Editor’s Note: The market may be rallying to close out the year, but Chris Johnson sees another healthy correction on the horizon. And it’s a correction you should welcome with open arms, because Chris has two stock picks that will let you take advantage of the next rally.
Yesterday, all three major indices extended their end-of-year rally, each closing at new all-time highs.
But the bull run can’t continue forever. In fact, the market’s trend higher tells me the opposite – as we head into a new year of trading, a healthy correction is coming.
While it may not feel like it, we have actually already seen some healthy corrections over the last few weeks. A few sectors started running higher after the election, and traders started taking profits.
And now, after the profit-taking, these sectors are ripe with profit potential yet again.
In fact, there are six sectors in particular that have seen incredible jumps higher – I’m talking up to 507% higher from their yearly lows.
When the market corrects again, these are the sectors you’ll want to watch.
And today, I’m going to show you the top two stocks to buy when that happens…
The Top Six Best-Performing Sectors Since November’s Election
These are the sectors – and in Bitcoin’s case, the assets – that have run the highest and fastest after the election.
Say the market does correct (which it will, eventually). Traders looking for opportunities to buy strong trends during a healthy correction are likely to find them in these exchange-traded funds (ETFs).
Now, this is simply a list of ETFs. The biggest question here is this: how do you play them?
Well, let’s dive into two names with some of the highest profit potential, and I’ll show you show…
- Grayscale Bitcoin Trust (GBTC)
You want to know what I said the first time that Bitcoin (BTC) perked up again this year? “Here we go again.” I remember the first round with BTC, years ago, when the asset shot through the roof, only to shatter the dreams of so many “paper millionaires.”
When BTC shot back up to a new all-time high over 20K this year, I was skeptical. But now, I’m the first to say that this time is different. With central banks around the world implementing plans to use BTC along with some large banks and mutual funds, the cryptocurrency market has moved into the “awareness” phase. And that’s where the real money gets made.
This means that we’re going to see rallies similar to what we’ve seen in the last month – breakneck rallies with sudden healthy corrections, like the one I think that we will see in the next week or two.
GBTC is a Bitcoin investment trust. It’s essentially an ETF that tracks the movement of BTC – and year-to-date, it’s up nearly 287%. Monday’s rally above $32 stretched the rubber band (the ETF’s relative strength index reading) back towards correction levels.
The shares had just come off a similarly frothy level registered last week, but a one-day move of 25% will catch all the technical traders’ eyes and alert them that another correction may be brewing.
That thought was enough to swing GBTC from its highs above $32 to its closing level of $30 in just a few hours. And that move has me watching closely for the next buying opportunity.
The technicals tell me that $30 will try to hold as round-numbered support for the next day or so, especially since we can expect to see trading volume lighten up as the New Year’s holiday approaches.
A break below $30 will quickly target a price of $26.00-$27.00, which is where the ETF will start looking attractive to those looking to buy-the-dip.
That decline would take GBTC about 25% from its recent peak, signaling that a healthy correction has taken place – and putting the ETF in position for its first bull market rally of 2021, a rally that my analysis targets with a price of $36.00 (another 35% for the Bitcoin Trust).
See, you don’t have to buy BTC
to invest in cryptocurrency’s bull run. You don’t even have to buy BTC
ETFs, really. My colleague, Tom Gentile, shows his readers how to invest in crypto by recommending trades on tiny coins called microcurrencies. And he just discovered three with the potential to make you 20X more money than BTC
in 2021. Click here
to see how.
- Signet Jewelers Ltd. (NYSE:SIG)
SIG is the world’s largest diamond jewelry retailer – a pretty impressive feat. But I have to say, I’ve had problems buying this stock.
That’s it, my confession of the day. Something about the company itself didn’t make sense to me, even though the stock chart did. And because I couldn’t rationalize the idea of buying the company, I missed out on the stock’s 200% rally.
This is a constant reminder of two things… as traders, we’re buying the stock, not necessarily the company. And secondly, “the data never lies
Looking at SIG’s stock chart, shares are coming out of a nice healthy correction after a 20% pullback from recent highs.
That pullback has also put the stock in a perfect position to grab support from my favorite trendline, the 50-day moving average.
On Monday, SIG rallied 6% higher, pushing the stock back above its 20-day moving average, which is also shifting into a bullish pattern as we get ready to enter the new year.
Now, looking forward to the first quarter, we may see some signs of weakness in the retail sector – note that it was not included in that top-performer list – but SIG shares have been outpacing the rest of the retail sector by more than 2:1 for the last six months.
I like the odds of SIG maintaining its stronghold as a leader in the group. I’d recommend buying SIG at $28.
And there you have it – six sectors, two stock buys. Whenever you dive into the world of technical analysis, you’re sure to find a profit opportunity hiding somewhere.
Tomorrow, I’ll show you another one.