Nvidia To Surge Again
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.
It’s been a dramatic week for the stock market where tremendous sector rotation is underway with more of the same fund flows out of high price-to-sales tech and growth stocks into deep value and cyclical stocks with energy leading all sectors. The heavily-tech weighted S&P and Nasdaq are retrenching to key support levels that are being retested as of Friday, but I think the intra-day lows seen on Monday will hold.
Retail sales for December came in well below estimates due to Omicron, inflation, and supply chain bottlenecks, all of which should see improving conditions in the weeks and months ahead. However, for the here and now, it’s a stock picker’s market with a lot of busted charts all across the trading landscape.
The start of earnings season is also triggering some doubts after the big banks and brokerages sold off on what were good fourth-quarter results but guided to more challenging times ahead for their trading desks. This ate into some of the bullish sentiment that had carried the bank sector to new all-time highs. That momentum has now faded, leaving energy semiconductors as the two strongest sectors going into the weekend. It’s a more narrow market and stock picking is definitely at a premium.
The $SPY pulled back to $462 and right below the 50 DMA. The value/reflationary outperformed the $SPY and was near the all-time high. The technology is below the 50 DMA, right below the key December low level, and above the most recent low.
The $DXY was under pressure and broke down at $94.50, right at the key long-term breakout level of $94.5 and below the 50 DMA. The $TLT traded higher and closed at the 200 DMA. The $VIX traded higher, at 20 levels.
After a recent rebound, the Technology stocks broke the long-term bull trend. The $QQQ started the second sell-off wave and can potentially reach the recent lows; the worst-case scenario is the 200 DMA.
I would be a seller of the high beta stocks into the rallies and continue rotating the portfolio into the value stocks ($XLE, $XLI, and $XLF). Since the DXY broke the long-term bull trend, I would accumulate $EEM, $XME, $SLV, $FCX.)
The $VIX has never reached the "extreme" levels one should expect another retest/marginal break of the recent lows in the next 2-3 weeks.
The $SPY short-term support level is at $456 (key short-term support), followed by $450. The SPY overhead resistance is at $472.
I would consider rebalancing the portfolio at this time and have an overall market NEUTRAL portfolio. I do expect potential sharp pullbacks (10-15%) in $QQQ followed by a rebound in the next two months.
If you are trading options, consider selling premium with March and April expiration dates.
"BUY" signal based on the Aggressive Power Trader Portfolio for tomorrow is at $462 level using SPY and the "SELL" signal is at $472 for short-term traders. Short-term, the market is overbought and due for a pullback in the next few trading sessions.
Based on our models, the market (SPY) will trade in the range between $450 and $480 for the next 2-4 weeks.
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Signals have historically averaged over 86% accuracy in my live trading since inception. Sometimes we hold position 2-5 days by using options (selling OTM Calls and Puts spread) and targeting 1% target gain and 1% stop loss using stock price. The green color should be interpreted as a bullish signal and the red 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 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.
Earnings Season is here and Bank of America is in the batter's box.
The last time we traded BAC on March 31st we had a 182.5% return on risk.
Let me repeat that, we had a 182.5% return!
That's a pretty good return after holding the position for only 1 day!
Be prepared: Bank of America (BAC) is scheduled to announce its earnings on January 19th.
This is my favorite time of year!
You’re Invited: Click Here
Looking at what is shaping up best following the 9% correction for the Nasdaq, my AI platform is getting bullish on the semiconductor and semiconductor equipment sector. I am always interested in trading the chip stocks when my algorithms are flashing buy signals, and as of late this week, I’m getting some green lights in the space.
The best way to trade the sector is by owning shares and calls on the VanEck Semiconductor ETF (SMH) – easily the most actively traded ETF that has all the right stocks in its top holdings that institutional fund managers want to own and trade.
Using our AI tools, when we input SMH into the Seasonal Chart, we get a “Higher” reading for the next 20-day period. This is a great indicator of a pivot area for the sector and as of Friday, we saw that in bullish price action with shares of SMH up against a very negative tape. This is the power of AI at work.
From the one-year chart, the 20-day (blue) and 50-day (yellow) moving averages are converging at an inflection point that should result in an upside move given the powerful revenue and earnings fundamentals for the top stocks in SMH. We’ll be looking to trade this ETF in the coming days. Don’t miss out when we alert our members to act!
TRADE OF THE WEEK
Of all the top ten holdings within SMH, our AI system has identified high-end chipmaker Nvidia Corp. (NVDA) as the stock with excellent upside potential from its current price of $265. The company is considered the de facto leader in advanced GPU, cloud, data center, gaming, and auto semiconductors while also out front in the whole new move into the metaverse.
According to the consensus of the 30 analysts that cover the stock, sales and profits soared in 2021 with Q4 earnings forecast to come in at $1.22 versus $0.77 per share for Q4 2020, implying a 58% Y/Y rise in profits. Source: www.yahoofinance.com. Nvidia continues to maintain its technological lead in the markets it serves and that is why it commands a premium to its peers from a valuation standpoint. The stock trades at roughly 50x, which coincides with its growth rate.
When we apply our AI-driven Forecast Toolbox to NVDA, we get a bullish Model Grade “B” rating with a 10-day Predicted Resistance price target of $288.08, making for high-quality, high-probability 13-point upside potential trade from its current price of $265. Again, having a proven AI program the pinpoints precise levels of entry and exit is how our service is so valuable to everyday traders.
The 6-month chart shows a strong technical case for the stock to hold last Monday’s low, put in a double bottom, and trade higher into the $288 price target level where its 20-day moving average lies overhead.
This is what our precision AI platform does for our members. It identifies, clarifies, and verifies high-quality trades like a clear and powerful uptrend in stocks like NVDA. By being a member of any one of our services, it’s these kinds of opportunities that our proprietary algorithms provide our members to look forward to every day, where they can put their risk capital to work on both long and short positions.
Through our services, we tie our Tradespoon Live Trading Room to manage the parameters of every trade. And we update our closed positions daily. Our AI platform works seamlessly to provide our subscribers with the most robust trading experience available anywhere in the market today.
The beauty of our AI-driven system is that we are always equipped to bring new trades ideas to our members. Trades in best-of-breed stocks and ETFs that are not yet recognized by the larger universe of traders.
We really pride ourselves on this kind of discovery process to bring trades with very high probability risk/reward parameters to members throughout each week. Our track record speaks for itself from the standpoint of a Winning Trades Percentage, Average Return Per Trade, and Net Gain.
Considering the choppy landscape of late, we’re taking advantage of market dislocation and valuation distortion. We’re striving to help our members ring the register all the time and this is why serious traders don’t trade without checking in with market-proven AI tools. Here are some examples of recently closed trades using our services.
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Have a wonderful week ahead and let’s create some meaningful wealth together in 2022!