Are you an investor who wants to beat the market and also lower your risk?
If you do, look at money flows — they give you an edge. Technology stocks are the leaders in this “up” leg in the stock market. Let’s review money flows in 11 popular technology stocks with the help of a chart.
Please click here and note the following:
• When taken in totality, money flows are the most positive since January 2018.
• Positive money flows are good for stocks until they reach very high levels. Money flows in popular tech stocks have reached very high levels quickly. This is often a contrarian signal. This means there is too much risk in buying popular tech stocks right here. Since tech stocks have been the leaders, the risk in the overall market has increased.
• Risk-adjusted rank is number one for Alibaba BABA, -2.69% and number two for Facebook FB, -1.79% These ranks are based on the six screens of the ZYX Change Method. Please click here to learn about the six screens.
• Non-risk-adjusted rank is number one for Amazon AMZN, -0.46% and number two for Netflix NFLX, -1.64%
• Nvidia NVDA, -1.53% and Tesla TSLA, +1.05% are ranked the lowest.
• Intel INTC, -1.87% is seeing extremely positive smart money flows. (The smart money is professional investors.)
• Smart money flows have slipped to neutral in AMD AMD, -4.34% but the momo (momentum) crowd flows are very positive.
• Microsoft MSFT, -1.03% has moved up but smart money flows are neutral.
• Smart money flows in Apple AAPL, -0.40% and Google GOOG, -1.07% GOOGL, -1.10% are mildly positive.
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What to do now
At The Arora Report, we advocate buying in the buy zones. Money flows are one of the major factors in determining buy zones.
For short-term positions, when smart money flows slip, that is an indication to book profits.
At The Arora Report we also advocate diversifying by time frame. This way if positions do not work out in one time frame, they work out in another time frame. This lowers the risk.
As an example, AMD was started as a short-term position at an average price of $10.95 near the bottom of the current “up” leg. At the time of buying AMD, we gave $15.33 as the top end of the target zone. Since the stock moved above the target and smart money flows slipped to neutral, we have taken profits and exited the positions.
We have taken profits in the face of very positive momo crowd flows. The reason is the risk in holding the stock is now much higher than before, and this was a short-term trade. We have profitably completed several short-term trades on AMD.
In contrast, Intel has been a long-term position originally bought at an average price of $34.01 when it was a hated stock. Intel is trading around $56 as of this writing. The buy zones on Intel have been raised several times, as the good news started coming in to help newer subscribers.
As an example, please see: “A breakout in this cheap, forgotten stock is powering the Dow Jones Industrial Average.”
Our target zone for Intel is $68 to $73.
Disclosure: Subscribers to The Arora Report may have positions in the securities mentioned in this article. Nigam Arora is an investor, engineer and nuclear physicist by background who has founded two Inc. 500 fastest-growing companies. He is the founder of The Arora Report, which publishes four newsletters. Nigam can be reached at Nigam@TheAroraReport.com.