BANK ON #1 SNAPBACK TRADE
BANK ON #1 SNAPBACK TRADE
Hi everyone. Vlad Karpel here for Yellow Tunnel, an aggressive short-term trading service dedicated to all classes of traders seeking to up their game by leveraging the most cutting-edge AI platform available to retail and professional traders anywhere.
Every week our team at Yellow Tunnel brings forth both mental and physical tools for honing the skills and discipline necessary to be consistently successful in both up and down markets. Our robust track record speaks for itself and lives are being changed because of our efforts to help traders of all walks of life boost their net worth.
CURRENT TRADING LANDSCAPE
Any Peloton lovers out there? Prior to this pandemic, I was, you could say, an orange theory fanatic. My wife originally got me into it and ever since that day, I was there, Monday through Friday, without fail. I liked everything about it. The accountability of the point system, the friendliness and familiarity of the trainers, and the support of my fellow orange theory addicts.
Then came March 16th and all of the gyms closed. At this point, I do not know when they will reopen and whether I would even feel comfortable being in a gym, at least for now. So, I decided to take the plunge and order the Peloton bike. My wife, who has been eyeing one for months, had a large list of pros and a very nonexistent list of cons for this purchase, including a very wishful idea of our children using the bike to stay/get in shape. I was finally sold.
To my dismay, as I dreamed of spinning my way through this quarantine, I was told that the delivery time for the bike is 6 weeks out and any requests to move that date up will not be honored. Obviously, everyone else had the same idea, the smarter ones had it much earlier. So, I am back to the drawing board, debating whether or not I will even need this bike in six weeks or if it will end up, like so many of my wife's ideas, in our bonus room, collecting dust.
Markets gave up some of the gains from yesterday, but SPY managed to close above 289 level, which is short term the support level. My view of the market has not changed. At this point, I expect only shallow pullbacks and it is only a matter of time for SPY to trade above 200-day MA. Small-Cap stocks, Banks, Industrials led the market to the downside today. AAPL and AMZN delivered below expected earnings results.
I expect the market volatility and the three percent daily market moves to persist. At this point, I believe we have set the bottom (market can overshoot support and resistance levels especially when VIX is elevated). I believe the worst part of the sell-off is behind us. Please monitor VIX level as current levels are above the historical average. My strategy is to aggressively buy any market corrections.
Based on our models, the market (SPY) will trade in the range between $270 and $310 for the next 4 weeks
SECTOR SPOTLIGHT
This past week saw fund flows rotate heavily into the financial sector, under the notion that a V-shaped economic recovery was in the making. Banks, credit card processors, and asset managers all stand to benefit if the economy does make a speedier than anticipated rebound as Treasury Secretary Mnuchin has been promoting.
Under this scenario, traders that want to take advantage of this sector shift should consider putting to work the S&P 500 Financials Sector SPDR ETF (XLF) as the go-to trading vehicle. This is clearly the favorite of institutional accounts and hedge funds as XLF trades between 50-200+ million shares per day.
Shares of XLF rallied off the March 23 bottom of $17.49 and rallied up to $23.90 before running into its downward sloping 50-day moving average where some short-term profit-taking set in. But there is good buying pressure on dips thanks to the flood of liquidity and SBA stimulus flowing through to small business, and therefore an attractive trading range is being established.