This Stock Rallies Like Clockwork – A New Profit Cycle Starts Now

Sorry to burst your bubble—but the stock market’s not magic.

Mysticism has no place in what we do as traders and investors, our own Jonas Elmerraji reminded us yesterday.

But markets do rhyme. Buyers and sellers react to market conditions in similar ways throughout history. As traders, we can exploit this phenomenon for gains.

Yesterday, Jonas showed us how a curious correlation from two completely different time periods lined up to forecast a massive rally in the S&P 500 in 2013. But as we hinted yesterday, this correlation wasn’t finished just yet….

“At the end of 2013, I used the correlation to project a 12.8% gain in the S&P 500 in 2014 if that relationship held up,” Jonas continues. “Yeah, it was a little nutty to forecast a double-digit rally after the best year for the S&P 500 in about two decades, but that’s what the data said. 2014 ended up handing investors a 13.7% gain in the S&P 500.

“I’m not telling you this to brag – believe me, I had nothing to do with those spot-on forecasts. I was just lucky enough to notice the data and crunch the numbers. Anyone armed with an Excel spreadsheet could have done what I did.”

Of course, all trends eventually come to an end. Unfortunately, 2014 is where the big correlation in the S&P 500 stopped dead in its tracks. Jonas says It’s impossible to say when it’ll show up the next time.

But that doesn’t mean we’re forced to sit around waiting for another potentially profitable S&P correlation to show up. In fact, Jonas is hard at work mining for data-driven trades as I type…

“It’s fair to say that I’ve been a bit obsessed with finding more of these relationships in the market,” Jonas admits. “So I’ve been working on a project over the past year to figure out if we could take the market cycle that proved so profitable in the S&P 500 and find similar situations in individual stocks – all 8,974 of them.”

That’s a huge challenge. And it’s taken Jonas a whole lot more than an Excel spreadsheet to get the results he’s been looking for.

But his research is finally beginning to bear some serious fruit…

Jonas has agreed to share one of his actionable results with you today. And it could be good for a 15% gain in the next 78 trading days…

Jonas’ research is pointing to a stock called Pentair (NYSE:PNR). It’s an $11 billion industrial stock that is exhibiting a potentially profitable trading pattern…

“Over the last 27 years, Pentair has rallied like clockwork at the start of the year, posting average gains of 15% in the stretch between January 27 and May 18,” Jonas notes. “It’s a pattern that’s been profitable 85% of the time during that stretch.”

Today just so happens to be January 27th. PNR’s most profitable annual cycle will begin when the market opens this morning…

After finding a low in November, Pentair has been moving up and to the right, kicking off a series of higher lows that could be the start of a much bigger move between now and May.

If you decide to buy PNR here, consider parking a 7% trailing stop below your entry price – in the few calendar years when this stock’s price cycle hasn’t panned out, the average drawdown has been that 7% number.

Sincerely,

Greg Guenthner
for The Daily Reckoning

The Daily Reckoning