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How to “Hack” a Backdoor Trump Trade

As stocks continue to push higher this week, the leader of the free world is cheering on the rise to new all-time highs.

The Trump administration has made clear its intention to use the stock market to measure the success of its policies. So it’s no surprise the president felt the need to celebrate the recent rally on Twitter between stumping for his favorite primary candidates and complaining about the results of his late-night Google searches…

trump-tweet

To be fair, the tweet is accurate. The Nasdaq Composite is resting at all-time highs as I type, closing above 8,000 for the first time ever on Monday afternoon.

But it’s the strength in the tech sector — not political posturing or tariff spats — that’s fueled the run to new highs. Not too long ago, investors were concerned that Trump’s tough guy act on Twitter was going to spark a full-blown trade war and tank the market. Some pundits even suggested Trump’s team needed to convince the president to take a social media break before all hell broke loose…

Here’s another crazy scenario: What if Trump’s Twitter is hacked?

The idea’s not so far-fetched. Back in 2013, the hackers got ahold of the AP’s Twitter account and sent out a tweet about an explosion at the White House. The fake tweet even managed to incite some temporary panic in the stock market before the hoax was uncovered.

The threat of high-profile hacks is becoming an important theme on Wall Street. That’s why cybersecurity has emerged as one of the most powerful trends in the tech space this year.

After struggling to keep up with the melt-up rally last year, a fourth-quarter breakout helped launch the PureFunds ISE Cyber Security ETF (NYSE:HACK) into its new role as a tech market leader in 2018.

HACK did a great job hanging onto its gains as the major averages tested their correction lows during the first half of the year. A picture-perfect bounce in early February helped the ETF maintain its momentum during difficult market conditions.

The cybersecurity ETF even miraculously outperformed the Nasdaq Composite during the first few months of the year, posting double-digit gains well before the end of the first quarter. But the sector started to run out of gas toward the end of June. A quick drop scared away traders — and a failed run at new highs less than one month later squashed cybersecurity’s momentum.

But thanks to a quick rally, these stocks are back in action and ready to reclaim their market leadership role.

chart

I noted earlier this month how HACK found a floor near its June lows. A quick bounce at support soon turned into a huge rally that pushed the sector to new all-time highs this week. HACK is now up 27% year-to-date. Meanwhile, the Nasdaq Composite it up just 16%.

We’re already seeing the effects of this powerful rally in our trading portfolio. Your long-term cybersecurity play Palo Alto Networks (NYSE: PANW) is on fire this year. Its most recent romp to new highs has this stock up a staggering 58% year-to-date — and it wouldn’t surprise me to see it blast higher into the fourth quarter.

With industry stalwarts like PANW streaking higher, I’m also seeing some newer players in the sector setting up for impressive gains.

If the rest of 2018 is as good to cybersecurity stocks as the first half of the year, these trades should continue to deliver impressive returns…

Sincerely,

Greg Guenthner

[Ed. Note: Send your feedback here: askgreg@sevenfigurepublishing.com – and follow me on Twitter: @GregGuenthner]

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Greg Guenthner, CMT, is the editor of Rude Awakening PRO and Seven Figure Signals. He has been with Agora Financial/Seven Figure Publishing for 13 years. In 2018, Greg’s Rude Awakening PRO portfolio beat the S&P 500 by 14%.

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