The Spread of Coronavirus Effecting Energy, Leisure, and Transportations earnings
Welcome everyone to another big week at Yellow Tunnel. Our team is fully committed to improving members’ trading performance, psychology, awareness and trading skills that generate aggressive trading strategies, resulting in a high percentage of consistent profits. We strive to provide the right set of tools and trade discipline the lead to real financial success within our trading portfolios while also providing for a rewarding experience.
CURRENT TRADING LANDSCAPE
The ground has really shifted under the market as panic has set into the fixed-income markets where Treasury yields are crashing and the spreads on non-investment grade debt is widening out aggressively. But we need to be aware that the bond market operates out of fear and the stock market operates out of greed. For bond investors to panic is not abnormal. It’s just this time around it is elevated.
It’s been a wild week for stocks. The markets have given up all gains from last week’s rally attempt, as the spread of Coronavirus has intensified. Most indexes are trading near their 200-day moving averages. At this point, the bulls were able to stage a comeback and the bottoming process has begun. One of the most encouraging observations is that QQQ (technology sector) is above its 200-day moving average, 10-year yield is below 0.90% and, I am thinking about refinancing my mortgage.
The question is whether or not this is the end of the bull cycle or just a temporary 10-20% correction. I remain bullish on the market and do not believe that the US economy will enter into a recession.
I expect the market volatility and the three percent daily market moves to persist. At this point, the support is at $280-285 on SPY.
The market (SPY) will trade in the range between $285 and $320 levels for the next 4 weeks. I am still hedging my positions using SPY puts. I believe the market will retest $285 level in the next 1-2 weeks.
The rebound this week will be short-lived and potentially reach $315-325 level on the upside.
Please follow key support levels on TLT ($142), GLD ($145), and DXY ($98). As long as these support levels are intact, the market is prone for pullbacks .
Against a backdrop of high volatility and wide price swings, there is no place more comforting to trade than within the utility sector. Just from a fundamental standpoint, it represents the most logical investment proposition. We all need to keep the lights on, power up our homes, offices and businesses. That goes without saying.
Electric power companies are, for the most part, domestic operators with little to no competition in their respective regions. They have protected pricing power. Most power companies have formidable balance sheets and they pay some of the highest blue-chip dividend yields afforded to investors.
The best way to play the sector as a whole is by trading shares of the Utilities Select Sector SPDR ETF (XLU) – which is an excellent way to approach investing in this sector without having to exercise precision stock picking.
The fund invests primarily in companies that produce, generate, transmit or distribute electricity or natural gas. There are 28 companies in this ETF.
The top ten holdings for XLU listed below make up just over 62.42% 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 XLU currently trade within the current market correction, shares of XLU topped out at $71.10 and now trade at $66 and back down to where a strong 5-year rising 50-week moving average converges with the stock price. So, this $65-66 level has a lot of technical credibility, especially given how the market is looking at this sector to offer a proxy for bond yields.
Because the daily price action is so volatile, using a longer-term chart to illustrate how far ahead of the utility sector traded above its long-term moving averages. This pullback is very healthy and offers traders and excellent opportunity to trade a sector with much more attractive risk/reward than at any time in many months.
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TRADE OF THE WEEK
Of the top ten holdings within the Utilities Select Sector SPDR ETF (XLU) ETF, the most compelling growth story in my view is Duke Energy (DUK), which holds the number two spot among all holdings.
Duke Energy through three segments: Electric Utilities and Infrastructure, Gas Utilities and Infrastructure, and Commercial Renewables. The Electric Utilities and Infrastructure segment generates, transmits, distributes, and sells electricity in the Carolinas, Florida, and the Midwest. This segment serves approximately 7.8 million retail electric customers and owns approximately 51,144 megawatts (MW) of generation capacity.
The Gas Utilities and Infrastructure segment distribute natural gas to residential, commercial, industrial, and power generation natural gas customers; and owns operates, and invests in pipeline transmission and natural gas storage facilities. It has approximately 1.6 million customers, including 1.1 million customers in North Carolina, South Carolina, and Tennessee, as well as 535,000 customers in southwestern Ohio and northern Kentucky.
The Commercial Renewables segment acquires, owns, develops, builds, and operates wind and solar renewable generation projects, including nonregulated renewable energy and energy storage services to utilities, electric cooperatives, municipalities, and commercial and industrial customers. It has 22 wind, 126 solar, and 1 battery storage facilities, as well as 11 fuel cell locations with a capacity of 2,282 MW across 19 states.
Shares of Duke Energy are trading in a wide range of late, but are maintaining their technical integrity per the one-year chart below.
My Tradespoon Stock Forecast Toolbox is giving the stock an “A” model grade rating with a near-term price resistance level of $103.71 for the next ten days. With the stock trading at $97, there is a lot of room for trading this name and making some great profits from it – assuming you’re using the right trading tools.
My AI platform has the tools to buy and sell DUK in a way that will produce fast profits in repeat fashion. Once we’re on a trusted name that our tools fall in love with, then we’re just taking full advantage of the situation – and so should you!
I’ve been trading Duke Energy successfully within our Tradespoon premium trading services and is a go-to name in the sector for aggressive stock and options trades. My AI tools pinpoint specific bands of entry and exit points that provide the ability for traders to be nimble and consistently profitable.
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.
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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.