I will give you further proof of hidden stock fortunes from the years before 2010 deep into the last crash.
Had you bought right when the "insiders" did, you could have made $178,000,000 in 5 years. Every $37,580 invested became three quarters of a billion in just 60 months.
Let me tell you a little about Denny's (DENN).
I was doing my usual quarterly chart reading of the roughly 3,700 worthwhile stocks trading on the NYSE, AMEX, and the NASDAQ exchanges. A highway diner stock named Denny's caught my eye.
As before with Ambarella, there was no earnings report released and none due for several weeks. There was no announcement. No news of any kind. But the volume had surged along with the share price.
I did some digging. I found that the company had re positioned itself as "America's Diner" under the hands of Frances Allen who was proven himself from his time at the helm of Dunkins' Brands (DNKN).
The spike in volume told us two things were highly likely:
It indicated either a buyout, or insiders were withholding their shares from the market restricting supply against mounting demand.
As word leaked out, people close to the situation snapped up shares. To us, this volume spike was as good as insider information.
Even better. It was perfectly legal!
You can probably guess what happened. Denny's share prices have risen over time from $2.25 then to $11 today. In one month nearly 4 billion shares traded hands. You could have more than quadrupled your money in less than 5 years.
But here's the thing...
I knew that the investing public, ever hungry for good news and the next rags to riches story, was driving this stock higher than it deserved to go. The new CEO was good news, but not THAT good...
Also the earnings were weak when I first identified this trade. But a few months later I noticed a significant improvement.
Denny's continued to rise.
Rule #1: Ride These "Spikes" For All They're Worth and Then GET OUT!
Denny's (DENN) and Ambarella (AMBA) are perfect examples of how you can profit following insiders using volume spikes and price trends.
But it's important to know that this is purely a timing strategy. It is not a buy and hold portfolio.
When a volume spike arises — and the research checks out — ride it until you see signs that the fervor is fading.
Then get out. Take whatever profits you can.
Sometimes investors are rewarded with 400% returns in a year — like the gains in Ambarella (AMBA) and Denny's (DENN). Other times they’ll make 100% in a few months...
or 1,000% in a few years, as you saw was possible above...
My point is, trading on volume spikes requires you to employ a stock trader's most powerful weapon: discipline. You're only in for the up-elevator.
Usually the ride is quick or you are stopped out. But it is never a "buy and hold" situation.
Rule #2: Trading using volume and price is not passive, it's an "E-Ticket" ride!
It is fast-paced. It’s exciting.
And the scientifically proven potential for big speedy gains are tremendous...
[SEE FOOTNOTE]
Makes sense so far right?
Good.
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