The Hottest Win Streak in the Whole Market By Michael Salvatore, Editor, TradeSmith Daily In This Digest: - Is this tech leader hot streak about to end?
- Why all-time highs are often the best buys…
- And how long to hold stocks after they hit open skies…
- If you’ve given up on crypto, that’s a great sign it’s going higher…
- Watch this urgent presentation to understand why…
Unlike its other peers in the AI race, META has two unique qualities: - Its AI model, Llama, is open-source – something neither of the other leaders, Google and OpenAI, can boast. The jury’s still out on whether this is good or bad for business, but for the time being, it at least lends Meta some credibility in the AI race.
- Its stock is going up really, really fast right now. The jury’s in on this one. META is hot, and tech investors seeking new leadership in the space want to own it.
It can’t be overstated just how hot META stock is right now. As of Thursday’s close, META had closed up 13 days in a row. That’s four days more than the next hottest streak in the market, VeriSign (VRSN) with nine days, and Cisco Systems (CSCO) at seven. Rare isn’t the word. This is unheard of. META has never closed higher 13 days in a row in its nearly 13 years of trading history. This is also the first time it’s closed higher 12 days in a row. (As I write, it looks like it will add another day to the tally.) Why the pile-on? Your guess is as good as mine. Earnings were quite good last quarter, with massive beats on earnings (EPS $8.02 vs. $6.77 expected) and revenue ($48.39 billion vs. $47.04 billion expected). But let’s set META’s incredible business aside for just a moment. Great business or not, this hot streak is getting a little bit stretched. I’ll put it to you this way: Only 17 of the current Nasdaq 100 stocks have seen a 13-day win streak… ever. And only four of those – Costco Wholesale (COST), Diamondback Energy (FANG), Cognizant Technology Solutions (CTSH), and Old Dominion Freight Line (ODFL) – continued that win streak for another day. What are the odds of making money after buying META post a 13-day win streak? No one knows. There’s no data. But I’ll tell you how things look after a seven-day streak, which has happened 11 times and is the first such record I would call statistically significant enough to test. After buying META when it’s on a seven-day win streak… - Five trading days later, the stock was up just 30% of the time. But importantly, the average return of trading this signal is still profitable, with an average gain of 1%. The biggest return during this window was back in 2013, a few months after it had IPO’d. The stock returned more than 27% from July 17 to July 25 after running higher eight days in a row.
- Hold for 21 days, and the win rate rises to 50%, and the average trade rises to 2.7%.
- And hold for two months, and the win rate rises even further to 60%, and the average trade result is 7.1%.
This is a helpful reminder. While it’s extremely uncomfortable to buy stocks that have gone up so consistently in such a short period, trading that momentum is usually a profitable strategy. Just take something as broad as the SPDR S&P 500 ETF (SPY). That’s never gone up more than 14 days in a row, and it only did that one time back in late February 2010. But if you bought it and held it from that point… - Five days later, SPY was up 0.2%…
- One month later, up 3.3%…
- But two months later, it fell -4.1%.
That one-month timeframe shows us that the market can stay crazy longer than many folks expect. But the two-month span shows that hang on too long, especially at a time like 2010 when stocks were still well off their 2007 highs, and you could get burned. But this isn’t that kind of market… 2010 was a bull market. But it’s different from the one we have today. Today, we’re in a bull market that’s making new highs. A very different beast. In fact, buying stocks as they hit new highs is a fantastic strategy. (Yes, truly. Stop listening to anyone complaining that stocks are too expensive and you missed the boat. You haven’t.) Let’s stretch the timeline out and look at the data for what happened after every time SPY hit an all-time high since inception – something it’s achieved 264 times… - 21 days after, stocks were higher 68.9% of the time, but for an average return of just 0.25%.
- Three months later, stocks were higher 71.8% of the time for an average return of 2%.
- And six months later, stocks were higher 73.8% of the time for an average return of 5.6%.
So in the short term, new highs tend to see a period of mild consolidation. But looking out further, it’s crystal clear that all-time highs are exactly what you want to see in a bull market. We aren’t seeing new highs just yet, though we’re knocking on the door. So one helpful study would be to look at the best amount of time to hold stocks after they inevitably hit new highs again. On the chart below, the x-axis is the number of days you buy and hold stocks after they hit a new high, between 0 and 252 (the number of trading days in a typical year). The y-axis is what we’ll call the profit factor – the cumulative dollar return resulting from wins trading this strategy divided by the cumulative return resulting from losses. 
This shows us a couple key things… - Returns generally trend higher over the year to follow. Short holding periods (one to three months) see returns much smaller (but still positive) than longer periods (four months and beyond).
- Returns really spike around 114 days and 170 days, and there’s an especially strong anomaly around 222 days.
What can we take away from this? Mainly that it’s a good thing for the stock market to hit new highs. And it’s not the proverbial “bell ringing at the top” or signs of “irrational exuberance” you might have heard of. It’s, in fact, a sign that things will stay good for quite a long time. That’s feeling vs. facts in action. In fact, there’s only four periods of time where buying and holding stocks isn’t consistently profitable: 1 day, 4 days, 6 days, and 7 days. All of these periods see a negative average return even with a win rate just above 50%. Maybe that’s where all the naysayers get the idea that buying stocks at all-time highs is a bad idea. (But, as we now know, these short dips are longer-term buying opportunities.) Finally, a note on crypto… Last week, my colleague Luke Lango really helped me understand exactly what’s going on in crypto right now. The action in crypto last week was kind of anemic. Bitcoin is fluttering around just below $100,000, rangebound and not really doing much. Meanwhile, many altcoins are in free fall… with both the new entrants and the old stalwarts all feeling the pain. To many casual observers, this feels like a warning sign before a new bear market. To Luke, though, this feels like a final washout before we see the next major wave higher… And with that wave higher comes the rare, beautiful opportunity to quickly make multiples on small altcoin positions over and over again until the cycle is done. This goes beyond just feeling, though. Luke is closely watching the new White House administration for signs of when the next crypto wave can begin. He’s boiled it down to three things that he believes will occur during President Donald Trump’s first 100 days… all of which should be positive for crypto and bring about the kind of wild price gains we’ve seen in previous cycles. Luke’s team backtested his new quantitative crypto-trading system in those previous cycles and found that it’d have nabbed a 2,033% gain on Lisk (LSK/USD), 5,437% on MediBloc (MED/USD), even 11,514% on Verge (XVG) – all in 90 days or less, importantly. No holding and hoping here. So, to find out why Luke thinks this could all happen again in 2025 – plus three free trades to get you started – click here. To your health and wealth, 
Michael Salvatore
Editor, TradeSmith Daily | 
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