Power Trading and Markets – March 20, 2020
Best Stock To “Pop”
Welcome, everyone to another big week at Yellow Tunnel, and what a week it’s been for traders of all levels and backgrounds. It’s exactly in times like the present when more heads than one help to manage 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 that lead to success within our trading portfolios while also providing for a rewarding experience.
CURRENT TRADING LANDSCAPE
As the news of the lockdowns in various cities and counties are announced, we brace ourselves for what is to come. My parents are glued to the tv, my kids to their phones, and I am glued to the market charts. However, I truly believe that putting everyone on a mandatory lockdown will speed up the process of self-isolation and will force people to stay home. Once this occurs, the virus will stop spreading and we can begin our road to physical, mental and financial recovery. Let us all do our part for our future and let us stay calm, stay mindful and stay home.
The markets were able to stage a comeback starting last Thursday, as the U.S. government revealed details behind fiscal stimulus and quantitative easing. Despite the strong rebound heading into the weekend, the market continues to face uncertainty due to the duration of the spread of Coronavirus. As more cities in US imposed full lockdown , it is only a matter of time for new cases of Coronavirus to decelerate.
SPY tested $230-240 level, which is December 2018 low and a 50% retracement from the peak of 2000 and 2007 bull cycles. This will take a market drop close to 33%, which is an average drop during the economic recessions. SPY is prone for additional 10-15% sell-off if the December lows are breached.
I expect the market volatility and the five 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. However, all asset classes are oversold and I believe the worst part of sell-off is behind us.
The market (SPY) will trade in the range between $230 and $302 levels for the next 4 weeks. I am still hedging my positions using SPY puts. I am adding SPY puts on oversold rallies to my positions as I expect $230 level on SPY will be broken in next 1-2 weeks.
I expect short term rebound to start next week but it will be short-lived and 230-240 level will be tested again. I believe SPY will recover back to the $315 level as we approach summer as the spread of the virus will slow down in Europe and the rest of the world.
Please follow key support levels on TLT ($142), GLD ($145). As long as these support levels are intact, the market is prone forpullbacks .
Sector rotation is rampant as traders try to anticipate the news feed and impact the headlines are having on the market. Businesses are planning one week at a time and the forward data about economic growth and unemployment are sure to keep those sectors leveraged to the economy on guard.
One sector that is essential to daily life where earnings are most likely to not disappoint is in the consumer staples sector. Companies that make products that we need and not what we want is to be on the receiving end of fund flows that want to own recession-proof blue-chip companies with pristine balance sheets and hefty dividend yields.
The best way to play the sector as a whole is by trading shares of the Consumer Staples Select Sector SPDR ETF (XLP) – which is an excellent way to approach investing in this sector without having to exercise precision stock picking. XLP delivers a conservative basket of consumer-staples firms. The fund's holdings are nearly all large-caps, which investors may appreciate for their familiarity and stability. XLP's expense ratio ranks among the cheapest in the sector, its asset base is solid, and the fund's extremely strong liquidity keeps transaction costs low.
The top ten holdings for XLP listed below make up just over 71.39% 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 XLP currently trade within the current market correction, shares of XLP topped out at $65 and now trade at $52 and back down to where a strong 3-year support level is drawing some initial interest. So, this $50-$52 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 XLP, we can see from 20, 30 and 40 days out, my indicators are implying shares of XLP will rally, and therefore deserve being put on our watchlist for a bullish trade.
While we are getting a bullish signal in XLP, we want to be sure we are buying into the stock with the market’s wind to our back. I want to see a definite and tradable bottom in place before we pull the trigger on this ETF or any stock for that matter. This is why for traders, it’s imperative to have my AI tools working for you. There is no substitute for rich data that is being crunched 24/7, so we can get the price and time to buy right.
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TRADE OF THE WEEK
Of the top ten holdings within the XLP ETF, the most compelling stock to trade at this time in my view is Coca Cola (KO), which holds the number two spot among all holdings.
The company, manufactures, markets, and sells various nonalcoholic beverages worldwide, providing sparkling soft drinks; water, enhanced water, and sports drinks; juice, dairy, and plant-based beverages; tea and coffee; and energy drinks. It also offers beverage concentrates and syrups, as well as fountain syrups to fountain retailers, such as restaurants and convenience stores.
The company sells its products under the Coca-Cola, Diet Coke/Coca-Cola Light, Coca-Cola Zero Sugar, Fanta, Fresca, Schweppes, Sprite, Thums Up, Aquarius, Ciel, Dasani, glacéau SmartWater, glacéau Vitaminwater , Ice Dew, I LOHAS, Powerade, Topo Chico, AdeS, Del Valle, fairlife, innocent, Minute Maid, Minute Maid Pulpy, Simply, ZICO, Ayataka, Costa, dogadan, FUZE TEA, Georgia, Gold Peak, HONEST TEA, and Kochakaden brands.
For 2020, revenues are forecast to grow by 3.8% to $38.7 billion and earnings are estimated to increase by 5.2% to $2.22 per share.
Shares of KO are trading well off their recent highs, down at a level not seen since early 2016, currently changing hands at $41.
My Tradespoon Seasonal Chart has turned bullish on shares of KO, flashing 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 33% off its high in a sector that is seeing strong rotation.
My AI platform has the tools to buy and sell KO in a way that will produce fast profits in repeat fashion. My AI tools pinpoint specific bands of entry and exit points that provide the ability for traders to be nimble and consistently profitable.
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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.
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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.