Vlad’s Triage Trade
Welcome, everyone to another big week at Yellow Tunnel, and what a week it’s been for traders of all stripes. It’s times such as these that test the nerves of even the most seasoned traders and is when more heads than one help to smooth out daily performance that requires precision timing and an extra measure of trader discipline.
Our team is fully committed to improving members’ trading psychology, awareness and trading skills that generate aggressive trading strategies, resulting in a high percentage of consistent profits. We are constantly pursuing to deliver the right set of tools and trade discipline that lead to real financial success within our trading portfolios while also providing for a rewarding experience.
CURRENT TRADING LANDSCAPE
The markets continued the sell-off last week as spread of Coronavirus has intensified. Futures were halted twice on Monday and Thursday, as main indexes dropped more than 7%, triggering circuit breakers.
The question is whether or not this is the end of the bull cycle or just a temporary 10-30% correction. The sudden 20% drop in oil prices and 14% drop in equity market indicate that the $273 level on SPY failed to hold and that the market will drop close to the next support level, near December 2018 low (230-240). This will take the market drop close to 30%, where it would argue well for a bottom to start to form.
I expect the market volatility and the three percent daily market moves to persist. At this point, I do not believe we have set the bottom and I would wait for 2 days for markets to make higher highs and higher lows before the bottom can be established.
The market (SPY) will trade in the range between $230 and $315 levels for the next 4 weeks. I believe the market will retest $240 level in the next 1-2 weeks, and hopefully, Thursday’s low of $247.68 was a floor. The Fed launched a $1.5 trillion repo operation that will infuse the market with liquidity for the next two weeks while Congress is working on a stimulus package to boost assistance to small businesses and consumers.
Please follow key support levels on TLT ($142), GLD ($145). As long as these support levels are intact, the market is prone to pullbacks .
I updated the Aggressive Power Trader list and added VXX as market participants will continue to look for ways to hedge their positions. Please watch the Live Trading Room recording where I reviewed SPY trade.
There is a tremendous emphasis being placed on the medical community to deliver a vaccine to combat the COVID-19 virus. President Trump huddled with CEOs of the leading pharmaceutical companies to address the desperate need for whatever therapies, testing kits and essential supplies can be fast-tracked to fill the immediate demands to fight and eradicate the virus.
With Joe Biden starting to pull away from Bernie Sanders in the Democratic race for the Presidential nominee, there is definitely renewed confidence that the medical insurance companies, drug companies, medical device companies and medical supply companies will be able to hold pricing and continue to grow earnings at an attractive pace.
Knowing the economy is going to move into a period of slower growth, investors will be rotating capital into defensive asset classes that carry attractive valuations and good dividend yields. Healthcare has historically been a sector that outperforms in such a scenario because people can’t do without proper healthcare. Plain and simple.
The best way to play the sector as a whole is by trading shares of the Health Care Select Sector SPDR Fund (XLV) – which is an excellent way to approach investing in this sector without having to exercise precision stock picking. Companies in this sector fund primarily include health care equipment and supplies, health care providers and services, biotechnology and pharmaceutical industries.
The top ten holdings for XLV listed below make up just over 50.73% of the fund’s total assets. Depending on the fundamental and technical analysis, the fund managers will actively adjust individual weightings and which stocks to buy and sell. As is the case with most ETFs, this is not a static portfolio.
Looking at how shares of XLV currently trade within the current market correction, shares of XLV topped out at $105 and now trade at $87 and back down to where a strong 5-year support level is drawing some initial interest. So, this $80-$85 level has a lot of technical credibility, especially given how the market is looking for recession-proof asset classes to rotate into.
Applying my Tradespoon AI tools to XLV, we can see out the very short-term (10-days) is still showing downside risk, but 20-30 days out, my indicators are implying shares of XLV will rally, and therefore deserve putting on our watchlist for a bullish trade.
It’s rarely a good idea to buy into a down market, and thus until a well-defined bottom for SPY has been established, trading XLV from the long side should be considered only on snapback rallies and done so with an aggressive short-term time horizon.
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TRADE OF THE WEEK
Of the top ten holdings within the XLV ETF, the most compelling growth story in my view is UnitedHealth Group (UNH), which holds the number two spot among all holdings.
UnitedHealth Group Incorporated operates as a diversified health care company in the United States. It operates through four segments: UnitedHealthcare, OptumHealth, OptumInsight, and OptumRx. The UnitedHealthcare segment offers consumer-oriented health benefit plans and services for national employers, public sector employers, mid-sized employers, small businesses, and individuals.
The OptumHealth segment provides access to networks of care provider specialists, health management services, care delivery, consumer engagement, and financial services. This segment serves individuals through programs offered by employers, payers, government entities, and directly with the care delivery systems.
The OptumInsight segment offers software and information products, advisory consulting arrangements, and services outsourcing contracts to hospital systems, physicians, health plans, governments, life sciences companies, and other organizations.
The OptumRx segment provides pharmacy care services and programs, including retail network contracting, home delivery, specialty and compounding pharmacy, and purchasing and clinical, as well as develops programs in areas, such as step therapy, formulary management, drug adherence, and disease/drug therapy management.
For 2020, revenues are forecast to grow by 8.2% to $262 billion and earnings are estimated to increase by 9.1% to $16.50 per share.
Shares of UNH are trading in a wide range of late, but are finding key support at the $250 level per the one-year chart below. In fact, one can start to make a case that the stock is forming a bullish “double-bottom” pattern that typically precedes a move higher.
My Tradespoon Seasonal Chart has turned bullish on shares of UNH, flashing no less than three “higher” probability readings as of last week. One would be hard-pressed to find a better set of AI data for a stock that is a Dow Jone component trading 19% off its high in a sector that is seeing strong rotation.
My AI platform has the tools to buy and sell UNH in a way that will produce fast profits in repeat fashion. I’ve successfully traded UNH for members of our other premium services at Tradespoon and my AI platform is highly dialed into this particular stock that is appropriate for aggressive stock and options trades. My AI tools pinpoint specific bands of entry and exit points that provide the ability for traders to be nimble and consistently profitable.
In our new service Aggressive Power Trader, I walk our subscribers through the “trade decision-making process” with the mindset of being in and out of trades within 24-48 hours with the objective of booking 30%-60% gains against the amount of capital at risk on each and every trade with 75% accuracy.
The major element of this service is that it provides tomorrow’s featured trades the night before so traders can analyze and work on how they might best want to participate. You get to examine stock candidates well ahead of when I’m going to execute my best ideas the next day. It’s my TOP STOCK watch list of trading candidates with the various parameters that I use to trade each trade with defined risk levels, entry points and projected exit prices.
Each day at 8:00 PM and 8:30 AM CST, we provide our Top Bullish and Bearish Stocks, each with an Entry Point and projected exit price. Our signals are meant to last 1-2 days. Below are actual recommendations with parameters found on our Aggressive Power Trader Watch List.
I’m only showing a few stocks and ETFs that made up our Thursday night Watch List, so there are plenty of trading opportunities in stocks, and ETFs to put to work on a daily basis. There are typically 10-12 trading strategies to consider.
I also post details of our trading activity and updates on the Watch List at the bottom section of our daily blog. So, make sure to stay tuned in that service as well.
Trading Thoughts: 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 and allocate no more than 5% of trading capital to any single trade.
I allocate less than 5% of my portfolio if I hold a position overnight. On average, less than 1% of the portfolio should be at risk if you hold a position less than one day. I personally enter a position at predicted LOW (BUY) price or yesterday's close price. My stop loss is 1% and my target gain is 1% of a stock price. I target 75% accuracy using these signals.
Through the Aggressive Power Trader service, we tie our Tradespoon Live Trading Room to manage the parameters of every trade. And we update our closed positions daily. The two platforms work seamlessly to provide our subscribers with the most robust trading experience available anywhere in the market today.
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Trading thoughts on our trading model :
Within our Aggressive Power Trader trading stock watch list, trades are recommended in our Tradespoon Live Trading Room the next day.
Aggressive Power Trader is purposed to deliver high-visibility sector strength where a cluster of leading stocks are identified, coinciding with what we call a “10-day prediction momentum trade”. When we recommend a stock, ETF, or related option strategy, our time horizon is same-day in-and-out and up to five days max, at which time in the majority of trades, would be closed out.