Here's Your Shot at "Trickle-Up" Gains

Doom and gloom continue to dominate Wall Street.

The financial media can’t pry itself away from the political soap operas here in the US and abroad. Every day is a barrage of new negative headlines. Hell, even Brexit worries are creeping back onto the front page…

Meanwhile, more evidence is quietly piling up in favor of a big year-end rally.

Key stocks and sectors are gaining traction under the surface of the major averages. The third quarter is officially in the books—and it was a profitable one if you tuned out the noise.

No, the world hasn’t ended just yet. MarketWatch reports 49 stocks jumped at least 20% in the third quarter. This list is chock full of biotech, semiconductor and software stocks. That’s just a few of the places we’ve explored for gains over the past several months.

As we dive headfirst into the fourth quarter, these gains are starting to “trickle-up” to some of the biggest, most recognizable names on the Street.

The big boys are back in action!

That’s right—the gigantic stocks that held the major averages together over the past 24 choppy months are taking the wheel. In fact, one of these popular stocks just flashed a huge buy signal. More on this opportunity in just a minute.

First, to understand where we are now you have to go back to 2015– the year of “bad breadth.” Just a handful of powerful stocks were propping up the major averages last year. That’s how the FANG meme – Facebook, Amazon, Netflix, Google—came to be. While the major averages went nowhere, these stocks shot to new highs.

We managed to successfully trade every single one of these stocks last year. If you wanted to generate double-and triple-digit returns, you had to hitch your star to at least one of these FANGs in 2015. “Buy strength” was the stock market’s motto. Everything else was garbage…

But the good vibes didn’t carry over to the 2016. Traders even tossed their beloved FANGs into the trash. Before the market bounced in February, the FANG family was down a collective 17% year-to-date. As the world turned bearish, skittish investors cashed in their big winners…

But the market has changed drastically over the past eight months. Along with the speculative breakouts, FANG is getting the band back together. Facebook and Amazon have stayed strong since the market bottomed out back in the winter. Google shares finally turned higher in July. Now, Netflix wants some time in the spotlight.

Netflix hasn’t impressed investors so far this year. Shares were down 25% year-to-date as recently as July. Even Mad Money’s Jim Cramer—father of the FANGs—booted the stock from his red-hot growth plays. Cramer has instead opted for the much less catchy FAAA acronym– Facebook, Alibaba, Alphabet and Amazon.

While most investors fretted over Netflix subscriber counts and its lackluster performance, the stock has been quietly building a base over the past several months. Yesterday, shares broke out in a big way after rumors circulated that Disney was potentially interested in a buyout. Check it out:


Netflix shares smashed through resistance yesterday to four-month highs, leaving the 200-day moving average in the dust. With its newfound mojo, this stock could get back in the black for 2016 in no time flat—putting double-digit gains in your pocket.

The final piece of the FANG puzzle is back in play. After nibbling on speculative stocks for months, traders are rotating into the household names like Netflix. That gives us a great shot at a lucrative trade as the herd “trickles up” into the most recognizable stocks on the market…


Greg Guenthner
for The Daily Reckoning

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