Power Trading and Markets – December 15, 2019
Power Trading and Markets – December 15, 2019
Welcome to our weekly publication of Power Trading and Markets (PTM), a service of YellowTunnel.com that works in close relation with Tradespoon.com to bring readers a higher level of trading awareness and discipline backed by AI-driven research and the most advanced trading algorithm available to individual traders.
A winning trading formula is born out of the sophistication of my platform's underlying algorithm. Our models take into account options volatility, statistical correlations with indexes and proprietary technical and fundamental analysis conducted in real-time, among other factors.
We leverage advanced artificial neural networks that constantly self-learn in order to apply the best-fitting models to a particular stock or ETF in order to generate highly accurate signals.
In each issue, we give a tight summary on the trading landscape, highlight a top performing sector that we’re actively trading in and spotlight at least one stock or ETF that is demonstrating strong short-term performance. We also provide a look ahead as to what the traders should focus on for the week ahead where traders should consider timely set ups.
OUR TRADING MODEL
Within our Aggressive Power Trader trading list, trades are recommended in our Tradespoon Live Trading Room as well as having access to my Watch List.
YellowTunnel 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.
When looking to execute recommended trades, 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 I usually allocate less than 5% of the portfolio if I hold a position overnight. On average, less than 1% of the portfolio should be allocated if you hold a position less than 1 day.
For the best results, I personally 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.
CURRENT TRADING LANDSCAPE
News of a formal “Phase One” trade deal between the U.S. and China broke last Thursday, sending the major averages higher. The Dec. 15 tariffs will not go through, but the market didn’t overreact to the news. The S&P 500, Dow Jones and Nasdaq Composite were little changed on Friday after setting incremental record highs earlier in the session. I view this action as trade war narrative “exhaustion.”
The USTR stated that the tariff rate on $250 billion of Chinese imports will remain at 25%, the tariff rate on $120 billion of Chinese imports will be cut to 7.5% from 15%, and China will make substantial additional U.S. farm purchases in the coming years. Preceding this statement was a lot of mixed reporting, presidential tweets, and a Chinese trade briefing that confused market participants.
Chief U.S. trade negotiator Robert Lighthizer says those reporting on the deal should be skeptical of whether China would keep commitments, but there will be no new tariffs as long as talks continue in good faith. China will purchase $200 bln in US goods, which will include $40 bln in agricultural purchases and the issues of forced technology transfer and IP theft will be in Phase Two.
I’m very skeptical of China changing their internal laws to create a transparent system of mutual accountability on these two fronts, and given how long it took to achieve such a minor milestone, anything Phase Two related will likely come after the 2020 elections.
In the U.K. the Conservatives have won a majority in the UK's general election and Boris Johnson’s plan to move ahead with Brexit will go into action. The British FTSE 100 rallied 1.1% on the news, as did the rest of European markets, defying critics that predicted a big sell off if Brexit was passed.
I expect shallow corrections in the next two weeks and so far, the bullish trend is intact. Please watch 304 and 307 support levels using SPY. I believe market will be range bound in the next 2 weeks and potentially make new highs last week of December/first week of January. Healthcare, Semiconductors and Utilities are set outperform the stock market short term and any “sell the trade news” profit taking.
Friday’s tape showed further conviction in the ongoing rotation into select deep cyclical stocks within industrial and metals and mining stocks, sectors we have recently highlighted. We are buyers of the sector ETFs – SPDR S&P Metals and Mining (XME) and Industrial Select Sector SPDR (XLI) on timely dips.
The trade deal with China removes a dark cloud over the cyclical sectors and gives rise to the notion that a wave of analyst upgrades will be forthcoming to validate the bullish momentum seen in a number of key leading stocks. As 2020 comes into view and global PMIs showing incremental improvement, traders should be looking to feature stocks in manufacturing, transportation, materials, metals and mining companies to trade for 1-5-day periods that our signals identify in on our Watch List as well as within the Live Trading Room sessions.
Both the XLI and XME have powerful short-term charts as indicated by the rising 10-day moving averages for both ETFs. Shares of XLI have broken out of a trading range going on two years, and has done so without the help of its top holding – Boeing Co. (BA) at 8.05%. So, when that stock gets back into play at some point, and in my view it will, shares of XLI will trade like a coiled spring.
In the very immediate sense, our Stock Forecast Toolbox is giving XLI an “A” rating to be long the shares over the next 10 days. Again, be on the lookout on the Aggressive Power Trader Watchlist for when XLI might appear.
Shares of XME are also showing excellent short-term relative strength on the back of some sharp advances in some of its components, one of them our Trade Of The Week. XME shares are trading around $30 after spiking up through major resistance at $28, breaking its protracted downtrend and punching through its 200-day moving average like a hot knife though butter on a surge in average daily volume.
My Stock Forecast Toolbox is giving XME a “B” rating and shows near-term resistance to be up at $31.35 over the next 10 days. This is a nice 2-point trading range for aggressive traders to work this ETF for steady profits.
TRADE OF THE WEEK
Of the stocks that is on a tear within the XME ETF, Freeport-McMorRan Inc. (FCX) is the hottest performing copper and gold company on the board and we are buyers of this leading commodity stock per my indicators. As of December 31, 2018, the company's estimated consolidated recoverable proven and probable mineral reserves totaled 119.6 billion pounds of copper, 30.8 million ounces of gold, and 3.78 billion pounds of molybdenum, as well as estimated proved developed oil and natural gas reserves totaled 7.2 million barrels of oil equivalents.
Earnings for FCX are forecast to soar from 4 cents in 2018 to 55 cents in 2020 on a 6% jump in revenues to $15.26 billion. BoAMerrill upgraded the stock to Buy from Neutral on November 13 and UBS maintained its Buy rating and raised its price target to $14.50. The stock trades at $12.80 following an 18% rally in the shares during the past two weeks. From the chart below, the stock is in the midst of a powerful breakout.
Buying FCX on dips will be tricky. The stock carries a strong buy signal from our Seasonal Chart – giving 3 out of 4 “higher” readings for the next 20, 30 and 40 days.
I’m sure I’ll be covering XLI, XME and FCX in the Live Trading Room events where I lay out the parameters of each trade whereby traders determine their level of risk for each trade within the recommended range outlined and we move on to the next trade and do it again and again. For stocks like FCX that have jumped, consider buying a half position and another half on any market-related pullback.
It’s a truly hands-on system and personal approach that lends itself to building a high level of confidence for grooming traders with constant coaching and my guiding of each trade using the tools I’ve created.
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. Each day at 8:00 PM and 8:30 AM CST, we provide our Top Bullish and Bearish Stocks, each with an Entry Point. Our signals are meant to last 1-2 days. Below are actual recommendations with parameters found on our YellowTunnel Watchlist.
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 that exceeds that of an institutional proprietary trading shop.