Whenever the market gets stupid complicated and it seems impossible to find that next good trade, we pull back and go to a simple approach that has payed off for us many more times than not.

When demand is growing for something and supply is constricting, that is a good time to buy. An extreme example is to buy into pharma at the start of the pandemic. Buy oil at the start of the Ukraine war. The hope is to get a strong tailwind behind you that increases the likelihood of finding repeatable profitable trades.

The broader market is churning viciously making it a challenge to find good trades in most sectors. If you look at what sectors are seeing benefit that the rest of the market may not be seeing you can often start to find more fertile ground to plant your profit seeds.

There is clearly a trend toward clean energy and EVs, but we have already looked at that a bunch. But one of the reasons that sector is strong is because of the incentives to manufacturers and consumers for those products. The pandemic highlighted supply chain weaknesses that have inspired incentives to allow us to be less vulnerable to supply chain disruptions in the future. Another area that is in line for some incentives is domestic semiconductor manufacturing.

SOXX is an ETF that tracks US listed (not necessarily domestic based) semiconductor stocks. If we start with that we see an interesting pattern.

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We can see that SOXX has been coiling up in a range for the last month and just gapped up. That breakout could be a bigger move to recent highs closer to 500. This is an ideal opportunity for a call option to grab that upward potential while shaving your risk significantly when compared to simply buying the stock.

Andy Chambers uses a very simple approach to spotting stocks like this and then adds another component that multiplies the opportunities to win with this type of trade. Simple. Increased winning potential. Definitely checks off the boxes. Plus he turned it into a a trading approach that is designed for people who can’t stay glued to a screen all day. Check out his Market Propulsion system here.

Keep learning and trade wisely,

John Boyer

Editor

Market Wealth Daily