Bryan Bottarelli, Co-Founder, Monument Traders Alliance
Dear Reader, It started over three years ago... When I asked myself a simple question. Could the counting method developed by MIT math students and engineers to break the Las Vegas blackjack casinos be applied to Wall Street? You see, most blackjack players place the same amount on every hand, rather than increasing or decreasing their bets based on the situation. MIT's success involved a running count technique, and increasing bet sizes when the deck count was more favorable. How they did it was simple... They had one individual standing behind the table where the other players were playing. This "counter" behind the table was counting face cards. Whenever the deck had a majority of 10s remaining, the odds favored the player. In other words, any deck with a higher-than-normal amount of face cards left meant the dealer had a higher chance of busting. When the deck skewed toward more face cards, the person standing behind the table would motion to their runner, who would sit down, bet the table max, and leave after the card shoe ran out.
A quick "in and out" whenever the deck favored the player and was stacked against the dealer. In less than two years, this technique took some of the world's most sophisticated casinos for more than $3 million. The entire story was featured in the NY Times bestseller "Bringing Down the House." Could This Method Get Applied to Wall Street?I huddled up with my research team, and we got to work beta-testing a method that used that same counting approach to see what happened when some of the most actively-traded stocks experience periods when they have multiple down-days in a row. Since algorithmic trading has dominated the market over the past decade, we studied the Nasdaq 100 over the past 10 years. What we found was remarkable... The 10-year dataset, which included 7,377 triggers, delivered a 98% accuracy rate. Specifically, every time our trigger hit, showing that a stock experiencing a multiple-down-day move was finally changing direction... 98% of these stocks swung higher at some point within the next seven days. Let me show you a recent example... Shares of Apple (AAPL) were down four consecutive days in a row...
But then, Apple started to stabilize, and stopped the downside trend. This green day triggered a green check mark. In other words, this was our "Flash Rally" moment.
As you can see below, the move on Apple after receiving this green check resulted in a powerful upside rally. This "Flash Rally" trade could've delivered a +531% gain over the next week.
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