Vlad’s Top Sector Trade!

Published Jun 12, 2020

Hi everyone. Vlad Karpel here for Yellow Tunnel, an aggressive short-term trading service dedicated to all classes of traders seeking to elevate their trading skills, market awareness and trading profits. This is the kind of market where the combination of AI and personal discipline can result in fantastic portfolio performance.

Every week my team brings to our audience of traders ongoing education, coaching and trading strategies to not just heighten our collective knowledge and instincts, but to create a truly rewarding personal experience for all our members.

NEW OPTION FEATURE FOR PAID SUBSCRIBERS

We recently launched our new Option Portfolio for paid subscribers to Aggressive Power Trader. This expansion of our service brings a major offering of quick-hit option strategies to our audience that thrive on trading options. We offer specific option trades of what our AI tools generate. All traders need to do is execute per the parameters set forth in the table of instructions.

Each day (8 PM and 8:30 AM CST), our expert traders use YellowTunnel Tools to provide the Top Bullish, each with an Entry Price, Target Profit, and Stop Loss. Please note, that it is possible to hit the Target multiple times throughout the trading day, so you can trade the same stock multiple times using the same entry price.

Also, note that signals are meant to last for 1-2 days as long as the vector confirms the same direction as the original pick. In the live trading room, we use target gain like 1% and stop as 1% of stock price.

Signals have averaged over 75% accuracy in the live trading account. Sometimes we hold a position overnight 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

I wonder what effect does the shelter in place has on couples. Are people getting tired of seeing, listening and talking to each other day in and day out, or are couples getting closer, spending more time together and realizing how nice it is to finally spend so much together?

Before the pandemic, I would argue the first one, but I was just told otherwise. Apparently, this couple was in a midst of filing for a divorce when the pandemic hit, locking them up in the same home for an unknown amount of time. The wife, who is a busy real estate agent with a talent for selling houses, but zero ability to cook, couldn't work, so she took up watching cooking shows and trying out different recipes.

The husband, who was eating out throughout their 12 years of marriage, finally started to look forward to coming home to a home-cooked meal. As he began to finally enjoy his wife's cooking, he wanted to somehow thank her, so he began to bring home flowers, bottles of wine, and other trinkets, which the wife obviously loved. Now, fast forward three months into the pandemic, and they are giving their marriage another chance. I wonder if this is a lone occurrence or a trend?

Value stocks sold off third day in a row. All sectors sold off from 3-7% and VIX jumped 50% to 41. The top building process has begun. SPY overhead resistance is at $323 and the short-term market is oversold and due for a rebound starting next week. SPY can overshoot support at $300.00, 200-day moving average, but should rebound starting next week. The market can continue to make incremental gains in the next 1-2 weeks but is prone to a sell-off . The put to call ratio stands at 0.4, lowest number since February, and can be interpreted as complacency and a potential sell off (10-15%) on any negative news.

I expect the market volatility and the two 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. SPY top is set at $322 and the market can potentially retest this level in the next 1-2 weeks. My strategy is to buy 5-10% market corrections.

Based on our models, the market (SPY) will trade in the range between $275 and $330 for the next 4 weeks. Our AI-driven Seasonal Chart shown below is still registering bullish forward indicators meaning any bouts of selling will be well-contained constructive to the intermediate-term trend.

SECTOR SPOTLIGHT

Following a huge rotation into deep cyclical and value stocks, the market quickly gave back some of those heady gains last week. Lagging the pack, but now getting some fresh focus are the consumer staples stocks as concerns a slower-than-expected comeback for the economy is seeping back into market sentiment.

Fed Chairman Jerome Powell’s comments on Thursday about the economy being seriously challenged to restore itself to pre-COVID levels was worrisome and money is quickly making its way back into the consumer staples sectors and a place to capture the new mood swing stemming from economic slowdown fears, a resurgence of the coronavirus, social unrest, tensions with China.

Traders wanting to make a sector bet should trade the Consumer Staples Select Sector SPDR Fund (XLP) as the leading ETF that big money is involved with. XLP holds all the best of breed stocks within its top positions that include food, beverage, tobacco, paper products personal care and essential big-box retailers. The top ten positions occupy 70.81% of total assets.

A view of the one-month chart to XLP clearly shows out quickly the sector was sold down at the expense of travel, transportation and industrial stocks. At its current level, XLP is sitting on a key trendline that is support for what should be a good entry point.

It’s an interesting set up for aggressive sector traders to take full advantage of per my buy signals to maximize optimal entry points. I’ll be looking to trade this sector for those that want to trade on our signals within our Aggressive Power Trader advisory service.

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TRADE OF THE WEEK

Proctor & Gamble (PG) is the top holding within XLP and a member of the Dow Jones. The stock is trading well off its all-time high of $128 and has plumbed a recent low of $116 where a reversal is just now underway. The 5-day chart below shows a rising trend line right above $116 where the stock is attracting buyers.

Applying our AI tools, the Seasonal Chart is bullish on PG for the next 20, 30 and 50-day periods, making for an excellent trading candidate to trade actively. It’s always a good practice to stick with a horse that keeps on winning until it doesn’t.