The Next Red Hot Stocks

After the market had its best first quarter performance since 1998, a pattern emerged that is likely to continue to identify the market winners.

You don’t want to buy the stocks that are red-hot now.

You want to focus on the stocks that have the potential to become red hot.

Here’s a good example.

Adobe Inc. (ADBE).

The rally of 2019 has left a lot of institutional traders behind.

As a result, it’s likely that there will be a push higher in the big-name stocks that institutions like to trade as they try to catch up with the market 2019 gains.

When institutions play the “catch up” game they don’t buy the lagging stocks.

They buy the stocks that have been working.

The ideal candidates for explosive moves higher are stocks that have been strong, but have not yet gone straight up.

Other candidates are the red-hot stocks that have cooled off a bit.

ADBE is an example of the former.

As you can see in the chart below ADBE has been consolidating right below its all-time highs.

This sets up a nice breakout trade. The entry is a break over 270.

If the breakout over 270 is a good one, then it should not trade under 263.

Therefore, place your stop-loss under 263.

ADBE also has good option volume; so if you trade options and you don’t want to buy a 270 stock, consider the June calls. ADBE reports earnings on June 18 and the calls expire after that (June 21). This will help your call maintain their value longer.

Based on the chart a breakout over 270 has the potential to quickly rally to 300.

That’s a nice $30 gain for shareholders, and a potential 300% gain on options like the June 300 calls.

Trade smart,

Rick Nartarian, Chief Investment Officer
The American Investor Daily