How Traders Made A Fortune From Citigroup’s Collapse

| November 26, 2008 | 0 Comments

Are you staring at your stock portfolio wondering what to do?  Ever wish for a simple signal that you should buy a stock?  Are you confused about when to sell an investment?  If so, you’re not alone.

What you’re seeking is the holy grail of stock investing.  While no system’s perfect, I like to use technical analysis.  I believe it can make you a better trader…

Don’t believe me?  Check this out.

Back in June I recommended a trade to my Currency Options Insider subscribers.  The Yen had recently traded below the $95 level.  It was looking weak, and when combined with basic fundamental analysis I knew it would be heading lower.

I suggested put options which would profit only when the Yen moved lower against the U.S. Dollar.  I identified a support line right at the $92.50 level.  Sure enough the Yen traded down to the support level not once, but twice in the next two months!

Traders who used the support line as an exit point were very happy.  In the first 10 days traders could have captured a maximum gain of 140%.

Some investors sell stocks on gut instinct… I like to have a system.

Every good trade starts with good analysis.  For me, that means two things, detailed fundamental analysis, and rigorous technical analysis.

What’s fundamental analysis?  It’s when you look at the details surrounding a specific security.  In the case of stocks you might look at revenue growth, margins, earnings, cash flow, and balance sheet strength.  You also analyze new products, market share, and product life cycles.  The analysis might even look at the management team and ownership structure.

I could go on for three more pages about fundamental analysis… let’s just say it’s extensive and detailed.

Technical analysis is a totally different animal.

All technical analysis measures is price action.  That’s it.  It’s just looking at where buyers snap up shares and where sellers dump them on the market.  Once you identify an area where buyers overwhelm sellers you’ve found a support level.  Resistance is where sellers far outnumber buyers.

Technical analysis (especially support and resistance) is a great tool to determine entry and exit points.  Now, keep in mind there’s lots of other parts to technical analysis.  Unfortunately, I just don’t have the space to describe them all here.

Now here’s a little secret profitable traders know.

Once a security breaks a support or resistance line it often continues to move in that direction.

Just take a look at Citigroup (C).  In 2006, Citigroup put in a low of $39.50.  It’s a perfect example of a support line.  The stock collapsed in late 2007; it briefly paused right at the support level.

Once the stock broke through support, it was all over.  Traders using technical analysis either sold their stock or established a short position. Think about how much money you could have saved… think about how much you could have made.

Using this simple technique traders not only look smart, but can become very, very wealthy.

Editor’s Note:  Greg, Brian and the rest of the team at Hyperion Financial Group wish you and your family a Happy Thanksgiving.  Eat, drink, and be merry!

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Category: Stocks

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The Dynamic Wealth Report works with a number of staff writers and guest experts who specialize in everything from penny stocks to ETFs to options trading. These guest analysts post under the 'staff writer' moniker for ease of use.

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