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RoboStreet – July 29, 2021
Another Round Of Rotation Just Ahead
Mega tech stocks have led the market to new all-time highs on strong earnings and the notion that the sector worked best during the worst times of the pandemic last year and into early 2021. They have been considered safe havens of sustainable growth during periods of lockdown, and with the recent spread of the delta variant, money flows back into FAANG and other mega tech stocks have dominated the market landscape.
With that said, value and cyclical stocks have spent much of the past few weeks consolidating as bond yields fell in conjunction with the narrative that global growth would slow due to another wave of Covid-19 hitting recovering economies. That scenario seems to have run its course where it can be argued that it’s time to buy back into value stocks at their current discounted prices and look for a bullish move to materialize.
And remember we’re not talking about day-trading here. I’m looking for 50-100% gains inside of the next 3 months, so my weekly updates are timely enough for you to act.
The $SPY started its correction and broke through the key short-term support level at $438. The technology stocks led the market this week with GOOGL and AMD outperforming the market. SMH, XBI, and IWM gained over 1% after FOMC meeting notes were released.
The $DXY has broken above $90.60 resistance and has confirmed its breakout. The next level of resistance is at $93. The $TLT continued to trade higher and has more room for the upside (lower yield).
Based on the steep correction in the reflationary stocks, strong dollar, and overbought technology stocks, the market will continue the correction in July/August. The $SPY short-term support level is at $435, followed by $430. The SPY overhead resistance is at $445. I expect the next stage of correction to resume this week or next.
I would consider rebalancing the portfolio at this point to be more market neutral. The second wave of the sell will continue for the next 2-4 weeks. Market corrections are never a one-way trade.
Based on our models, the $SPY can pull back 5-10% from the all-time highs in the next 2-4 weeks. If you are trading options consider selling premium with October and November expiration dates.
Based on our models, the market (SPY) will trade in the range between $400 and $440 for the next 2-4 weeks.
A good proxy for getting back into the value trade is to consider the bank and energy sectors, both of which have been go-to leaders when money rotates back into value and deep cyclical stocks. For our RoboInvestor advisory service, our favorite stocks in these sectors are JP Morgan Chase & Co. (JPM) and ExxonMobil Corp. (XOM).
Both companies are the biggest by market cap in their respective sectors and the names institutional fund managers buy when they want to raise exposure. For our purposes, we rely heavily on our proprietary AI platform that has been years in development that has given our RoboInvestor members a big investing edge when sifting out where the best opportunities lie.
When we apply our AI-driven Forecast Toolbox to JPM, we get a Model Grade “B” rating for the stock with a six-month Predicted Resistance price point of $216.99 implying a 42% gain from where the stock currently trades at $153. That’s a big move that gets our full attention and is why we are long JPM in the RoboInvestor Portfolio.
Moving to the energy sector, ExxonMobil Corp. (XOM) is primed for challenging the recent 2021 high of $64.92 and pushing higher from there following the pullback in the shares during the month of July. Oil prices traded to $75/bbl, corrected to $68, and are back on the rise again. XOM is the second-largest natural gas company in the world and with prices of natural gas trading at multi-month highs of around $4.00/mcf. Additionally, XOM pays a dividend with a yield of 5.9% that is money good. It’s a sound bet in a sector seeing rejuvenated demand.
Our AI-driven Seasonal Chart of XOM is very bullish on the stock, posting “Higher” probability readings for the next 20, 30, and 50-day periods. Here too, we recently added XOM to the RoboInvestor Portfolio with the goal of seeing the stock break to new highs and keep pressing higher based on our AI models and strong fundamentals.
Where the rubber meets the road with any investment advisory service is how the track record stands up over time. RoboInvestor’s Winning Trades Percentage is an impressive 91.63% going back to April 2018. And while we are thrilled with this data point, our AI platform is always learning to increase performance constantly, because AI doesn’t sleep. It crunches data 24/7/365 which delivers trades with solid risk/reward profiles for our members.
Within RoboInvestor, we recommend blue-chip stocks and ETFs the cover indexes, market sectors, sub-sectors, commodities, currencies, interest rates, volatility, and inverse ETFs for shorting strategies. The service is unrestricted as to what it identifies, and ultimately it is my decision for final recommendations. After all, I’m putting my personal capital in on every trade we recommend to our subscribers.
Come alongside me and our community of AI investing members and become a RoboInvestor today. It just might be the smartest investment you make for all of 2021.
And remember we’re not talking about day-trading here. I’m looking for 50-100% gains inside of the next 3 months, so my weekly updates are timely enough for you to act.
*Please note: RoboStreet is part of your free subscription service. It is not included in any paid Tradespoon subscription service. Vlad Karpel only trades his own personal money in paid subscription services. If you are a paid subscriber, please review your Premium Member Picks, ActiveTrader, MonthlyTrader, or RoboInvestor recommendations. If you are interested in receiving Vlad’s personal picks, please click here.
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