3 Effective Ways To Potentially Profit In Stocks While Minimizing Risk

by: Chris Kacher and Gil Morales


When the market corrects, buying opportunities arise.

Three formidable low-risk buying techniques: the undercut & rally, volume dry-up, and Wyckoff retests.

Taking profits when a stock's price gets ahead of itself has worked well in this market environment.

We are always looking for ways to profit while keeping risk to a minimum in the ever-changing stock markets. Two strategies continue to yield excellent reward/risk ratios of at least 3:1, though often significantly higher, since our buy points have sell stops typically within 2-3% from where we buy.

Markets have a natural rhythm to them, an ebb and flow if you will. When markets have even a minor correction, many leading stocks go down two to three times as much as the general markets. Stocks will often undercut prior major support points and then turn back up. When this happens, you buy. Leading stocks typically rebound the quickest, thus the undercut below prior support typically is only a couple percent, which means the entry point as the stock crosses back above the low of its prior support level often only carries minimal risk, using the low of the undercut as your stop. For example, read one of our reports here that shows how Yext, Inc. (NYSE:YEXT) went on to score nearly 10% in just 3 trading days, while risk was kept to 1.3 to 3%. More recently, on July 11, 2017, we sent an email to members bringing attention to the volume dry-up action in YEXT up through July 11, 2017, which made it actionable. The very next day, YEXT issued a second buy point in the form of a pocket pivot. It has since moved higher by more than 10% as of this writing.

This process has been repeated over and over again throughout the last couple of years. Indeed, quantitative easing has distorted many tried-and-true indicators, thus we strive to stay ahead of the curve with our unique but profitable trading strategies. We have long advocated:

  1. Buying on constructive weakness using our time-tested techniques, which include undercut & rally, volume dry-up, and Wyckoff retests.
  2. Selling into strength, should the stock price get ahead of itself. Numerous examples can be viewed in our report archives here: Stock market timing reports - Stock Marketing Investing Tips

Three important themes arise:

  • The closer one buys a stock as it pulls back to a logical area of support, the less risk, since one's sell stop is well defined.
  • The stronger the prior price move in the stock, the greater the odds of the stock continuing to exhibit such price strength when it launches again.
  • When a stock's price gets too far ahead of its 10-day moving average, it typically corrects or trades sideways to digest gains.

In selecting our stocks, we run our screens throughout the trading day in search of such stocks with the best risk/reward profiles. You should do the same as you conduct your daily research.

As a few of many examples, see our Focus Lists, Voodoo Reports, Weekend Reviews, and individual stocks that can be searched by ticker symbol in the free report archives here.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.