JPM Alert: Buy! Buy! Buy!

Published Mar 21, 2021

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A delayed reaction by the bond market, to the downside, triggered a steep sell-off for the tech sector and Nasdaq as a whole. The correlation between higher bond yields and lower growth stock prices is very high. And yet, as earnings season approaches, I would expect some rotation back into growth due to very bullish profit forecasts for tech.

The back and for between growth and value is keeping a lot of traders working overtime, as most have made their living in the tech sector and know and trust these stocks, whereas there is far less experience getting a good feel for other cyclical sectors that have shown excellent momentum. But yesterday’s $6 plunge in oil prices shows just how fleeting the cyclical trade can be and is why traders are lured back to tech when the sector shows any signs of reversing higher. It’s where most traders are happiest.

CURRENT TRADING LANDSCAPE

What's true happiness? In a book that I recently read, the largest percentage of people said that it is the freedom that defines happiness. Freedom to do what you like, when you want, and with whom. But how can you do what you want, when you want to, without money?

The trick is to make just enough money to be able to do what you want, when you want to, as long as the what and the when is not too expensive or too often, respectfully. Otherwise, you just have to make more money. However, chasing money will not make you happy. So, how do you find that balance? When is enough good enough? I love these self-help books, just keep trading folks. Compounding is crucial in trading.

The SPY reversed yesterday's gains after the Fed decision yesterday. Growth stocks led a decline on the higher interest rates. The main question is this a new leg up in the market or will there still be more volatility next week. Short-term, the SPY range remains between $380 and $400.

The SPY is reaching overhead resistance at $400 and can retest recent lows at $380 level in the next two weeks (still a low probability event).

The DXY is losing its momentum. The TLT is in the process of building a bottom with incremental declines in the treasury prices.

The bottoming process has started and the worse part of the sell-off is now behind us. The market will finish the bottoming process in the next two weeks and will resume bullish momentum by the end of March-early April.

I would be a buyer using any short-term corrections and use a dollar-cost averaging strategy to accumulate positions. If you are trading options consider selling premium with May and June expiration dates.

"BUY" signal based on the Aggressive Power Trader Portfolio for tomorrow is at $385 level using SPY and "SELL" signal is at $390 for short-term traders.

Based on our models, the market (SPY) will trade in the range between $380 and $400 for the next 2 weeks.

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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.

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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.

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SECTOR SPOTLIGHT

As the focus of the market is so riveted on bond yields, the clear winner when rates tick higher are the big banks. Borrowing short and lending long when spreads are widening is sweet music to the banking sector.

The Financial Select Sector SPDR ETF (XLF) has woken up from a multi-year slumber and become a juggernaut of late. As the long end of the yield curve has steepened, shares of XLF have rallied in tandem, clearing their pre-pandemic high and trading to a new lifetime high of $35.29 just this past week.

There are great stocks within the top ten holdings that make up about 54% of total assets. The recent activity in the reopening of the economy is going to fuel future loan growth that will boost earnings at a time when profits from Net Interest Income (NIM) is expanded with every basis point Treasury yields rise.

At Weekly Power Trader, we apply our custom proprietary AI algorithms to every trade, giving us a serious edge on how and when to trade stocks and ETFs. When we apply our Seasonal Chart to XLF shares, we get a bullish read for the next 20 days that forecast the stock trading from its current price of $34.20 to new highs. That’s impressive for a short-term forecast and one that we’ll consider adding to our daily trade recommendations for Weekly Power Trader subscribers.

Shares of XLF offer traders a lower-risk method by which to trade a sector that has real staying power. Trading the ETF removes single stock risk and yet XLF has demonstrated it has strong price action that makes for an exciting trading vehicle.

TRADE OF THE WEEK

In terms of the go-to single stock trade within the financial sector, no other company draws as much attention at JPMorgan Chase & Co. (JPM). As America’s premier bank, professional traders and fund managers stick to top-tier names when they are seeking sector leadership.

JPM’s market cap has mushroomed recently to $457 billion, as the company is literally printing revenue and profits from organic growth and robust trading operations. Share price appreciation has been steady and terrific, with the stock experiencing another upside breakout this past week, peaking at a new all-time high of $161.69 before taking a breather that pulled the stock back to the key 20-day moving average support.

The company earned $8.88 per share last year and is forecast to grow earnings by as much as $12 in 2021. That’s just huge and the market will continue to reward JPM with this kind of profit trajectory.

On a short-term basis, our AI-driven Seasonal Chart has JPM in a position to make a bullish move higher over the three weeks. The stock is setting up for a climax move higher right into its first-quarter earnings report due out in early April, making for a prime candidate for Weekly Power Trader subscribers.

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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 look to enter a position at the predicted LOW (BUY) price or yesterday's close price. For Weekly Power Trader, my stop loss for stocks is 2% and my target gain is 2%.. I target 75% accuracy using these signals.

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