Delta: High Flying Stock
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Another week of hand wringing and technical levels violated by the major averages have the market on the defensive and in deeply oversold territory. There was a complete collapse in the semiconductor sector, which had been a stalwart of leadership all of 2021, but sentiment abruptly turned bearish and selling pressure swept through the chip stocks after hammering the high price-to-sales stocks for most of January.
Solid earnings from Apple Inc. (AAPL) and Microsoft Corp. (MSFT) have helped to stem the bleeding in the tech patch, but there is clearly a change in what tech stocks the market wants to own going forward. Namely, legacy companies with next-generation innovations where price-earnings ratios are generally low – like under 20x. And even then, there has been a huge loss of trust that takes time to restore in the vaunted tech space. Until then, I expect continued volatility to remain elevated.
TRADING LANDSCAPE
Friday’s session was the first sign of encouragement that traders could latch onto as the market opened down hard and put in a mid-day reversal higher. This is a probable sign that the market is groping for a bottom as both SPY and QQQ are holding their climax lows set this past Monday. The market isn’t out of the woods yet, but it is a constructive pattern shaping up.
The $SPY remained volatile and range bound. The $SPY has been trading between $420 and $440 and closed at $435, below the 200 DMA. The value/reflationary closed lower, down 0.2%, below the 50 DMA. The technology sector ($QQQ) is below the 200 DMA, closed down at 347, and near the October low.
The $DXY continued to trade higher and broke through the recent highs. The $DXY is overbought and should pullback in the next 1-2 weeks. The $TLT traded higher, up 1.9%, and closed below the 200 DMA, near the recent lows. The $VIX traded closed at the 29 levels.
The $SPY short-term support level is at $420 (key long-term support), followed by $400. The SPY overhead resistance is at $460.
The $QQQ's second wave of the sell-off is approaching the end and traded at the October low, on the extreme spike in the volatility and volume. The worst-case scenario would be a marginal break of the October low, $350 is still on the table. I would be a seller of the high beta stocks into the rallies and continue rotating the portfolio into the value stocks ($XLE, $XLI, and $XLF).
The $VIX has finally reached the "extreme" levels, and one should expect $SPY to start the rebound toward the $460 level this week or next
I would consider rebalancing portfolio at this time and have an overall market BULLISH portfolio. I do expect the $SPY's sell-off to come to an end in the next 1-2 weeks, followed by a rebound in the next 1-2 months. The FED meeting announcement initially put the market on the defensive but is beginning to stabilize heading into the weekend.
"BUY" signal based on the Aggressive Power Trader Portfolio for tomorrow is at $425 level using SPY and the "SELL" signal is at $438 for short-term traders.
If you are trading options, consider selling premium with April and May expiration dates.
Based on our models, the market (SPY) will trade in the range between $400 and $470 for the next 2-4 weeks.
NEW EARNINGS POWER TRADER SERVICE
We recently launched our new Earnings Power Trader service that we at Yellow Tunnel are very excited about. Each week, our expert traders use our AI Tools to provide the Top Bullish and Bearish Stocks, each with an Entry Price, Target Profit, and Stop Loss.
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 positions for 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 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 OTM put (strike less than 100) with option BID price close to $0.5.
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Earnings Season is here and Disney (DIS) will announce its earnings on February 9th.
The last time we traded DIS during Earnings Season we had a 60% return on risk.
Let me repeat that, we had a 60% return!
That's a pretty good return after holding the position for only 1 day!
Be prepared: Disney (DIS)is scheduled to announce its earnings on February 9th.
This is my favorite time of year!
You’re Invited: Click Here
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SECTOR SPOTLIGHT
In light of the spread of Omicron, which has kept a wet blanket on the travel sector, recent bookings data for summer flights are at pre-pandemic levels. Several airlines are guiding to an upbeat summer travel season and the data surrounding Omicron is looking more favorable this past week, providing for some renewed optimism about the travel sector.
When looking at the subsectors of the broader travel sector, it can be divided up into lodging, cruise lines, airline, and travel services. Today, I want to place some focus on the airline industry, where recent data suggests this sector is due to “take off” – pun fully intended. But seriously, after several false starts due to Covid, airline stocks are cheap.
From a sector standpoint, the U.S. Global Jets ETF (JETS) is best suited for those that want to avoid single stock risk and yet get nearly the same level of beta from an ETF that owns all the quality names in the space – the top 10 holdings accounting for about 57% of assets.
Looking at the one-year chart below, I would contend that a constructive double-bottom formation is developing within the larger pattern that could have shares of JETS trade back up to its 200 DMA, followed by an upside breakout to $23.