JPM: Bank On This Trade
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Traders are finding solace in Friday’s inflation data that showed a small ebbing in the month-over-month and annual rate, suggesting peak inflation conditions might have occurred in the month of April. The data sparked further short-covering and net buying to build on Thursday’s rally and set up the market to have its first positive week in the past two months. It’s a nice turn of events, but one week doesn’t make for a trend.
All the major indexes enjoyed a week of rebounding stock prices following a parade of better-than-expected and less-than-feared earnings reports that crossed the tape in the past two sessions. Upbeat quarterly reports from Macy’s Inc. (M), Nordstrom Inc. (JWN), and William-Sonoma Inc. (WSM) posted results that topped Wall Street estimates, helping to affirm the high-end consumer is still spending while both Dollar Tree Inc. (DLTR) and Dollar General Corp. (DLR) surprised with good numbers that run counter to the disappointing Q1 results from Walmart Inc. (WMT) and Target Corp. (TGT).
The rally broadened out to include the beaten-down technology sector even as chip sector leader Nvidia Inc. (NVDA) gave a more cautious outlook while other semiconductor companies cited improving supply chain conditions. On the flip side, Broadcom Inc. (AVGO) posted better-than-forecast quarterly results and launched a $61 billion bid for VMWare Inc. (VMW), adding some M&A sizzle the to mix. Software stocks also reversed higher following strong results out of Intuit Inc. (INTU) and Splunk Inc. (SPLK). It’s a nice change of sentiment for the tech sector.
Commodity grain prices remain elevated as well, implying most measures of inflation are still near their highs. With all this being said, the market is taking it in under the notion that the economy will avert a recession and inflation will decline in the second half of 2022. It’s a nice change in sentiment, and time will tell if it is warranted.
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CURRENT TRADING LANDSCAPE
It’s good to see trader sentiment turn bullish, at least in the near term. The same macro problems besetting the market the week before remain a major overhang. But clearly, inflation is the biggest concern in the overall market narrative, and it shows signs of topping out and giving the market a much-needed reprieve from the constant selling.
The $SPY closed higher 2.0%, at $405, and broke through the short-term resistance at $396. The value/reflationary ($VTV) closed higher 1.3%, at $143, above the 200 DMA. The technology sector ($QQQ) closed higher 2.8%, at $300, trading above the 50 percent retracement from the pandemic 2020 low to 2022 high.
The $DXY closed lower, near the $102 level, trading below the December 2016 high. The $TLT closed lower 0.4%, at $119, and facing the key short-term resistance. The ten-year yield closed lower at 2.74%. The $VIX closed lower, near the 27 level.
The $SPY short-term support level is at $396 followed by $385. The SPY overhead resistance is at $412 and then $430.
I would be a seller into the rally and have a NEUTRAL portfolio at this time. Short-term the market is oversold, undergoing the bottoming process, and due for a rebound that could last for multiple weeks.
The "BUY" signal based on the Aggressive Power Trader Portfolio for tomorrow is at the $387 level using SPY and the "SELL" signal is at $397 for short-term traders.
If you are trading options consider selling premium with September and October expiration dates.
Based on our models, the market (SPY) will trade in the range between $350 and $430 for the next 2-8 weeks.
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This new service is special because it offers real-time alerts via SMS and access to Vlad's live positions and orders. When I put together this system, I wanted to be in the fight with other investors. That’s why I don’t play on your emotions to sell newsletters - I put my money where my mouth is.
Every trade recommendation that I make using this system – comes straight from the list of trade recommendations I use myself.
Not only that but every trade I make is logged in detail for you to review at any time. You can see my entire trading history, updated LIVE so that you can see, learn from, and even copy my trading strategy.
Signals have historically averaged over 85% accuracy in my live trading since inception. Sometimes we hold position 2-5 days by using options (selling OTM Calls and Puts spread) and targeting 1% target gain and 1% stop loss using stock price. The green color should be interpreted as a bullish signal and the red as a bearish signal.
How To Use Our Signals
Once you become a member, I encourage you to review our Live Trading Room recordings to see how I trade Aggressive Power Trader signals in my account. A snapshot of how we produce our Live Trading Room Sessions shows how we pack in a lot of information that can be accessed from whatever device you’re driving.
As a reminder, consider buying near the "BUY" level with a "10 days prediction" higher than the close price. In our live trading room, I usually hold a position for 1-2 days.
I allocate less than 5% of my portfolio if the position is being held overnight. On average, less than 1% of the portfolio should be at risk if you own a position for less than one day.
I enter a position at the predicted LOW (BUY) price or yesterday's close price. My stop loss is 1% and my target gain is 1% of the stock price. I target 75% accuracy using these signals.
Few subscribers asked about Options trading using the signals provided. Please review live trading room recordings. I often sell OTM credit put spread using weekly options and collect 0.5% using stock price. For example, if the stock is trading at $100, I would sell an OTM Put (strike less than 100) with an option BID price close to $0.5.
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There is a widening out of the spreads between short-term and long-term bonds that creates strong conditions for banks to profit from. Banks call this net interest margin or “NIM” which is a major component of earnings growth. For a while this year, the yield curve was flat, implying little if any profit margin from borrowing short and lending long, as banks ideally like to do. However, in the past few weeks, spreads have widened out.
Trading the Financial Select Sector SPDR (XLF) is a favorite instrument for active traders seeking to trade the sector and eliminate single stock risk. This ETF gives traders broad exposure to the top banks that are selected for gross and net margin growth, institutional accumulation, and good technical qualities.
XLF has an AUM of about $32.2 billion and owns 68 stocks. The top ten holdings account for about 53% of total assets, making this a fairly concentrated ETF.
The one-month chart of XLF is very appealing for bullish trading strategies as shares of XLF broke their downtrend this past week and are in the early stages of clearing out overhead resistance.
We get further confirmation of this trading opportunity from our AI-driven Seasonal Chart algorithm that shows “Higher” price readings for the next 20 and 30-day periods. This is strong AI confirmation that provides us with a high level of confidence in working with XLF as a long-side trade over the next two-to-four weeks.
TRADE OF THE WEEK
JP Morgan Chase & Co. (JPM) is the largest bank in the U.S. by market cap and revenue. The company is widely considered the favorite institutional bank that has the top CEO Jamie Dimon at the helm. This past week Mr. Dimon raised his outlook for the bank’s NIM prospects for the current quarter.
This statement gave shares of JPM a strong bid that reverberated through the entire banking sector. JPM occupies the second-largest position in XLF at nearly 10% of total assets, behind Berkshire Hathaway (BRK-B) which owns major positions in several bank stocks. According to YahooFinance.com, of the 24 analysts the cover JPM, the average price target is $157.50 and well above where the stock trades at $130.50.
Backing up our newfound bullish sentiment on JPM is our AI Forecast Toolbox, giving the stock a Model Grade “C” rating and a near-term price target of $149.64 which implies a strong move higher during the month of June.