Trades that Make Sense Often Don't Make Profits
Stockscores Foundation for the week ending March 2, 2026
In this week's issue:
In This Week’s Issue:
- Market Outlook – Buy the Threat, Sell the Bombs
- This Week’s Market Minutes video – The First Sign a Stock is About to Explode
- Trader Training – Trades that Make Sense Often Don’t Make Profits
- Strategy – Gainer on a Quiet Day
Market Outlook – Buy the Threat, Sell the Bombs
The markets reacted to war in the Middle East with a weak open and then a comeback to even. Typically, markets do well during wars, perhaps this one will be a catalyst for a break out of the range that stocks have been in for a few months.
Oil made a big price gap up but since it has been moving up for the past few months in anticipation of the attack, there is a good chance that we will see Oil pull back in the near term, perhaps after a few days. You would think that Gold would make a bigger gain on the uncertainty of war but I have learned (the hard way) that what makes common sense usually does not work. Gold does not look bad but I don’t think the reward for risk trade off on it is great right now. For Gold and Oil, the war was anticipated and investors bought the rumor, will they now sell the news?
This Week’s Market Minutes Video – The First Sign a Stock is About to ExplodeStocks that make explosive price gains almost always start with this simple signal. This week, I share with you the trading signal that I have used for 30 years to find market beating stocks. Then, I provide my analysis of the overall markets and whether war in Iran will trigger a stock market crash or a big gain in Oil. Finally, a look at the trade of the week on AEHL.
Click Here to Watch on YouTube
https://youtu.be/ikSCxkXybeo
Commentary – Trades That Makes Sense Often Don’t Make Profits
For as long as I have been a stock trader, there have been “head scratching” moments when the market did something that made little sense. Stocks that go up on bad news or down on good news happens often. Understanding a few simple lessons that I have learned the hard way will help to explain why.
The Market Does Not Care Much About the Past
The stock market predicts, it does not react. Investors consider all available information to predict the future earnings of companies. It is like a giant polling tool, taking in the opinions of millions of investors to determine what stocks are worth.
So, when a company announces something positive, and the stock goes down, it is not because investors are irrational. This happens because the market already predicted the positive news before it came out. Often, stocks go up before the news as some investors, with better access to information, anticipate what the news will be.
For example, war breaks out in the Middle East over the weekend and the market finished close to unchanged. Oil gapped up but did not gain from the open and Gold made only a small gain for the day.
How People Judge Information Depends on their Mood
The value that the market gives to information will depend on whether investors are feeling optimistic or pessimistic. Their mood is mostly influenced by the direction of the market.
This is why I always encourage investors to look at the chart of the market and the stock that they are considering. Are there rising bottoms on the chart or falling tops. Rising bottoms mean investors are optimistic and falling tops are a sign of pessimism. Buying pessimism is like trying to catch a falling knife.
If the stock is trending up and the company announces news, it is more likely that the market will judge the news favorably. At least until expectations are much higher than what the news justifies.
Parabolic Trends Are Bubbles Waiting to Burst
Investors buying on positive news and general optimism has a limit. Stocks in up trends can continue higher for some time, carried by the positive momentum. However, when the trend gets steeper and price runs up and away from the trend line, there is an increased chance that the stock, or market, will have a downward price correction.
This is because expectations get very high and a broad range of investors have bought the stock. Eventually, there are just not many more buyers to take ownership and the stock can quickly collapse, even when the story remains positive. Hold linear upward trends but get ready to exit when the trend goes parabolic.
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With the onset of war in the Middle East, not surprising that the market was a bit quiet today. I went in search of stocks that made gains today, a Sentiment Stockscore of at least 60 and under $20. Found 1 stock that I think looks interesting.
1. KLXEKLXE has been making gains over the past two months, although with a fair bit of price volatility. Today the stock made a strong move higher on higher than normal volume, which may set up for a break out of its recent trading range. Position trade with support at $2.2
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