you.
Take The Walt Disney Co. (NYSE:DIS), for example.
The stock had been on a tear since January, leaving most investors who want to buy in the dust. Monday, it fell to a low of $90 per share… which not coincidentally represents key support right before the run and a fabulous entry point for another leg higher. It closed the day at $95.89/share, for a quick 6.54% gain.
Or, how about Apple.
Last Monday, the Cupertino giant blew through price levels others thought impossible on its way down to a low of $92 a share before reversing and closing at $103.12 for a quick gain of 12.09%. Yesterday it opened at $111.11 a share. Even if traders got in early at $95 based on levels set last fall, chances are they did just fine, too.
Obviously these are both shorter-term entries, but the principle still works well over far longer time frames.
Consider Altria Group Inc. (NYSE:MO).
Based on the chart below, I can envision lowball orders placed in several logical areas I’ve underlined in yellow: $43, $44.50 and even $48 per share.
With a dividend yield of 4.20% on the heels of an 8.7% dividend increase, I wouldn’t be especially concerned by a few percentage points up or down in the scheme of things, especially if your anticipated holding period is a multi-year period.
You can use Lowball Orders on almost any financial instrument from stocks and bonds to ETFs.
Right now, for example, I think a Lowball on the SPDR S&P 500 ETF (NYSEArca:SPY) makes great sense if the markets take out last year’s low of 181.92, which I’ve annotated here for you using a swing trading setup oriented around a 7-21 day window.
At the end of the day, it doesn’t really matter whether you are placing lowball orders as a day trader or as an investor. The principle is the same – buy low and sell high.
That’s how the game is played and, more importantly, how you profit from quick swings in the markets that drive most investors straight to the poorhouse.
Lots of great companies got put on sale in a market move Monday that had nothing to do with the business case for owning them: Visa Inc. (NYSE:V), Google Inc. (NasdaqGS:GOOG), Netflix, Apple, Celgene Corp. (NasdaqGS:CELG), and more. So go line up your share of profits right now.
More selling only plays into your hands…
Until next time,