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What a Perfect Trade Setup Looks Like... Today

By Dr. Steve Sjuggerud
Monday, October 12, 2015

 
It had almost the exact setup that I wanted to see. It was missing just one crucial thing.
 
Today, that one crucial thing is in place. The setup is perfect for what I look for in a trade.
 
A perfect setup doesn't guarantee that it will work out, of course. But I've learned that my odds are best when all of these things come together.
 
The principles of this "perfect setup" apply to just about every trade I make.
 
This particular trade happens to be in the Australian dollar... You are welcome to trade the Aussie dollar now... But that's not my point today.
 
My message today is to show you the "perfect setup" in action...
 
Two weeks ago in DailyWealth, I wrote:
 
The Aussie dollar has lost a quarter of its value since last summer. That is crazy for a developed country's currency.
 
By any measure, the Aussie dollar is cheap... oversold... and hated. Traders have placed near-record bets against it (based on futures contracts). These things are classic signs of a bottom in the Aussie dollar.
 
The thing is, you could have said the same thing about the Aussie dollar earlier this year – and yet it's hitting new lows today. If you had bet on a higher Aussie dollar then and held until now, you would have lost real money.
 
The message from the Aussie dollar is simple: Don't fight the trend.

Longtime readers know I look for three things in an investment – I want it to be 1) CHEAP, 2) HATED, and 3) in the start of an UPTREND.
 
Two weeks ago, the Aussie dollar was CHEAP and HATED. But we didn't have a clear uptrend yet.
 

Today, we have the perfect setup...
 
As you can see from the chart, we have what looks to be the start of an uptrend in the Aussie dollar. That gives us the trifecta – cheap, hated, and in the start of an uptrend.
 
To me, it's time to enter that trade.
 
To protect your downside risk, you can set a stop loss at the recent low in the Aussie dollar. This way, your downside risk is very low, but your upside potential is wide open.
 
The principle behind setting the stop loss at the recent low is, if a new low is actually hit, it means I got it wrong... It means a new uptrend is not actually in place.
 
That is about it.
 
You can easily make it much more complicated than this. But those are the basics. That's what a perfect setup looks like to me.
 
Thankfully, today, we're seeing this perfect setup in a large number of different assets...
 
The newest issue of my True Wealth newsletter comes out Tuesday (which is a few days early), and because of all these perfect setups, I have a few new buy recommendations. (You can learn more about my True Wealth newsletter and how to sign up right here.)
 
I urge you to look out for these perfect setups (they happen more often than you might think) and take advantage of them! I can assure you, you'll be a better investor if you do.
 
Good investing,
 
Steve




Further Reading:

Last week, Steve told readers that "the correction we've gone through in stocks since August is just that – a correction." And he highlighted yet another sign that higher stock prices are ahead. Read his full argument right here.
 
Steve also recently shared his conversation with gold expert Rudi Fronk, the CEO, chairman, and founder of Seabridge Gold. Learn why it's a good idea to own some gold today right here: The Basics of Gold, From the Man Who Has the Gold.

Market Notes


NEW HIGHS OF NOTE LAST WEEK
 
Clorox (CLX)... consumer basics
WD-40 (WDFC)... all-purpose lubricant
Constellation Brands (STZ)... booze
National Beverage (FIZZ)... soft drinks
Altria (MO)... cigarettes
McDonald's (MCD)... fast food
Tyson Foods (TSN)... meat
Aaron's (AAN)... rent-to-own
Pool Corp. (POOL)... pool supplies
Pep Boys (PBY)... auto parts
Advance Auto Parts (AAP)... auto parts
Nike (NKE)... athletic apparel
L Brands (LB)... fashion retailer
Progressive (PGR)... insurance
St. Joe (JOE)... real estate development
Vantiv (VNTV)... payment processor
Lockheed Martin (LMT)... "offense" contractor
Silver Standard Resources (SSRI)... silver miner

NEW LOWS OF NOTE LAST WEEK
 
GoPro (GPRO)... personal cameras
Aeropostale (ARO)... clothing retailer
Gap (GPS)... clothing retailer
Sally Beauty (SBH)... beauty supplies
Ruby Tuesday (RT)... restaurants
Krispy Kreme Doughnuts (KKD)... donuts

premium teaser

Here's exactly how to trade the Australian dollar...
 
The Aussie dollar is a perfect trading setup...
 

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