Last Week’s Chaos Triggered Two Big Trade Signals

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BY LUCAS DOWNEY, EDITOR, TRADESMITH’S ALPHA SIGNALS

In retrospect, investors had it pretty good in 2025.

Sure, there was the Liberation Day crash in April… and a violent snap-back right after.

And there was plenty of volatility, bumps, and bruises along the way.

Remember Nvidia crashing on news of DeepSeek, a cheaper and more efficient AI model made in China?

Or the surge in international stocks?

Or the hemming and hawing about the Fed’s rate cuts?

But at the end of the year, stocks of nearly all shapes and sizes gained.

The S&P 500 was up 18% in 2025… and the small-cap Russell 2000 put up gains of nearly 13%.

Precious metals like gold and silver put up an even bigger winning year, rising 64% and 146%, respectively.

Then came 2026.

So far, we’ve dealt with a software stock crash… as AI cannibalization fears gripped investors. The iShares Expanded Tech-Software Sector ETF (IGV) is down more than 16% so far this year.

But that was just the tip of the iceberg for what was ahead.

Fast-forward to today, and traders are facing not one but two ultra-rare events.

First, crude oil has spiked to levels not seen in over three years in the wake of a U.S. conflict with Iran.

Second, the market fear gauge, CBOE Volatility Index (VIX), just surged to levels last seen in April 2025 coming out of Liberation Day.

No doubt, uncertainty is high right now.

But before you decide to sell it all, just review the facts and the evidence.

History suggests double-digit gains are coming for stocks in a matter of months.

Today, I’ll show you how to prepare for it with one top-ranked AI juggernaut.

Crude Oil Surge Whipsaws Stocks

The big news of the week is the violent surge in energy prices.

The U.S. and Israel attack on Iran has threatened transit disruption through the Strait of Hormuz.

This is a huge deal, as estimates peg the daily oil volume passing through this waterway at 20 million barrels or more. That represents nearly 30% of all seaborne crude supply.

Anytime there’s a drastic cut to oil supply, prices rocket. WTI crude oil futures soared over $100 per barrel.

By using the tracking ETF, the U.S. Oil Fund (USO), we can see how the ETF surged 36.4% in six trading sessions ending March 6:

That’s a heck of a rally. In fact, in nearly 20 years of trading history, a USO 6-day surge of 20%+ has only occurred just 14 times prior to 2026:

Twice in 2009
Another two times in 2015
Eight times during the COVID-19 crash and rebound
And twice in the high-inflation period of 2022

If you’re thinking now’s the time to put the big bear suit on – think again. History has proven this to be a great opportunity to buy stocks.

Here at TradeSmith, one big focus this year is isolating rare trading conditions like these… and then looking at what happened when we saw them in the past.

Often, these signals can produce powerful trade setups.

Today’s are no exception…

In the past, when USO jumped 20%+ over 6 trading sessions, the S&P 500:

Gained 6.7% on average a month later
12.5% three months later
16% six months later
33.6% 12 months after
44.5% 24 months later

And look at the hit rate along the bottom of the chart. Stocks were higher 92% of the time over the next month… 83% of the time over the next 12 months… and 100% of the time over the next two years.

That means buying stocks now seems like a solid move whether you’re looking at the short- or long-term.

Let’s keep going… because another rare signal is unfolding.

The VIX Pops to Nearly 29 as Stocks Fall

I’ve written extensively on why you want to buy stocks when volatility rips.

Back in April when talking heads told you to sell everything, I noted how the bear-killer signal flashed anew.

That signal is prime evidence of why you want to buy with both hands when the VIX rises and falls rapidly.

Today we see another unique and rare opportunity.

On Friday, the CBOE Volatility Index (VIX) soared to 29.49… the highest level since April of 2025, coming out of the Liberation Day crash.

Going back to 2015, there’ve been 184 instances when the VIX closed above 29.

Memorable market moments causing this wicked volatility ramp include:

Late 2018 during rate hikes
The COVID-19 crash of 2020
The high-inflation bear market of 2022
And 2025’s Liberation Day crash

Here’s what happened afterwards. Since 2015, when the VIX closed above 29, the S&P 500:

Jumped 9.7% on average three months later
14.8% six months later
26.8% 12 months later
39.4% 24 months later

Notably, in all timeframes, stocks were higher over at least 83% of the time:

The evidence clearly points to a buying opportunity. Here’s a great pick to play the liftoff.

A Top-Tier AI Chipmaker

With market winds at our back, we should lean into leading companies.

This bodes well for leading semiconductor juggernaut, Taiwan Semiconductor (TSM).

TSM is the world’s largest semiconductor foundry. It manufactures high-performance chips for the largest companies in the world, including Apple (AAPL), Nvidia (NVDA), and Advanced Micro Devices (AMD).

Back in November, I highlighted this name as a bullish setup. I’m going to reiterate that stance today.

Over the past year, the stock has doubled, easily outpacing the S&P 500 (SPY):

With gains like this, the company must be firing on all cylinders… and they are:

2025 revenues leapt to $122.2 billion from $90.1 billion a year prior.
2026 sales are set to surge to $158 billion.
Most impressive is the profit picture. In 2025, net income soared to $55.1 billion from $36.5B in 2024. 2026 estimates peg net income to rise to $74.2 billion.

When business is booming, odds are the stock will follow.

My favorite TradeSmith indicator, the Quantum Score, seals the deal for me. It’s an instant snapshot of the overall technical and fundamental health of a company.

Readings of 80+ are in the buy zone.

TSM clocks in with Quantum Score of 80.4, made up of a 91.4% fundamental grade and 72.7% technical grade.

It’s clear to see this all-star stock is only being penalized technically… and a lot of that has to do with overall market weakness.

From my vantage, this is exactly the type of buy-the-dip opportunity, given all of the market uncertainty:

Look, there’s no guarantee what’ll happen in the future.

Fortunately, studying the past offers clues.

Don’t get sucked into the media-driven bear bait.

Rising oil prices and spiking volatility is a reason to invest… not panic.

TradeSmith software is geared to cut through the noise, offering signals you won’t find anywhere else.

Regards,

Lucas Downey signature

Lucas Downey
Editor, TradeSmith’s Alpha Signals

P.S. The two signals I walked you through today are exactly the kind of rare market conditions our tools are built to catch.

But there’s a bigger picture forming right now that I think every investor needs to see.

Our CEO Keith Kaplan has been tracking a broader set of warning signs in the market, and he recently put together a presentation laying out what the data says comes next – and how to position yourself ahead of it.

It all has to do with a new short-term indicator TradeSmith has developed and why it’s coming at the perfect time.

With it, any trader can make smarter moves ahead of major developing trends. Just as one example of countless more, this new indicator got bullish on oil stocks all the way back in November, before they ran up more than 25%.

Just click here to see all the proof for yourself.

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