Editor's note: Don't let anyone tell you investing is easy. You've always got to have a plan and be thinking one step ahead. Today, we're sharing a piece from our corporate affiliate Chaikin Analytics. It details how a no-brainer trade went bad... and how you can avoid similar mistakes in the future.
Teladoc Health (TDOC) was the perfect COVID-19 trade... until it wasn't.
Think about it... The lockdowns in the early pandemic meant you couldn't even leave your house to go to the doctor. Instead, the doctor saw you over the computer.
We'd finally stepped into the future. Thanks to apps like Teladoc's, all you had to do was set up a brief video chat. Then, your doctor could prescribe medication as you sat in your living room or bedroom.
Two years later, it's still convenient... I used this service just last month.
But just because it's a great service doesn't mean it's a great stock. As I'll explain today, Teladoc's stock has failed over the past year for one simple reason...
The trade was "too easy" to make.
We'll discuss how the Power Gauge from Chaikin Analytics saw its downfall coming. That's how I knew to warn subscribers to stay far away from the stock, even though it had started to bounce back.
Let me explain...
"Pandemic stocks" like Teladoc were all the rage in 2020. And for the right reasons, too...
COVID-19 changed the world. Folks started working from home. People began getting groceries delivered. And investors piled into the stocks best positioned to benefit from the "stay at home" trend.
As a virtual health care company, Teladoc was an obvious choice in this scenario... It surged roughly 160% from February 2020 through February 2021.
But that didn't stop investors from running for the exits once "normal" started to return...
You see, many of the hottest COVID-19 stocks gave back some gains after vaccines became readily available early last year. Teladoc was no exception... From its high in February 2021 through mid-May, the stock tumbled 55%.
But then, it looked like Teladoc had found its footing. Its share price rallied nearly 30% through the end of June.
Early in this bounce back, I decided to do a "Health Check" on Teladoc using our Power Gauge system. The outlook was terrible... In fact, it was so bad that I made Teladoc my "Bearish Chart of the Day" for a group of our paid subscribers on June 7, 2021.
That bearish signal turned out to be exactly right. Take a look...
Notice that I warned folks in the middle of the big bounce up, when it would have been tempting to buy.
As part of my analysis, I called out the pandemic starting to wane and the continued "reopening" trade. The technical picture from the Power Gauge was the final piece of the puzzle.
Two main factors played into that bearish outlook...
First, I looked at our proprietary relative strength indicator. It went negative when the stock traded at around $240 per share in February 2021.
Then, our Power Gauge system itself turned "bearish" in mid-March. Teladoc was around $185 per share at that point.
So in June, when it looked like Teladoc was bouncing back, it was easy for me to tell our subscribers to "stay away."
The Power Gauge did the work ahead of time. And I hope folks listened to the warning... Teladoc is down 52% since I made it my "Bearish Chart of the Day" on June 7.
The thing is, even after such a big drop, the Power Gauge is still "bearish" on the stock. Take a look at the Power Gauge's current Health Check on Teladoc...
Teladoc's stock is down 57% over the past year. But even at the low level of $73.30 per share, its Health Check score is failing.
This "too easy" pandemic trade wiped out many investors. On the way down, it flashed what looked like a possible return to glory. Even today, Teladoc still seems like an obvious trade... Like I said, I used its service myself recently.
But the Power Gauge helped us avoid all the carnage. And right now, it's still telling investors to steer clear of this stock. I recommend you heed that warning.
Good investing,
Pete Carmasino
Editor's note: TONIGHT at 8 p.m. Eastern time, Wall Street legend Marc Chaikin is stepping forward to share a critical stock warning that could help you save your wealth in the next 90 days... from a market event that's already shaking up U.S. stocks. He'll explain how to prepare, including his No. 1 stock to buy right now – and his No. 1 stock to avoid. You don't want to miss this... RSVP to watch online for free right here.
Further Reading
If you want to be a successful investor, it helps to have all the best tools at your disposal. That's why Marc Chaikin created a system that looks at the most important measures of a stock's success to determine when to buy and when to sell… Read more here: The Four Main 'Ingredients' to My Life's Work.
"Stock implosions happen," Marc Gerstein writes. Even the strongest stocks can collapse in just a few days. That's why it's crucial to have a plan in place to protect yourself from major drawdowns… Get the full story here: How to Avoid the Metaverse's Next Collapse.
We want to be invested in assets that are less obvious. And this crucial sector is a subtle way to play a big change coming to the United States.
FOLKS CAN'T DO WITHOUT THIS UTILITY COMPANY
Today, we're looking at an essential company with a solid business model...
Longtime readers know utility stocks are some of the safest investments over the long term. These companies provide our homes with water, gas, and electricity... services folks will always need. And because they typically enjoy regulated monopolies in their regions, their customers are even more "locked in." Take today's company, for example...
Duke Energy (DUK) is an $85 billion utility provider. It's one of the largest electric power companies in the U.S., serving 8.2 million customers with electricity and 1.6 million with natural gas. All of this business helped Duke survive the pandemic downturn. Sales barely stumbled over the past two years... And although profits fell in 2020, net income then tripled last year to $3.8 billion – an impressive surge, and a 2.5% increase from pre-pandemic levels.
As you can see, DUK still plunged during the 2020 crash. But shares recovered within a year. They're up 85% from those lows today, including dividends... And they recently hit an all-time high. It's more proof that utility companies make resilient businesses...
