Peloton: Speed-Up Profits
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.
What a roller coaster of a market. The bond market went through a reset in the wake of some bottleneck inflation and rising growth prospects, the latest bond auctions went off without a hitch, hedge fund titan David Tepper gave his thumbs up for stocks and the Nasdaq caught a serious bid and rallied 1,000 points or 8% while the Dow and S&P traded to new all-time highs.
The latest $1.9 trillion stimulus plan was signed by President Biden and checks will start going out this weekend. Any worries of a bond market meltdown or major breakdown in the dollar have been alleviated for the time being as both stabilized, affording traders to re-focus their attention on high-beta growth stocks. It was a true demonstration of just how much pent-up demand there is for money to buy into the market on any weakness.
The balance of the month will center on portfolio window-dressing and digesting more economic data that may or may not influence bond yields. But it can be said that the market is adjusting to higher yields as part of the whole recovery theme where rising interest is a natural event as long as sales and growth prospects are accelerating. And that seems to be the base case by which the trading landscape is embracing.
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
Coming into the week, it felt as if the market was going to make a decisive move in either direction depending on the bond market’s sentiment. A break above 1.61% for the 10-yr Treasury would have set in motion a further breakdown for the Nasdaq, but the bulls prevailed, bond prices held, and stocks rallied led by the tech sector.
With the market broadening out, a good foundation for an extension of the bull trend is being built. As much as two-thirds of the total market cap (S&P and Nasdaq) is weighted in the tech sector – so it goes without saying – as the tech sector goes, so goes the market. And to the joy of the bullish camp, tech showed up this week when needed.
The SPY continued its rebound from Friday led by the strong rebound in the value stocks. Short-term, the SPY range remains between $368 and $395. The SPY is reaching overhead resistance at $387 and can retest recent lows next week. The DXY is losing momentum. The TLT is in the process of building a bottom.
The short-term correction has reached its lowest point.
The key support is now at $375-$380 and potentially the SPY to retest these levels the next week (low probability event at this point).
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.
I would be a buyer using any short-term corrections, and use dollar cost averaging strategy to accumulate positions. If you are trading options consider selling premium with April and May expiration dates.
"BUY" signal based on the Aggressive Power Trader Portfolio for tomorrow is at $393 level using SPY and "SELL" signal is at $395 for short-term traders. Based on our models, the market (SPY) will trade in the range between $375 and $395 for the next 3 weeks.
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 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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SECTOR SPOTLIGHT
As the spotlight has been shining bright on the cyclical and value stocks before this week’s rebound in the growth sectors, the work-from-home and work-from-anywhere stocks and ETFs were a source of funds. However, many of the work practices and systems put in place during the pandemic are not going back to pre-pandemic norms, which have been widely publicized by the majority of large corporations.
The cost savings have been huge and productively levels of many layers of corporate labor forces have proven to be efficient and a strong contributor to wider profit margins that are driving strong earnings growth.
The Direxion Work From Home ETF (WFH) put up a big 2020 performance, gaining over 50% after going public in late June. As the momentum for epicenter and reopening stocks took hold late last year, shares of WFH pulled back off their high of $76 to $64 before buyers stepped in the past two weeks as certain components related to cybersecurity, networking and mobile communications equipment were snapped up.
There are some compelling stocks within the top ten holdings that make up about 35% of total assets. The recent high-profile cyberattacks are evidence that business for 7 of the top 10 positions is going to be robust for 2021, and so, this ETF has plenty of potential for traders to buy dips and trade it from the long side.
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 Forecast Toolbox to WFH shares, we get a bullish read for the next 10 days that forecast the stock trading from its current price of $70.60 to $75 or higher. 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 WFH offer traders a lower-risk method by which to trade a sector that has real staying power. Many parts of America’s workforce have changed permanently and is why WFH should be on all trader’s watch lists as a potential profit producer.
TRADE OF THE WEEK
On a single-stock basis, one of the most compelling stories and stock performances of 2020 was home exercise equipment company Peloton Interactive Inc. (PTON). Their stationary bikes were easily the hottest consumer item on the market with the company still trying to catch up with a deep order backlog.
The back-to-the-gym mentality of the past month weighed on the stock even as sales and earnings growth for 2021 are not being revised lower. Sales for this year will grow by 124% from $1.83B to $4.1B and earnings will ramp from a loss of ($0.32) to a profit of $0.32 and are forecast to more than double to $72 per share in 2022.
Recurring subscription sales are modeled similar to software-as-a-service (SaaS) which makes Peloton more of a tech company in the future than an equipment provider. However, orders of the company’s “Tread” are very robust, with the company moving aggressively to spend $100 million to speed up shipping and bolster customer service.
Peloton is also taking their hugely popular product line outside the U.S., expanding into Australia, with ambitious plans to enter the lucrative Asian, Pac-Rim market. These new developments for the company prompted Macquarie to give PTON an Outperform rating and a price target of $190, representing a potential upside move of 62%.
On a short-term basis, our Forecast Toolbox has PTON in a position to make a bullish move higher over the next two weeks. The Predicted Resistance price of $141.13 is an aggressive price target, but this past week, we’ve seen some huge reversals in several oversold pandemic-related stocks.