Hi everyone and welcome to the Yellow Tunnel community, an aggressive short-term trading service dedicated to all classes of traders seeking to elevate their trading skills, market awareness and trading profits.
We’re about one-third of the way through third-quarter earnings season and there are already some key takeaways. Companies are beating estimates by an average of 20%, where normally, a 5%-10% average beat is more in line historically. However, even with the strong results, the corresponding price action for the underlying stocks is muted.
For those companies that are missing estimates like IBM Corp. (IBM), Intel Corp. (INTC), Union Pacific Corp. (UNP) and Kimberly-Clark Corp. (KMB), their stocks were sold off rather aggressively. Clearly, the market is subject to caution over lack of stimulus, lack of COVID-19 vaccine and lack of clarity on the election cycle.
Once these issues are resolved, it stands to reason the market will break out of the current trading range to establish new highs. Until then, it’s a bit of a waiting game.
NEW WEEKLY POWER TRADER SERVICE
We recently launched our new Weekly Power Trader service that we at Yellow Tunnel are very excited about. Each week on Sunday, 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.
Also, note that the Weekly Power Trader signals are meant to last for 5-10 days as long as the vector confirms the same direction as the original pick, for stocks we use a target gain of 2% and stop as 2% of the stock price.
Signals have averaged over 75% accuracy in my live trading since inception. Sometimes we hold position 2-5 days by using options (selling OTM BULLISH PUT spread) and targeting 1% target gain and 1% stop loss using stock price. Green color should be interpreted as a bullish signal and Red color as a bearish signal.
CURRENT TRADING LANDSCAPE
The SPY continued to trade in a well-defined range and retested the main support at $340-344 level on the news about the additional stimulus.
The US Dollar, DXY, was trading in a narrow range with downward momentum. Value stocks (Banks, Energy, Airlines and Healthcare) significantly outperformed growth stocks on the drop in the treasury prices.
Currently, the key support level is at $340. As long as the SPY is trading above $340-344 level, I expect the market to retest October highs in the next two weeks.
I would be a buyer using any short-term corrections and use dollar-cost averaging strategy to accumulate positions at this level. If you are trading options consider selling premium with February and March expiration dates.
"BUY" signal based on the Aggressive Power Trader Portfolio for tomorrow is at $340 level using SPY and "SELL" signal is at $345 for short-term traders.
Based on our models, the market (SPY) will trade in the range between $318 and $360 for the next 4 weeks. Based on the aggressive trader monthly predictions, the market will break through the $360 level in December of 2020/first quarter 2021.
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 your 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 stock is trading at $100, I would sell OTM put (strike less than 100) with option BID price close to $0.5.
Of all the differing political views being floated around, one area of common ground is that a massive infrastructure bill will be forthcoming in the months ahead, regardless of the electoral outcome. Copper, iron and steel prices are rebounding nicely with the strong home construction market and China’s economic recovery.
Shares of the SPDR S&P Metals & Mining ETF (XME) are a strong representation of companies that are enjoying improving fundamentals and demand, while also signaling that the broader economy is picking up steam.
From a purely technical standpoint, shares are setting up for an upside breakout if XME can clear $26 on rising volume. What’s encouraging for traders is when these deep cyclical stocks come into favor, they can rally sharply over a short time period. They tend to be more volatile being commodity-driven , so when prices firm, these stocks pop.
Trading at around $25.50, it would bode well for readers of this blog to join up today to Weekly Power Trader and be ready when we act on this trade.
TRADE OF THE WEEK
One stock that is a prime beneficiary of the rally in copper and to a lesser extent is Freeport-McMoran Inc. (FCX). The company engages in the mining of mineral properties in North America, South America, and Indonesia. FCX primarily explores for copper, gold, molybdenum, silver, and other metals, as well as oil and gas.
The company also operates a portfolio of oil and gas properties primarily located in offshore California and the Gulf of Mexico. As of December 31, 2019, it estimated consolidated recoverable proven and probable mineral reserves totaled 116 billion pounds of copper, 29.6 million ounces of gold, and 3.58 billion pounds of molybdenum, as well as operated approximately 210 wells.
This past week, FCX reported Q3 earnings of $0.29 per share, $0.08 better than the S&P Capital IQ Consensus of $0.21; revenues rose 16.4% year/year to $3.85 bln vs the $3.68 bln S&P Capital IQ Consensus. Consolidated sales totaled 848 million pounds of copper, 234 thousand ounces of gold and 20 million pounds of molybdenum in third-quarter 2020.
The six-month chart of FCX shows the stock breaking to new 52-week highs after the solid third-quarter results, where near-term dips in the stock can be bought for short-term profits by following our indicators and trading parameters.
When we apply our AI-driven Stock Forecast Toolbox to FCX, we get a strong “B” Model Grade rating that portends of a steady uptrend for the next 10 days ahead amid a well-defined trading range supported by powerful fundamentals.
When our AI platform rates stocks “A” or “B” it takes into account numerous proprietary indicators that are updating around the clock 24/7. My AI platform is always thinking, always learning, which provides a stream of profitable trades for our members.