The retail sector has been performing very poorly over the last year. The problems in the credit market have had a huge impact on the spending habits of consumers, and retailers have struggled as a result. Declining sales and rising costs. Not exactly the recipe for profitability.

Despite the general downturn in retail business, one online retailer continues to grow. Amazon.com (AMZN) reported second-quarter results on July 23, and they beat estimates handily.

Analysts were expecting Amazon to earn $0.26 per share… and the company reported earnings of $0.37. Revenues nearly doubled from the same period last year.

AMZN has been stuck between $61 and $97 for the past 15 months, but appears to be heading toward the upper end of that range on this news. With solid support at $61 and momentum to the upside, AMZN deserves a spot in your portfolio. If the company continues to grow revenues and earnings at this pace, the $97 resistance point should be overtaken.

[Ed. Note: Knowing which stocks to invest in - and which to avoid - can be overwhelming. Especially if you're new to the investing game. That's where investment analyst Rick Pendergraft comes in. He's got an embarrassing secret that can help you make money. Learn more here.]

As recently as last November, Google was priced at over $700 per share. But the one-time Internet darling seems to have lost some of its allure.

Google took Wall Street by storm in August ‘04 when the stock debuted at an even $100 a share. Over the next few years, the stock seemed to know only one direction: up. It seemed that no matter how high the earnings expectations were each quarter, GOOG always exceeded them.

But things have changed with the economic slowdown that started last summer. Over the last three quarters, GOOG has missed earnings expectations twice, including the second-quarter results that were released on July 17.

As Google continued to climb higher, the stock price became out of reach for most investors, with a round-lot 100-share purchase costing more than $50,000. This resulted in more institutional investors trading in Google… and institutional investors are far less forgiving than individual investors.

My advice to you is to steer clear of Google. The company seemed invincible, but has proven otherwise in recent quarters. And though the shares may look like a bargain after dropping over $260 from the high, the uptrend in the shares is clearly no longer in place.

[Ed. Note: Being a good investor is as much about knowing what NOT to buy as it is about buying right. Investment analyst Rick Pendergraft can show you what to buy, what to avoid, and how to make smart choices. All by learning one embarrassing secret.]

What started last summer with news of credit problems and uncertainty in the mortgage industry has now claimed its first major bank. The FDIC took control of IndyMac Bancorp on July 13, in what is the third-largest bank failure in U.S. history. 

I remember reading numerous articles last summer about how the damage would be limited to the financial sector and would not bleed over into the rest of the economy. I also remember writing an article for Investor’s Daily Edge disagreeing with that general consensus.

How can a tightening credit environment not affect the entire economy when, as a nation, we rely on credit so heavily? 

Until the housing market stabilizes, the financial sector will continue with its struggles. And I don’t look for the housing market to turn around until later this year or early next year.

IndyMac may have been the first bank to fail during this financial crisis, but it won’t be the last. My advice is to steer clear of financial stocks for the foreseeable future.

[Ed. Note: There's so much turmoil in the economy right now, it's hard to believe you can ever make money again. But you certainly can - especially when you discover investment expert Rick Pendergraft's "embarrassing" secret. Learn the details here.]

You may remember the old acronyms for Ford: "Found On Road Dead" and "Fix Or Repair Daily." People used them to make fun of the reliability problems Ford had in the past. But they could also apply to Ford’s stock in recent years.

Since 1998, Ford has dropped from a high of $38.63 and is now trading under $5 per share. The last time Ford was this low, in 1991, some of my colleagues weren’t even old enough to drive.

At this point, the market cap for Ford is a paltry $10.13 billion. However, the company has over $25 billion in cash on the balance sheet. Granted, they have tremendous debt on the balance sheet as well, but they have more than $11 in cash per share.

I am not saying you should rush out and put all your available funds into Ford stock. But for a long-term investment (5-10 years), Ford looks like a bargain at this point.

There will be more bumps in the road, but I can’t see the government allowing Ford or General Motors to go under. These are the last two publicly held U.S. automakers, and politicos don’t want to see either of them fail.

There is one more acronym for Ford that I didn’t mention: First On Race Day. The race could be a long one, but in the end it could pay off for patient investors.

[Ed. Note: Despite what you may think, investing doesn't have to be super-complicated. In fact, once you learn a simple trading secret from professional trader Rick Pendergraft, you may find that making money is easier than you ever imagined.]

In The Last Samurai, Tom Cruise plays a mercenary with no allegiance to one side or the other. His only allegiance is to money and whichever side pays him the most. 

That made me think about how traders are mercenaries. They have no allegiance to the bullish side or the bearish side, only to the side that will pay the most money. This is the only way to be successful as a trader. Some of the more famous mercenary traders who played both sides of the market include Jesse Livermore, Bernard Baruch, and Joe Kennedy.

Sure, it would be nice if the stock market only went up and everyone got rich just by buying stocks and holding them for a while. But that isn’t how it works. The market goes up and the market goes down. And during rough economic periods, like the one we are currently in, the market is going to move down. 

Yes, you should stick to what you know. But if the companies you love or the system you’re using isn’t working, don’t worry about being loyal. Instead, become a trading mercenary. Your only allegiance should be to growing or protecting your own wealth. 

[Ed. Note: Despite what you may think, investing doesn't have to be super-complicated. In fact, once you learn a simple trading secret from professional trader Rick Pendergraft, you may find that making money is easier than you ever imagined.]

If you’ve spent some time in the investing world, you have probably heard the terms "triple witching" and "quadruple witching." But that doesn’t mean you know what they are or why they should concern you as an investor. 

A triple witching day is when stock options, stock index options, and stock index futures all expire on the same day. A quadruple witching day is when stock options, stock index options, stock index futures, and single stock futures all expire on the same day. 

These days happen on a quarterly basis, and the financial media usually makes a big deal out of it. Why? Because the expiration of these derivatives can, and will, cause increased volatility in the market. 

If you are a short-term trader, you certainly need to be aware of witching days. They occur on the third Friday of March, June, September, and December. If you are a long-term investor, triple witching and quadruple witching days will have little impact on you. Just be aware that when they happen, the market may get a little crazy. When you’re prepared for some volatility, you won’t overreact.

[Ed. Note: Once you've got an investing system, you can sit back as the money rolls in. Investment analyst Rick Pendergraft has uncovered a genuine, legal, and easy way to make potentially serious amounts of money for very little work. Get the details on Rick's rather embarrassing method right here.]

As the U.S. economy continues to struggle, investors are looking abroad for investment opportunities. While most of the attention is on China and its growing economy, one of the best opportunities is in the Western Hemisphere. 

I am talking about Brazil.

Brazil has the tenth-largest economy in the world and the third-largest economy in the Americas. The GDP of Brazil grew at a rate of 5.4 percent in 2007, and is predicted to grow at a rate of 5 percent in 2008. 

Though this rate of growth isn’t as high as China’s 11.4 percent, the rate of inflation is much lower in Brazil than in China. Brazil’s rate of inflation is currently running at 4.46 percent versus China’s rate of 8.7 percent. 

While China may have time before its economy overheats, Brazil’s growth rate looks much more sustainable. 

The easiest way to play the Brazilian market as a whole is to buy an exchange traded fund (ETF). The most-watched ETF for Brazil is the iShares MSCI Brazil Index Fund (EWZ). This ETF has pulled back of late, giving investors a chance to get in on a dip. The EWZ has found support at its 50-week moving average several times over the last few years, and is approaching that support level now. 

If you are looking for some exposure to the foreign markets, look to buy shares of the EWZ on this recent dip.

[Ed. Note: Don't worry about the economy - you can still make money with your investments. And it's simpler than you may think. Let investing expert Rick Pendergraft show you the secret to a better, more financially secure life.]

One of the basics investors need to know when making an investment decision is the risk/reward relationship of the trade. But just because it’s basic and necessary doesn’t mean you know how to calculate one. Today, I’ll show you.

I always look at the risk/reward relationship before entering a trade. It doesn’t matter whether it is a stock trade, an options trade, or a futures trade. The first thing I look at is the risk. And I always have a stop-loss point in mind to protect my investment.

Here is an example – a recent short-term stock trade I analyzed with my colleague Andrew Gordon…

The stock was trading at $86 at the time. A good stop-loss point would be a move below the 50-day moving average, which was at $84. If that happened, our loss would be in the vicinity of 2.5 percent. The chart showed clear resistance at the $96 level, so our target gain was $10 or 11.6 percent.

If we take the target gain of 11.6 percent and divide it by the target loss of 2.5 percent, it gives us a risk/reward ratio of 4.6. This is a very good risk/reward ratio.

I make trades only with a risk/reward ratio over 3.0, the higher the better. And when I combine this basic tool with the leverage provided by options (the type of trade I do most frequently), I can create extremely nice returns.

[Ed. Note: Using basic tools like the risk/reward ratio can help you maximize your gains and minimize your losses. Despite what you may think, investing doesn't have to be super-complicated. In fact, once you learn a simple trading secret from professional trader Rick Pendergraft, you may find that making money is easier than you ever imagined.]

I recently attended an investment conference in California, and it seems I always come back from these things with new ideas to share with you. At this particular event, one of the questions I kept getting was "How often do you trade?"

I have fielded this question many times in the past, and I used to give a numerical average as an answer. But this time, I didn’t feel like giving the same old answer. What I said was "I trade as often as the market tells me to."

Now this may sound like a smart-ass answer, but it is the truth. I don’t set minimum trade goals for myself.

Trading is about making money, not trades. So don’t get caught up in making X number of trades. If there has ever been a business where quality rules over quantity, trading would be it.

If you are just starting out as a trader, don’t worry about how many trades you make. Worry about the quality of the trades you make. And when you lose on a trade, learn something from it and move on.

[Ed. Note: The number of trades you make doesn't matter as long as the trades you do make are smart. A seasoned investor like Rick Pendergraft can give you the key to making smart trades every time. Rick's had 13 winners in the last 90 days, and he can show you how he did it. You just sit back on your comfy couch, watch his video demonstrations, consider his trading recommendations, and discover how to make your money grow.]

Food prices are rising as fast as, if not faster than, energy prices. And it doesn’t look like consumers will get relief anytime soon. But if you know where to look, this can be a moneymaking opportunity for you.

The U.S. Department of Agriculture recently announced that corn inventories are expected to be down to their lowest levels since 1996. Part of this is due to the recent flooding in the Midwest.

The worst thing about corn prices rising to record levels is the residual effect it will have on the price of beef, pork, and poultry. With ethanol producers, livestock producers, and food companies all trying to get their hands on as much corn as possible, prices will continue to soar. And if livestock farmers have to pay a higher price for the corn they use as feed, you can bet they will pass the cost along to the consumer.

If you are looking for a way to invest in the agricultural boom without investing directly in commodities, there is an ETF that can help you take advantage of rising food prices. The PowerShares DB Agriculture Fund (DBA), introduced in January ‘07, is designed to rise as the price of agricultural products rise.

The fund has rallied recently and is a little overbought on a daily chart, but it’s worth buying on any dip.

[Ed. Note: Don't get too worked up about increases in food and gas prices. One of the biggest secrets of successful investing is that market fluctuations are good. The more the market moves, the more money you stand to make. Learn how to make money no matter which way the market is moving right here.]

As a result of the legal issues big-name companies like Pfizer (PFE) and Merck (MRK) have been dealing with, the pharmaceutical sector is among the worst performing sectors so far in 2008.

Several ETFs provide exposure to this sector, but the two that see most of the trading volume are the Pharmaceutical HOLDRs Trust (PPH) and the Select Healthcare Spyder (XLV). The performance of these two ETFs has been abysmal over the past year, with the PPH down 17.24 percent and the XLV down 11.13 percent. During this same time period, the S&P 500 was down only 6.54 percent. So you can see how the pharmaceutical sector has been lagging behind the rest of the market. 

Is it time to start looking at pharma as a value play and buy some shares? I don’t think so. The legal issues are still piling up for these companies, and it could be a while before they are in the clear.

Another thing that will have a huge impact on this sector is the November presidential election. If a Democrat is elected, you can look for a healthcare reform push – which will certainly affect the drug companies. They may lose control over what they can charge for their products. 

My advice is to steer clear of the pharmaceutical sector for the remainder of the year. Once the election is settled, you can reevaluate to see if pharmaceutical companies are a bargain then.

[Ed. Note: The more the market swings up and down, the more money you stand to make. Based on this principle, professional trader and market analyst Rick Pendergraft has uncovered a genuine, legal, and easy way of potentially making a serious amount of money with very little work. Continue reading here...]

Historically, stock market volume has slowed down from Memorial Day until Labor Day. (Picture Wall Street traders lounging on the beach in the Hamptons, and you’ll know why.) Hence the old Wall Street adage: "Sell in May and go away." But this stereotype may be a thing of the past.

Last summer, volume on the New York Stock Exchange was higher in June, July, and August than it was in the three months prior or the three months after. The credit crisis was just coming to light, spurring some of that additional activity, but not all of it. Over the last few summers, there was plenty of movement and money to be made. There’s no reason to believe this summer will be any different.

But before you jump into summer trading with both feet, be aware. Most of the summer movement has been on the downside of the market. Fortunately, there is just as much opportunity to profit from the downside as there is with the upside. One easy way to make money on a downside move would be to buy an inverse index ETF. You can buy one on the Dow (DXD), the S&P (SDS), or the Nasdaq (QID).

So don’t just pack away your trading like you do your winter clothes. Learn to invest in the downside by using some different tools to make money. 

[Ed. Note: Most Wall Street bigwigs claim to know the "secret formula" to making money - and they pretend that real investing is too complex and difficult for the Average Joe. But professional trader Rick Pendergraft has uncovered a long-lost trading method that's embarrassingly simple.]

It doesn’t make much sense that a hard commodity would follow a seasonal pattern, but the ultimate hard commodity does just that. For a number of years now, gold has bottomed out during the summer doldrums and then rallied sharply. 

Last year, gold bottomed at the end of June around the $640 level before rocketing to $1,000 per ounce in March. In 2006, gold hit bottom in mid-June and then rallied more than $150 an ounce. In 2005, gold bottomed in early July at $420 an ounce before shooting up to $720 an ounce in May ‘06. 

This summer could present the same scenario we saw last summer when gold pulled back to the 50-week moving average in June and then went on a tear. Right now, gold is in the midst of a pullback, and the 50-week moving average is within reach in the $815 range. 

To take advantage of this pattern, you can buy futures on gold. If you are not comfortable trading futures, you can buy an exchange traded fund (ETF) that will rise with the price of gold. The Spyder Gold Shares (GLD) is the best ETF for tracking gold itself.

It might not be time for this trade yet, but as the days get hotter, so does gold.

[Ed. Note: Making money with your investments doesn't have to be risky or difficult. In fact, market analyst and professional trader Rick Pendergraft has uncovered a genuine, legal, and easy way to potentially make a serious amount of money with very little work. Continue here...]

The April Housing Starts report showed a surprising 8.2 percent increase. This is somewhat encouraging after seeing so many declines over the past few years.

While this might not signal a reversal for the housing market, it at least shows that the housing sector is stabilizing. And it is being reflected in the housing stocks. Most of them have made a slight reversal from their lows.

There was another piece of good news for housing from the April Retail Sales report. Of all the sub-sectors within the retail group, building supplies saw the greatest growth for the month. This could be a sign of things to come.

The S&P Homebuilders Spyder (XHB) has bounced back from its January low. The stock has recently moved above its 100- and 200-day moving averages. I find this to be encouraging for a long-term investment.

I am normally a short-term trader, but I know a long-term opportunity when I see it. The XHB is a great one. I would look to buy shares up to the $23.50 level and hold them for a year or more.

[Ed. Note: Investing in the XHB is just one way to give your funds a potential boost. If you're interested in learning what else can make your money grow, you'll want to learn Rick's embarrassing secret. It helped make him over $15,000 in 30 days - and it's so simple, a fifth grader could understand it. Learn more here.]

According to the Bureau of Transportation Statistics, there were 135,399,945 passenger cars in the United States as of 2006. The owners of all those vehicles have had less money to spend as the price of gas has soared. What impact does this have on the economy – and on your investments? Let’s do the math and find out.

Let’s say the average driver drives 1,000 miles per month and gets 20 miles per gallon. That would mean each one is using 50 gallons of gas per month. According to the Department of Energy, the national gas price has gone up $0.62 on average in the past year. So the average driver has $31 (50 gallons times the $0.62 price increase) less per month to spend on items other than gas. This may not seem like a huge difference, but let’s take the next step.

Multiply the number of cars (135,399,945) by $31 per month. That’s an additional $4,197,398,295 going into our gas tanks each month instead of getting used for other purchases.

The U.S. is bordering on a recession, and gas is taking an additional $4.2 billion out of the economy each month. How long do you think gas prices can stay this high without the demand falling significantly?

Prepare for falling oil and gas prices by scaling in to the shares of the ProShares UltraShort Oil and Gas Fund (DUG). This ETF goes up in value as the price of oil falls. It might not happen next week, but, from a purely economical standpoint, the price of gas can’t stay this high.

[Ed. Note: Invest in ETFs that rise as the price of oil falls. Simple advice that's easy to follow - this is the trademark of Rick's K.I.S.S. investment service. In it, this professional trader and investment analyst gives easy-to-follow, step-by-step advice that you can use to create consistent, automated income. Get the details here.]

Over the last few months, I have been giving you advice to help you rearrange your portfolio to protect it during these difficult economic times. There is a small sector that I have yet to mention, and that is the soft-drink makers. 

Both Pepsi (PEP) and Coca Cola (KO) have been in up trends for the last six years, and have maintained those trends despite the problems with the economy. Even during the bear market of 2000-2002, both outperformed the market. 

Another reason to consider these stocks is that both companies have been growing rather than shrinking revenue. In the most recent quarter, PEP and KO reported revenue growth of 13.4 percent and 20.9 percent, respectively. This tells you that Pepsi and Coca Cola are still expanding. 

People are creatures of habit. Even when the economy slips a little, there are certain things they will continue to buy – including Coke and Pepsi products. For example, I am personally addicted to Diet Mountain Dew, and regardless of what happens with the economy (or what ETR’s health editors tell me!), I will maintain my usual consumption. (I won’t tell you how much that is. The health group might pass out.)

[Ed. Note: Rick Pendergraft is a professional trader and market analyst. In Rick's new investment service, he gives easy-to-follow, step-by-step advice that you can use to create consistent, automated income. Learn more about how he can help you produce explosive gains - no matter which way the market is trading - by clicking here.]

If you hope to make money off the flailing economy, you need to keep your eye on the Fed. Last month, the Fed made another quarter of a point rate cut, bringing the target Fed Funds rate down to 2.25 percent. This makes 3.25 percent the Fed has shaved off the rate since last summer.

These rate cuts make it cheaper for banks to borrow and, as a result, make it cheaper for you, the consumer, to borrow. But before you get too excited, remember that rate cuts have side effects. For instance, making it cheaper to borrow can increase inflation. And this means goods and services (especially imports) will cost you more money.

At this point, Ben Bernanke has to feel like Barney Fife on the Andy Griffith Show. Remember how Andy gave Barney only one bullet at a time… and he had to keep it in his pocket? Mr. Bernanke has to feel like he is running out of bullets.

The economy isn’t improving the way the Fed had hoped. With the cuts being done in quarter-percent increments, the most the Fed has left is nine cuts. Of course, they could go the same route as the Bank of Japan and start doing 0.10 percent cuts. 

Last month’s cut is another spent round from the Fed’s gun. How long will it be before they start raising rates again?

Given the way food and energy prices are climbing, it won’t be long before the Fed has to make inflation their main concern. At that point, they will have to make moves to strengthen the dollar. This would help counteract the tremendous rise in oil prices. When the Fed decides to stop cutting rates, the dollar should strengthen and items that have ramped up on the fall of the dollar (oil, in particular) will start falling. 

There will be several ways to make money when the Fed starts raising rates. You could, for example, buy shares in the inverse ETF for oil, the UltraShort Oil and Gas ProShares (DUG). The value of this ETF will increase as the price of oil falls.

[Ed. Note: Rick Pendergraft is a professional trader and market analyst. In Rick's new investment service, he gives easy-to-follow, step-by-step advice that you can use to create consistent, automated income. Learn more about how he can help you produce explosive gains - no matter which way the market is trading - by clicking here.]

Yes, the economy is in the toilet. Fortunately for you, there are a few easy ways to "recession-proof" your portfolio. For instance, you can invest in so-called "sin" stocks. These include alcohol stocks, tobacco stocks, gambling stocks, etc.

The reason is simple: When times get tough, people still smoke, drink alcohol, and gamble. And some take up smoking, drinking, gambling, etc., as a way to cope. So investing in those stocks can provide stable returns, even under difficult economic conditions.

You still need to be prudent in your investing, and picking industry-leading "sin" companies is a good start. Some investors may exclude these types of investments from a moral standpoint, and that is understandable. But if you’re willing to bet on others’ bad habits, these stocks can give your portfolio diversity.

Two of my favorites are U.S. Tobacco (UST) and Anheuser Busch (BUD). Both are strong companies with strong brand loyalty that can see them through a bleak economy.

[Ed. Note: Rick Pendergraft is a professional trader and market analyst. In Rick's new investment service, he gives easy-to-follow, step-by-step advice that you can use to create consistent, automated income. Learn more about how he can help you produce explosive gains - no matter which way the market is trading - by clicking here.]

Just a few days ago, Karim Rahemtulla, one of my counterparts at Mt. Vernon Research, stopped by our office in Delray Beach, FL to say hello. I think he was only looking for some chocolate, but, as is often the case when two traders get together, the conversation turned to the market. 

It turns out we were both trading the S&P Financial Select SPDR (XLF) put options. (Just a reminder: Puts are instruments that benefit the buyer when the stock, or, in this case, the ETF, drops in value.) 

Now the odd thing is that Karim was selling the XLF puts and I was buying them. He was betting that the XLF would remain above the 20 level. So he was making money by collecting the premiums and letting the puts expire worthless.

I was buying the April 28 puts, which meant that I made money when the XLF fell from $27.50 to $24.50.

Two totally different approaches to trading the XLF puts. But we were both making money.

I prefer buying options to selling options. When you buy an option, the worst that can happen is you’ll lose 100 percent of what you paid for it. Meanwhile, your upside is unlimited. When you sell an option, your gain is maximized then and there. But your downside is unlimited. Given the choice, I’d rather maximize the upside and minimize the downside of any trade I make.

That is the name of the game when it comes to trading. There are many ways to trade. There are many ways to make money in the market. The key is to find the type of trading that works best for you.

[Ed. Note: Rick Pendergraft is a professional trader and market analyst. In Rick's new investment service, he gives easy-to-follow, step-by-step advice that you can use to create consistent, automated income. Learn more about how he can help you produce explosive gains - no matter which way the market is trading - by clicking here.]

We received a query from a reader on ETR’s Speak Out forum regarding global ETFs. Because many of our readers might be interested in this subject, I thought I’d answer it here.

This is the question… 

"Can one invest in global or foreign ETFs by using a company like TDAmeritrade - and how do you find the best ones? Are these a good hedge against the falling dollar?”  

And this is the answer…

You should be able to buy a global ETF with any brokerage firm. You can punch in the ticker symbol of the ETF just as you would for a stock trade, and follow the same steps from there. 

As for how to pick the best ones… that’s a little tougher. Personally, I use the same criteria to pick an ETF that I use to pick a stock. I look for a fundamentally strong economy, a good technical picture, and, ideally, an ETF that is being overlooked by other investors. Two that jump out at me right now are the iShares MSCI Brazil Fund (EWZ) and the iShares MSCI Hong Kong Fund (EWH). 

Regardless of whether or not the dollar continues to fall, there are better opportunities outside the U.S. at this time. Our economy is declining and others are growing. Meanwhile, getting some exposure to foreign markets keeps getting easier and easier. And at a time when our market is vulnerable, investing in a global ETF is a wise investment decision. 

[Ed. Note: Rick Pendergraft is a professional trader and market analyst. In Rick's new investment service, he gives easy-to-follow, step-by-step advice that you can use to create consistent, automated income. Learn more about how he can help you produce explosive gains - no matter which way the market is trading - by clicking here.]

Many economists are finally starting to use the "recession" word to describe the U.S. economy. Almost daily, someone is calling the bottom of the market. And many investors are sitting on the sidelines with their money until this magical moment is actually reached.

Just one problem: We won’t know when the bottom of the market happens until it has already happened. By then, prices will be on the upswing, and the opportunities to buy at fire sale prices will be gone. Kind of like what’s happening with the housing market. Many buyers out there are saying that they are waiting to purchase until prices come down more. What if they have already come down as far as they are going to go? We won’t know for certain where the bottom is until it is months behind us.

If, right now, you have the opportunity to buy a great company at a ridiculously low price, you should be taking advantage of it. Trying to save that extra few dollars a share by trying to perfectly time the bottom doesn’t make sense in the long run.

Take Microsoft, for example. It is currently around $28 /share. If you buy now and sell at $40 /share when the market rebounds, you will have a return of approximately 43 percent. If you wait for it to drop to $26 /share and sell at $40 /share, your return would be 53 percent instead of 43 percent. Great! That is a 10 percent increase in your rate of return. But what if Microsoft never gets cheaper than $28 /share? What if that is the cheapest it will trade for during this "recession"? Then you will have to buy it at $30 /share. Or maybe $32 / share. And then your returns will be only 33 percent or 25 percent.

Instead of trying to time the bottom, you should be buying the stocks of great companies now. Opportunities to buy them at current prices don’t come along very often. Take advantage of it.

[Ed. Note: Rick's takeaway today? Don't try to predict the market's bottom. Sounds simple enough, right? Turns out that a LOT of investing rules are just as easy to follow. In fact, Rick's new KISS trading service relies on principles like this - so simple, a fifth-grader could understand them. Learn the details here.]

Starbucks (SBUX) CEO Howard Schultz recently announced that the company would start offering energy drinks in its stores. He also mentioned that Starbucks would be getting into the "health and wellness business." Yep, you read that correctly. A coffee chain wants to break into the health business.

For a company known as a purveyor of fine (if not overpriced) coffee, this is a huge step outside their core competency. And, in my opinion, it’s a big mistake. With the company stock price down 50 percent in the last 16 months, now is not the time to be breaking into unfamiliar markets. For one thing, branching out costs money. For another, Starbucks risks losing brand identity as it expands its product line away from coffee.

The company is already facing shrinking margins due to increased costs of sales (up 1.1 percent versus last year) and increased operating expenses (up .90 percent). It is closing 100 under-performing stores, and reducing the number of store openings this year. Taking on the additional costs to expand into another market just doesn’t seem like a wise decision. Not to mention that the expansion would be into the highly fragmented energy drink market.

Investing in Starbucks Stock
With Starbucks’ stock already down dramatically from its peak, it may appear that the opportunity to profit from these missteps is past. But I believe there is still more room for the stock to fall. And I don’t think the slide will stop until the share price is in the single digits. So taking a short position against the coffee king can add some diversity to your portfolio… and be a profit opportunity in a falling market.

Meanwhile, if you hold Starbucks stock, it might be time to dump it.

[Ed. Note: Rick Pendergraft is a professional trader and market analyst. In Rick's new investment service, he gives easy-to-follow, step-by-step advice that you can use to create a consistent, automated income. Learn more about how he can help you produce explosive gains - no matter which way the market is trading - here.]

Last week was Masters week, and I’ve got golf on the brain. This got me thinking about the similarities between golf – one of my favorite sports – and trading. (And, no, "They are both frustrating as hell" is not one of them.)

Golf is an individual sport and trading is an individual occupation. When a golfer makes a bad shot, there isn’t anyone to blame except the person in the mirror. The same goes for trading. When a trader makes a mistake, the only one to blame is himself.

Notice that I said "mistake" instead of "losing trade." Losing trades are part of this game. And, in fact, a losing trade isn’t necessarily a bad one. (Though, of course, a bad trade will more than likely be a losing trade.)

One thing I’ve noticed about my golf game is that if I make a bad shot and then let that shot linger in my head, my next shot is usually bad too. The same thing can happen in trading. If you make a bad trade, don’t dwell on it… because that can cause you to make another bad trade.

If you want to master golf or trading, you need to learn from your mistakes. But you’ve also got to move on without the mental baggage of the last shot or trade. Your game will thank you for it.

[Ed. Note: Rick Pendergraft is a professional trader and market analyst. In Rick's new investment service, he gives easy-to-follow, step-by-step advice that you can use to create consistent, automated income. Learn more about how he can help you produce explosive gains - no matter which way the market is trading - here.]

I have cautioned you before against investing in rumors, regardless of the source. But I recently bought into one myself. Before you call me a hypocrite, let me explain. 

The stock in question is Office Depot (ODP). A local small-business owner who dabbles in the market told me he’d heard a rumor about ODP being the target of a hostile takeover. As I always do with any stock of interest, I checked three things:

• ODP’s chart (It looks like it has put in a double-bottom at the $10.80 level.)
• the sentiment indicators (Analysts don’t think very highly of this stock. All 10 are rating it as a "hold.")
• its fundamental stats (The fundamentals don’t look very good at this point, but it appears that all the company’s troubles may be out and on the table.) 

So what did I do? I bought some long-term calls on ODP that don’t expire until January 2010. I only bought a few, but if the company is going to turn around it should be within the next 12 to 18 months. If they do get a hostile takeover bid, the stock could shoot up from $11.70 to $17 real quick. 

So there you go. If you’re going to listen to a rumor, this is how you should play it.

ODP was brought to my attention by a takeover rumor. That’s what made me look at it twice. But that’s not what made me buy. In the end, I made a bullish play on the stock because of the same three things I always look at: technicals, sentiment, and fundamentals. I encourage you to do the same. Don’t buy into rumors. But if the stock happens to fit your investing criteria, go ahead and make the trade.

[Ed. Note: Rick Pendergraft is a professional trader and market analyst. In Rick's new investment service, he gives easy-to-follow, step-by-step advice that you can use to create a consistent, automated income. Learn more about how he can help you produce explosive gains - no matter which way the market is trading - here]

Everyone’s heard about oil going over $100 a barrel recently. Getting less publicity is the dramatic bull market in precious metals. Year to date, gold is up almost 17 percent and silver is up almost 37 percent.

Too late to catch the upswing in prices? Not necessarily. Global demand for precious metals will likely keep rising as the exploding middle class in Asia gets a taste for the finer things in life. So, yes, prices have moved up considerably over the last few months. But there is no reason to believe this is a bubble that could burst anytime soon.

You can get involved in this market by investing in ETFs (Exchange Traded Funds) that focus on precious metals. Choose from broad-coverage ETFs, such as the Powershares CD Precious Metals Fund (DBP), to more narrowly focused ETFs, like the iShares Silver Trust (SLV). You can even invest in silver and gold mining companies with the Market Vectors Gold Miners (GDX) fund. Purchasing shares in ETFs is as simple as buying shares of a stock. The benefit is you get the diversity of a mutual fund.

Commodities should always be a part of diversifying your portfolio, and it’s easy to add them with ETFs. Take advantage of the precious metals bull market and pick up a few. Don’t get spooked by any short-term price drops. We are in the midst of this long-term bull market, so consider them to be longer-term investments. A moderate pullback in prices may just make it cheaper for you to buy in.

[Ed. Note: Rick Pendergraft is a professional trader and market analyst. In Rick's new investment service, he reveals how you can make hundreds - even thousands - of dollars just by playing a simple game of "guess the pattern." Learn more here.]

It was Sunday night, and I was sitting down to my usual routine of going through charts and e-mails to prepare for the next day. I had barely been logged on for two minutes when I got an e-mail alert – a news blurb that J.P. Morgan (JPM) was buying Bear Stearns (BSC) for $2 per share. BSC’s stock had closed at $30 on Friday. What a deal!

Then a second news alert hit my inbox. The Fed had just lowered the discount rate from 3.5 percent to 3.25 percent. Was the Fed trying to calm the market? You bet they were. When news of BSC being sold at such a discount hit the street, futures dropped as much as 38 points. After the Fed announcement, they were down only 22 points.

You never know when the market will make an unexpected major move, up or down. That’s why I recommend being somewhat balanced between bullish and bearish positions. It is also the reason why you should take profits off the table on portions of your trades. If you take, say, a 50 percent profit on a third of your position, you will have limited your potential loss without limiting your gain if the stock continues to rise.

Though it was Sunday night and the equity markets were closed, the news was coming fast and furious and money was being made and lost. Bear Stearns dropped from $30 to $3.18 in one move. There was nothing traders could do unless they were trading futures, because S&P futures markets open at 5:30 p.m. Eastern Time on Sundays. Equity traders and options traders had to wait until Monday’s opening bell to know their fate. But those who had balance in their portfolios and had been managing their trades with partial closeouts didn’t have much to worry about.

Remember the phone call that Gordon Gekko makes to Bud Fox in the movie Wall Street that starts out with "Money never sleeps, Buddy Boy." No kidding.

[Ed. Note: Rick Pendergraft is a professional trader and market analyst. In Rick's new investment service, he reveals how you can make hundreds - even thousands - of dollars just by playing a simple game of "guess the pattern." Learn more here.]