439% Gains: The Anatomy of a Great Trade

Andy Snyder|December 7, 2020

Last Thursday, subscribers to our popular Codebreaker Profits research service locked in a huge gain.

A play we recommended on October 23 shot up by more than 400%.

The victorious lit up our inbox…

Awesome Results – Did awesome on WDR. In at $1.63, out today at $7.89. 10 contracts. Net profit of $6269. Thanks!!! – Subscriber J.P.

Exceptional Recommendation – Just wanted to thank you for the WDR recommendation in Codebreaker. I bought two calls for $1.20 on 23 Oct and just sold this morning for $7.70. Total investment of $321 sold at $1,539. That is a super respectable gain in a couple of weeks. – Subscriber R.B.

So how’d we do it?

Get out your pen and paper… This was a textbook play.

Your Turn to Thrive

It took just two things for us to uncover this opportunity and put some very good odds in our favor – industry insight and a unique type of volume analysis.

Here’s what we wrote our readers on the 23rd. It shows the value of industry research and insight…

If you tuned in to my monthly video on Wednesday, you heard my commentary on the banking sector. The industry has had a tough go of things. Not only are low interest rates making it tough to make a buck, but the regulators at the Federal Reserve have halted one of the industry’s best-kept moneymaking secrets.

It’s temporarily putting its thumb on share buybacks.

And it shows…

That’s the image I shared in the video. It shows the bank stocks have been flat or negative over the last month.

(The big green square in the middle, by the way, is PayPal. It is still allowed to repurchase its own shares… and, again, it shows.)

But JPMorgan, Wells Fargo, Citi, Bank of America… none of them can.

That means they must do something else with their cash.

Many folks expect them to put their money to use by growing their customer bases through acquisitions. Just as the last 12 months have handed us tremendous consolidation in the brokerage space, we’re likely to see banks buying investment businesses for the same reason – they bring new (and deep-pocketed) customers in the door.

We’re already seeing it.

Morgan Stanley is taking over Eaton Vance.

Another big fund manager has grabbed a big share of Invesco and Britain’s Janus Henderson.

And, in a potential nod to the future, JPMorgan’s Jamie Dimon has said the “door is open” for a deal. He’s been aggressively searching for growth through acquisitions since mid-2019.

With that idea in mind, we turned to the charts.

Finding the Best

Again, we had our thumb on a strong sector. Simply by focusing on the right industry with the right catalysts, we put the odds in our favor.

From here, some proven technical analysis would find the individual stock with the absolute best odds.

For that, we turn to my favorite metric and an odd type of chart we debuted late in the summer… an equivolume chart.

This unique chart shows us daily volume and pricing action in one simple display. With a glance, we can see the tug of war between buyers and sellers.

I’ll spare you the long lesson of why things work this way. Just know that when we see a big square block in the charts, it’s a surefire sign of something good.

That’s why we smiled when we saw this chart of the action from Waddell & Reed Financial (WDR), our old employer.
That big block in mid-October begged us to dig deeper. And when we did, we saw that it was spurred by buyout rumors.

Somebody wrote a story that JPMorgan Chase (JPM) was rumored to be looking to buy the company.

Rumor or not… true or false… didn’t matter. The rumors put the odds even more in our favor.

Suddenly, instead of simply getting a shot at a decent stock in a stirring sector (what most investors would be happy with), we now had a strong-odds play on a company that had buyers piling in on news of a potential buyout and hopes of a strong earnings report.

Again… we had several odds-boosting factors on our side.

That’s the key with any good trade.

Right Stock… at the Right Time

But here’s the key. We didn’t buy at the top. We were patient. We watched the chart and waited for the hype of the buyout rumors (which are almost always false) to wane.

Those thin, long boxes on the right side of the chart tell the tale.

Once they dipped back to the price we saw before the takeover speculation, we made our move.

We told our readers to grab shares of Waddell & Reed… and pick up some of the company’s March $17.50 calls as well.

Then we waited…

First, we got an earnings report. As expected, the money manager handily beat expectations.

Shares rose.

Again, because we owned a good company in a good industry at a good price, we would have been fine if things stopped there.

But remember, we knew there was a bit of a kicker with this play… a good chance of a buyout.

We got that news last Wednesday night.

The Australian firm Macquarie Asset Management made a $1.7 billion deal for the company.

Shares soared 50% on the news… and our options closed the day 439% higher than what we paid for them.

We sold.

Our inbox lit up.

The lesson here is simple.

Don’t do what so many folks do. Don’t stop your analysis when you find a good company in a good industry.

You must do better than that.

Use volume analysis to pick out the very best opportunities and, this is key, the very best entry point.

With one more step than most take, you can boost your odds immensely.

Finally, for details of a volume strategy that does exactly that and has showed average gains of 158% with a super simple, once-monthly trade, click here. We reveal everything you need to know.

Best of all… the next trade is just days away. It all starts on December 18.

Click here to learn the strategy.

Do you have questions about the charts Andy uses for finding the best trades? Let us know at mailbag@manwardpress.com.