This Trade Is Terrifying. That's Why It'll Probably Work...

I’ll admit it…

Today’s “trade of the year” idea makes me uncomfortable. Very uncomfortable. I’m squirming in my chair just at the thought of jumping onboard this play.

Why?

Let’s just say the stocks I’m about to reveal today have had a rough ride lately. In fact, I’d venture to guess that one glance at their charts would make your stomach churn worse than a Chipotle burrito.

But you know what? That also gets me pumped about this trade. That’s because sometimes the toughest trades to buy turn out to be the best trades you’ll ever make…

Most people would have thought you were off your rocker if you bought stocks in August 1982 when the Dow was at 777. It had lost about three-quarters of its value over a 16-year period and you even had Business Week announcing “The Death of Equities.” Of course, stocks then went on one of the greatest bull runs in history.

And when gold was under $250 in 1999, only the loopiest gold bug would have believed it would go on an extended bull run that would see it peak at $1,900 in 2011. No one was buying gold in 1999.

Point being, it’s always darkest right before dawn. Keep all that in mind over the next few minutes…

As you should have figured out by now, we’re smack in the middle of forecasting week here at Rude HQ. And even though the market’s fate is becoming murkier by the second, we’re pressing onward with our 2016 trades of the year. So before I get into the details of this long-term idea, let’s check in with our sickly markets…

Stocks have belly-flopped their way into the New Year. The S&P 500 has found its way lower four out of the past five trading days. And the major averages are already deep in the red for the year. Trouble in China, North Korean nukes, and global growth concerns ain’t helping, either.

That brings us to our next big trade of the year idea: cybersecurity.

I told you last year that cybersecurity will become one of the most lucrative plays of the decade. That’s because hundreds of millions of people are getting their personal data swiped. No information is as secure as it seems and most corporations are way behind the curve when it comes to protecting your data. That’s the reality of the digital world in which we now live…

Just think of all of the high-profile hacking cases we’ve seen over the past couple of years. Only a few months ago, three hackers were charged with stealing the data of more than 100 million customers from JP Morgan and other financial institutions. Because of the sheer amount of data these hackers swiped, officials called the attack “securities fraud on cyber steroids”.

And you ain’t seen nothing yet…

You don’t have to be Miss Cleo to see that more cyber attacks are on the way. Don’t believe me? Here’s a news brief that flashed across my screen less than 24 hours ago:

“Experts say they have established the world’s first known case of a cyber attack on a power grid, which cut power to more than 600,000 homes in Ukraine in late December,” Quartz reports. “US intelligence agencies and cyber security experts are looking to Russia as the likely source of the attack.”

Expect to see a lot more of this in 2016.

If you’ve been hanging around these parts for a while, you’ve already had quite a few opportunities to make dough on cybersecurity stocks. But the past few months haven’t been bullish for the industry. In fact, most of my favorite cybersecurity plays are sporting some hideous charts. That’s why I haven’t been too keen on these stocks lately. They’ve needed to blow off some steam…

Back to Earth

Despite its surge in early 2015, the PureFunds ISE Cybersecurity ETF (AMEX:HACK) has dropped back to earth and even fallen behind the S&P 500.

While the HACK ETF isn’t inspiring much confidence, you should also note that the more speculative names in the land of cybersecurity are doing much worse. FireEye Inc. (NASDAQ:FEYE) is a stock we’ve traded for substantial gains before. Not anymore—at least no time soon. FEYE is down more than 55% since June and hasn’t shown any significant signs of life.

But today, I have a new way for you to hop on the cybersecurity trade. In fact, the play I’m about to reveal isn’t looking nearly as sickly as some of the other cybersecurity stocks out there right now…

I’m talking about Imperva Inc. (NYSE:IMPV). Imperva’s approach is different than most cybersecurity firms because it looks to protect companies from insider break-ins, which account for 45% of all data breaches. And corporations will be lining up for that kind of protection.

Is Imperva’s chart perfect? Not even close. We’ll need to see this unique cybersecurity play hold above $55 to avoid a bigger downturn. If it can do that and grab some momentum, you could be sitting on substantial gains in a few months.

Due to an ornery market, let’s not go “all in” on this play. Just buying a starter position will suffice. If the world doesn’t end, we can load up at a later date…

Sincerely,

Greg Guenthner
for The Daily Reckoning

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