We are in December!
What just happened to November? It seemed to have slipped past so quickly!
November was eventful, beginning with the US Presidential Election. Did you expect former President Donald Trump to be re-elected?
The market cheered wildly and reached a new all-time high when he was confirmed the President-elect.
A day later, the S&P 500 futures crossed the 6,000 mark!
As I type this over the Black Friday weekend, the S&P 500 futures has formed another all-time high.
Instead of getting carried away, it pays to be defensive and conservative.
Let’s review the stocks shared in November.
- Cisco: Gain of 3.5%
- United Airlines: No entry
- PayPal: Gain of 3.3%
- Assurant: No entry yet
Have you noticed that I don’t favor buying stocks on the breakout? This is because I find more success buying stocks after they’ve pulled back.
Cisco and PayPal went exactly according to plan. They pulled back to the identified support area before rising.
On the other hand, United Airlines and Assurant are still enjoying their rally, thus there’s no entry.
Assurant looks to be pulling back, and I’m eagerly waiting for its shares to reach the support areas identified here.
Hence, the return generated in November is below the return generated by the S&P 500 of 5.9%.
Before you jump into this week’s #PowerStocks pick, let’s review last week’s: Assurant (AIZ).
Review Of Last Week’s Pick Of The Week
Assurant was our #PowerStocks pick last week.
It belongs in the Financials sector and has been under the radar of most traders even when it’s a superb outperformer.
After analyzing the share price of Assurant, I’d identified 2 support areas that its shares could pull back to – $218.50 and $213.
A week has passed, and its shares finally show signs of pulling back.
The moment I’ve been waiting for is near.
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Let’s check out this week’s stock pick, Cloudflare, shall we?
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Why Is Swing Trading Cloudflare (NET) Worth It?
Source: cloudflare.net/events-and-presentations/default
Cloudflare is a technology company in the cybersecurity business.
After a slump in the first half of 2024, its share price has steadily risen.
In the last 3 months, its shares have climbed more than 22%, outpacing the performance of the S&P 500 by almost 3x!
As its shares pull back, I’m eyeing a price to buy them for an explosive swing trade.
Which price area am I waiting for?
Continue reading to get the details.
P.S. What if I told you that you could drastically gain control over your emotions of fear and greed, and master the stock market in a short amount of time?
My team and I have worked tirelessly to help you achieve results fast.
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Performance Of US Stock Market vs Cloudflare (NET)
Let’s identify the trend of Cloudflare’s share price and the S&P 500.
Can you tell that they are in an uptrend?
To make a good return in an uptrend, you’ll want to be hunting for buying opportunities.
But if you’re looking to refine the efficiency of your trading capital, you’ll want to buy shares that are outperforming the S&P 500.
While the S&P 500 has risen by 7.8% in the past 3 months, are the shares of Cloudflare able to surpass that?
Without a doubt!
The shares of Cloudflare had risen by a much larger amount – 22.8%.
This works out to an outperformance of nearly 3x!
It makes sense to analyze Cloudflare’s shares further.
How Explosive Is Cloudflare (NET)?
Has its shares exploded sufficiently to make your time and money worthwhile?
In the past 11 months, Cloudflare’s shares have exploded upwards 19 times!
For a company that enjoys a massive market capitalization of more than $34b, these upmoves measuring between 4.5% and 45.9% are mind-blowing.
What’s even more mind-blowing is its ability to explode in price by 20% or more in 4 occasions in a matter of days!
Yes, Cloudflare’s shares pass this test with flying colors!
Does it mean that it’s time to buy its shares for an explosive swing trade?
Key Price Levels
Let’s determine whether the time is ripe to buy its shares for an explosive swing trade by uncovering its key price levels (aka support and resistance).
Because support and resistance are areas where prices tend to turn, they help identify buying and selling opportunities.
To save you time, I’ve marked out a support area at around $97.
As the share price of Cloudflare is pulling back, it’s likely to reach around $97 before rising again.
I’m waiting for this scenario before buying its shares for an explosive swing trade.
Here’s a pro tip: Instead of staring at your screen, you may want to set a price alert on your broker’s platform to be notified so that you can spend precious time with your loved ones.
Which Instrument Should You Consider Using?
Do you ever wonder about the instrument used to trade explosive stocks?
With 3 main trading instruments available – stocks, contract-for-difference (CFD), and options, you wonder which suits you best.
Since stocks (as an instrument) is easy to understand, I shall focus on CFD and options.
Here are the main similarities and differences:
CFD works like a mirror to stocks. When a stock rises $1, its CFD rises $1.
However, due to its unique pricing mechanism, your options price doesn’t rise by the same amount. In fact, the price of your options contract may even drop, depending on the market condition!
Your CFD broker will charge you a finance charge for lending you money for your trade. There’s no lending required for options, hence there’s no finance charge.
Because there’s a finance charge by your CFD broker, CFD is not the ideal instrument for mid to long-term trades. On the other hand, options allow you to implement different strategies across time horizons.
Both CFD and options are leveraged instruments because they allow you to control a larger position in the market with a smaller amount of capital.
While there isn’t an expiration date for CFD, options traders must pay attention to the expiration date of their options contract.
You must be thinking, “What’s the beauty of trading options?”
Options are like smartphones. You can choose to use a smartphone for its basic or advanced functions.
In the same way, you can implement basic and/or highly advanced strategies depending on your level of comfort.
Options allow you to be versatile in adapting to the shifting market conditions and capturing opportunities in the process.
Are you a CFD or options trader?
I’m glad to be fluent in both.
Finally, this is for educational purposes. Please perform your due diligence.
All images are taken from pexels.com, pixabay.com, sectorspdrs.com, tradingview.com, and unsplash.com, unless otherwise mentioned.
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Many new traders are often left confused by conflicting signs and signals.
Worse still, ~80% of traders lose money.
This is because trading isn’t just about skill alone.
It includes the mastery of your emotions.
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