Buy UGL When Gold Drops 5%

UGL is ProShares 3X Gold Bull ETF. This stock is a great buy whenever the gold index or GLD pulls back 5% or more. UGL tries to make three times the advance that gold is making. If gold is advancing 16% per year, UGL should be making 48%. It may gain slightly less than three times gold, but it will be close enough to make a lot of money. Currently, UGL has good support in the $75 price range. If you want to play it extra safe, you could sell UGL whenever the price drops below the 9-day simple moving average. Then, buy it again when the daily price crosses above the 9-day average.

Stocks For The Dow Going Higher

One way to make money in the stock market is to pay attention to the Dow each week using the DIA exchange traded fund as a reference point. If the Dow is down a few weeks in a row, it is time to buy leveraged ETFs like UDOW, TNA, and ERX because these stocks will quickly rise from the bottom of a general stock market pullback. If you go to Yahoo and call up a chart of DIA and then compare the Dow ETF to these three leveraged ETFs, you will quickly see how you can gain a lot of money by owning the Ultra Dow (UDOW) and the other two at the right time.

TNA is Direxion's 3X bull for small cap stocks, and ERX is Direxion's 3X energy bull involving mostly oil stocks. Not only are these stocks great for coming off the bottom, they also beat most stocks when the general stock market is going higher with a powerful bullish trend. So, you can even be profitable if you are late to the party as long as you don't stay too long. If you find one of these leveraged stocks already up 10%, they could have another 10% to go before they pull back. You could basically figure 20% upside from the low point for placing a profitable sell order. Just be certain to take profits while you are up because these stocks will fall fast in a downturn.

Safe Investing

Many companies nowadays are letting employees control their 401K plans. For example, if a company uses Charles Schwab as their plan administrator, the employees can buy individual stocks under a Personal Choice Retirement Plan. We also have popular online brokers where individuals can set up trading accounts. TDAmeritrade and Scottrade are two of these places.

I have accounts with all three of these brokers. It is great to have the power to control your own destiny in the stock market, but an inexperienced investor will lose a lot of money fast if he or she does not have a good game plan. I recommend watching CNBC to learn about the stock market along with making SeekingAlpha.com one of your favorite investing information websites. You can also buy investing books.

As for a good diversification plan, I believe that investors of all ages should have at least 1/3 of their money invested in bonds. This can be in U.S. Treasury bonds or bond ETFs that trade like stocks. Two ETFs that I like are RCS and JNK. They both pay around 8% annually, and you are paid a portion of that each month.

The other 67% of your money should be invested in several different stocks in different sectors. For example, AGNC is a real estate investment trust that pays around 19% annually through quarterly dividend payouts. This stock would be a buy and hold as long as they continue to pay a double-digit dividend. I recommend putting 15% of your money in this stock.

That leaves us with 52% left to invest. This should be divided equally into four 13% sections. Since it is difficult to always pick good stocks, the safest plan is to invest in four strong ETFs (exchange traded funds) such as ERX, DGP, UDOW, and TNA. This provides good diversification for your money.

ERX is a triple bull fund involving energy, primarily oil. DGP is a double gold fund. UDOW is a triple Dow stocks ETF. TNA is a triple small cap fund.

You must do some homework before you buy these four ETFs because you may be buying at the top and selling for a loss if you are not careful. You will need to buy these stocks only when the Dow has been down for a few weeks. Then, you must quickly sell them whenever you are up 20 to 25%. This means that the money you spend for these stocks may be sitting in cash for half the year. That is great, though, as long as you make a profit each time you buy at a stock market bottom.

This is a plan that will safely work for double-digit returns each year on average. Please do your own diligence for buying and selling at the right times.

Fibonacci Stocks

An investor faces numerous problems in buying and selling stocks. You must know which stocks are worth buying, and you must sell the stocks while you still have a profit rather than a loss. Since the stock market is constantly going up and down, you need to have some idea of how far it might go up from a bottom or a pullback. Even if you are a buy and hold investor, what happens if the market crashes 50% like it did in the financial crisis 0f 2008-2009? What if you need to get your money out when the stock market is in a bad downturn?

The solution is to sell whenever you have a good profit. Then, get back in when a pullback occurs. This is why a lot of investors and institutions follow technical charts for buying and selling. I recommend that you learn how to read charts, but there is another protective step you need to take also. Be familiar with the Fibonacci numbers that many stock market people use to predict chart patterns.

The actual Fibonacci number series goes like this: 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, and so on. Each successive number is the sum of the previous two numbers, like 2+3=5, and 5+8=13. The stock market, however, uses a variation of this system. If you divide two successive numbers out to infinity, you will arrive at the golden ratio of .618. It is not obvious at first when you are dividing 1 by 2, and 2 by 3, but the rest of the number divisions like 5/8, 8/13, 13/21, 21/34, 34/55, and so forth come very close to the infinity ratio .618. So, this is one percentage number stock market technicians use for estimating deep pullbacks of stocks.

There are two other important numbers, .382 and .236. The first number is derived from dividing one Fibonacci number from the second successive number away, like 5/13 or 8/21. Then, the .236 ratio is obtained by dividing one number by the third number away in the sequence, such as 8/34.

These three ratios .618, .382, and .236 are often used to chart possible support levels for a stock whose price is falling. There will be many buyers for good stocks when they are a little over 20% down (.236). 50% down is also sometimes used, which would be 1/2. These ratios can also be used to determine the upside potential from stock bottoms or pullbacks.

Usually, stocks will be ready for a pullback when they have gone up 20% or more. Thus, if a stock's chart looks like it is rising from a bottom, simply take that price and multiply it by 1.236 to get a possible selling target that is a little more than 20% profit. If the stock can be bought for $20 after a pullback, you will want to sell when the price rises to $24.72. Of course, a strong stock could rocket 38% (.382) before it falls again. The point is that you need to have a plan for selling a stock while you still have a profit. You can always get back in later after a pullback because the stock market will never go straight up without a break.

These pullbacks will happen many times during each year. If you can set your sell targets 20% higher just five times per year and successfully take your profits, you will be making 100% on your money every year. This is highly possible if you are paying attention to the up and down cycles, and you have good stock picks. Remember also that many institutions use charting and Fibonacci setups to determine their buying and selling. There will be enough big boys playing the game in an organized fashion so that you can profit from their moves if you know what their probable steps will be!