Stocks go up for lots of reasons.
But there’s really only one main factor I focus on…
That’s why in Monday’s live Stealth Trades session, I took a position in LPL Financial Holdings Inc. (LPLA) stock.
I’ll outline that trade in a moment, but first I want to give you a quick lesson I’ve learned over the years.
Focus on What Matters Most
It is easy to get distracted in the stock market of today.
A tweet from Elon Musk or an off-hand remark by the president can send a stock soaring or tumbling.
But those moves are usually short-lived.
The sustainable trends still come from the same place they always have – Earnings.
Nine times out of 10, a stock with big earnings and sales growth will outperform a stock without those factors.
Stock prices go up because investors view the company as more valuable. And only one thing makes a company valuable…
Would you own a business that never made a profit? I wouldn’t. It defeats the whole purpose of being in business.
That’s why earnings reports send stock prices sharply higher or lower.
Investors want to know if the company is doing better (more profits and a strong forecast for the future) or worse (less profits and a weak forecast).
My Trade in LPL Financial
With all that said, let’s look at LPL Financial and how I decided to play it.
In the table below, you’ll find the company’s earnings per share (EPS) over the last several years.
Not only have earnings per share grown steadily over the years, they even held up well during the pandemic and are expected to continue growing rapidly into 2022 and 2023.
The Technical Setup
Now that we know the key fundamentals driving the stock, here’s how the chart is setting up…
The chart pattern is pretty straight-forward.
We can see a nice “cup with handle” pattern has formed over the last couple months with a tight pivot area in the $180-$190 range.
The proper buy point was $191 when it crossed the white pivot line.
Mondays are busy for me, so I didn’t spot it until our live Stealth Trades session at noon.
But I bought in at $198.44 during the members-only session.
I usually don’t chase stocks even 3% above the proper buy point.
A Screaming Buy
But my other indicators were lighting up, and this was just a screaming buy.
Take a look…
First, relative strength was through the roof.
This is a sign the stock is outperforming the market and leading the move higher.
But the big tip-off for me was the volume.
Look at those huge green candles!
LPLA has had four big up-days of twice its average daily trading volume.
This is what I call “follow-through volume,” and it is a sign that large institutions are buying the stock.
The stock was up around 2% the first day and another 3% in the first hour of trading on Wednesday as I’m writing this article.
With price action like that, I am in no hurry to sell.
A Textbook Breakout
This is exactly what I want to see from a breakout trade. I want to immediately generate a profit and see confirmation that others are piling into the stock.
It was the same with Cameco Corporation (CCJ), which I told you I was buying last week.
I am already up 7.1% on the stock and have not yet taken any profits because the stock is behaving exactly as expected.
If it wasn’t, I would be selling or at least reducing my position.
So, remember… Add to your winners and cut off your losers. It doesn’t need to be any more complicated than that!
Want More Stealth Trades?
LPL Financial and Cameco Corporation are the kinds of stocks I focus on in my premium Stealth Trades research service.
These are under-the-radar stocks, but there’s clearly some major institutional buying going on behind the scenes that should continue to push these stocks higher.
And I have plenty more trades like this inside Stealth Trades.
Embrace the surge,
Editor, Stock Surge Daily