Millions of investors took part in Monday and Tuesday’s panicked selling, and the really sad thing is that they don’t have a clue about the opportunity they’ve missed. As always, that’s going to cost ’em dearly.

I don’t ever want you to find yourself in that position.

[ad#Google Adsense 336×280-IA]So today, we’re going to talk about what they did and why, despite the best of intentions, their actions will set them back years and rob them of the very successful financial future they crave.

Then, I’m going to share a recommendation with you that has the kind of windfall profit potential that can more than make up for the latest round of market madness, and keep you on the right track at the same time.

Here’s what you need to know.

How to Profit from Panic (and Knee-jerk Reactions)

All three averages got pounded Monday and Tuesday as the markets came to terms with President Donald Trump’s immigration edict. The Dow dropped by 01.31%, while the S&P 500 surrendered 0.62%.

At first glance, that’s plausible.

In an effort to keep radical Islamic terrorists at bay, the President’s executive order temporarily banned U.S. entry to persons from Iraq, Syria, Iran, Sudan, Libya, Somalia, and Yemen until “extreme vetting” is implemented.

In reality, there’s something else at work.

Three things, actually.

First, the Dow dropped below 19,800 points with two stocks – The Goldman Sachs Group Inc. (NYSE:GS) and 3M Company (NYSE:MMM) – experiencing a $3.26 billion selloff alone. Big banking stocks including Wells Fargo & Company (NYSE:WFC) and JPMorgan Chase and Co. (NYSE:JPM) sold off far more severely than the S&P 500 itself. Tech stocks were more or less unscathed, with the exception of Alphabet Inc. (NasdaqGS:GOOG), which received a 2.55% buzzcut of $26 per share.

Energy gave 2% back, which is almost an afterthought given how irrelevant oil has been lately – but that’s a story for another time. And the tech-heavy Nasdaq Composite actually finished Tuesday up 0.55% for the week so far.

My point is that the selling is neither as widespread nor as indiscriminate as the press made it out to be.

Second, Treasurys held steady, with the benchmark 10 year note treading water near 2.488% and the two year note hovering at 1.216%. This tells me that the smart money isn’t giving up.

Remember, the bond market is roughly 3-5 times the size of global equity markets depending on which indices you count, so the real move would have been out of bonds if traders were going to the sidelines and giving up the proverbial ghost.

And third, a pullback is long overdue. Nothing goes up in a straight line forever, especially stocks. So the fact that the markets sold off a bit just as earnings are beginning to accelerate and Trump’s beginning to take action is not only expected, but needed.

Let’s not forget that investors were very quick to price in the gains associated with lower taxes, reduced regulation, infrastructure, healthcare reform, and more. Since November 8, the markets have enjoyed a legendary “rip your face off” rally not seen since the Kennedy era if my memory serves.

Trump’s lightning-quick immigration policy has simply given them pause. It’s entirely logical that they’d sell off just as quickly under the circumstances.

There’s nothing complicated about this.

We’re coming off all-time highs in nearly every index, which is why the uninformed need only the smallest of excuses to take a breather based on nothing more than emotion. We can debate until the end of time about whether Trump is right or wrong. Chances I’d agree with much of what you have to say. However, that’s moot.

What matters is that millions of investors have let their emotions get in the way yet again. That never ends well for reasons we have talked about many times.

There’s a bright spot, though.

A little chaos is good for the system.

No, scratch that – it’s GREAT for the system and your money both.

Emotion is a very funny thing. It’s driven by psychology rather than fact, which means that you can flip around big down days like Monday and look for stocks driven by fact that will benefit from the very same emotional input.

This is counterintuitive, but key to the hunt for big gains when you think about it because there is a direct correlation between emotional input and profit potential.

History shows very clearly that the worse everybody else thinks things are, the more upside you have.

Here’s What to Look For

Not all stocks get hit equally.

Some, in fact, will use the discord that’s tripping everyone up as a springboard for even bigger profits.

It’s not a stretch, for example, to imagine that Trump’s policies radically accelerate the need for biometric identification. Extreme vetting or not, you’ve got to know who’s who in today’s world.

Everything from simple ATM transactions to e-prescriptions depends on it. So do health records, mobile phones, and payment systems. Even the trusty old Garmin GPS I use to track my daily running depends on knowing that it’s me out there pounding the pavement.

Most investors I talk to are shocked to learn that biometric identification is already projected to swell to a $24.8 billion market by 2021, according to a recently released TechSci Research study.

And that’s one of the most conservative forecasts.

Credence Research suggests that biometric markets may top $34.5 billion by 2022 only five years from now. I think the figure is more like $50 billion, but what’s a few zeros amongst friends!

The other thing that takes many investors by surprise is that this type of technology is already built into Windows 10 authentication and has been built into everything from Wal-Mart Stores Inc. (NYSE:WMT) to Amazon.com Inc. (NasdaqGS:AMZN) and the Amazon Live platform.

[ad#Google Adsense 336×280-IA]It has to be.

Cybercrime related to data breaches may cost $2.1 trillion globally by 2019 according to Juniper Research.

Research and Markets estimates that biometric banking technologies are a $5 billion market all by themselves only three years from now.

And, just in case you’re wondering, I think that figure’s low, too

You could invest in Alphabet Inc. (NasdaqGS:GOOG) or Facebook Inc. (NasdaqGS:FB), which are well along this path, but it’s very tough to move the needle on a $377 billion stock. Find the right small-cap, though, and you’ve got a great complement that could really make your portfolio pop.

Especially on big down days when selling puts ordinarily expensive companies on sale.

Take BIO-key International Inc. (OTC:BKYI), for example.

The FBI chose the company seven years ago to help implement a biometric fingerprint databases capable of handling in excess of 200 million prints. It was the only company at the time capable of meeting the stringent requirements and one of only a handful capable of doing so today.

Today it makes a slew of devices that could eliminate or reduce the dependence on passwords, PIN numbers and other card related systems. Some, like the PR0-20 PIV are designed to attach to desktops and docking stations while others like the SideTouch and EcoID are intended to be used with a variety of devices in a secured facility, for example.

With a market cap of just $181 million, the company is tiny and virtually unknown, which I like because that means it’s got lots of potential both on its own merits but also as an acquisition candidate.

Tread carefully, though.

At only $2.50 a share, the stock is well within the domain of aggressive day traders and penny stock bandits who would love nothing more than to separate you from your money. That means it’s going to be volatile.

Ordinarily, I’d tell you to use a trailing stop as a means of guarding against this, but that really doesn’t work very well with a speculative stock like this one under $5 a share. There simply isn’t enough range to make that practical.

Instead, limit your exposure to 2% of investable capital “on the way in” – meaning when you buy. That way you can still follow along but without the worry that comes from losing your asteroids.

I’ll be with you every step of the way.

Until next time,

Keith

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Source: Money Morning