Stocks Levitating to New Highs as Virus Fears Subside

RoboStreet – February 20, 2020

Stocks Levitating to New Highs as Virus Fears Subside

While the spread of Coronavirus still very much a threat, the pace of newly reported cases is falling by the day and investors are sensing the worst for this outbreak has already occurred. Assuming this is a reliable scenario, it would explain the bullish price action for the market that had the S&P and Nasdaq trading at new all-time highs.

Many leading stocks that are heavy-weightings in the indexes are technically very extended. And it is hard to tell where or when the next downside catalyst will come from for the bulls to contend with, but it might well related to renewed trade friction with China following recent indictment filed against Huawei. 

 “I’m investing my own money in each and every stock as my AI platform identifies.”

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.

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Just this past week,  Hauwei and two of its subsidiaries were charged with two serious counts of conspiracy and racketeering. As reported, the U.S. government charged the Chinese company attempting to steal trade secrets and federal racketeering which surely intensifies the current administration’s legal fight with the telecommunications giant.

In their latest news release, the Justice Department said: “The new charges, in this case, relate to the alleged decades-long efforts by Huawei, and several of its subsidiaries, both in the U.S. and in the People’s Republic of China, to misappropriate intellectual property, including from six U.S. technology companies, in an effort to grow and operate Huawei’s business.”

It wouldn’t take much for the market to give back some of the snapback rally gains that created a “V-bottom” pattern that is not popular with most technicians. To that point, I expect the market volatility to persist. I would not chase the market at these levels and I am waiting for SPY to retest the $330 level. Based on the stock forecast toolbox model, SPY might reach a $340 level on the upside. I expect the market to trade between $330 and $340 levels. 

I only expect shallow pullbacks starting next week. 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 to shallow pullbacks. With that said, I remain bullish on the pullbacks, as long as the market is above $330 level. Investors should consider buying targeted stocks and ETFs near $330.

One sector far less crowded after falling from great heights is the cannabis sector, where there has been great destruction of capital amidst a huge shakeout. Of the many colorful and promising story stocks that were bet heavily on, most have turned out to be a complete disaster leaving a trail of carnage. 

However, now that that shakeout seems to have run its course, there are a couple of stocks that are turning higher on improving fundamentals. One of them is medical cannabis leader GW Pharmaceuticals (GWPH). The company manufactures the drug Epidiolex for the broad usage in rare epileptic conditions like DS and LGS. Epidiolex is projected to procure between $1.2 billion and $1.5 billion in peak annual revenue.

In mid-January, shares of GWPH started to trade off a four-month bottom after the cannabis-based medicine company forecast better-than-expected sales of Epidiolex. The company is expecting fourth-quarter revenue of about $108 million and about $309 million for the year. Analysts surveyed by FactSet estimated revenue of $102.4 million for the fourth quarter and $304.6 million for the year, up from a previous estimate of $100.2 million for the quarter and $302.1 million for the year. 

With this in mind, Epidiolex sales are expected to near $104 million for the fourth quarter and about $296 million for the full year. “Our fourth quarter and full-year results for 2019 reflect an exceptional launch year for Epidiolex,” said Chief Executive Justin Gover in a statement. “Our goal in 2020 is not only to continue to drive Epidiolex growth but also to leverage our world leadership in cannabinoid science to advance our pipeline.”

Earnings are set to be released on February 25. From a technical standpoint, GWPH stock is challenging its 200-days MA overhead, where if penetrated should free the stock up for a notable move higher as momentum traders move in. The stock is trading around $127 with first resistance at $135 and then up at $150, which looks very doable on a solid earnings report.

The other driving force that could propel the stock higher is the large short position that exists. With 30.9 million shares outstanding, there are 5.95 million shares or 19.2% of the float is short. As far as short positions go, this is sizeable. Anything above 10% is a serious potential catalyst for a “short squeeze” that creates a sudden upside impact. 

Within the RoboInvestor Portfolio that I personally invest in every recommendation, we have a highly diversified set of stocks and ETFs that have been producing a winning streak where 90% of all our trades make money – an unheard-of performance track record. We have exposure to utilities, gold, healthcare, industrials, financials, technology and retail where market leadership has been strongest. 

While there will be air pockets of selling in a market that has been in a powerful uptrend, the proper use of AI tools, such as my Tradespoon tools, provide accurate indicators of when to pull back on the reigns and when to get fully invested. At present, we are long select stocks and ETFs, but not fully invested and with stocks like GWPH popping up on my screens as potential long candidates, it is imperative that I utilize the power of AI to consider when to add such a name to our model portfolio. 

I want to highly encourage all readers of this column to take a hard look at their investing acumen and examine if your system of investing is producing results anywhere near what is being generated with the AI-driven platform of RoboInvestor. If not, take a few minutes, join today and start booking profits on every 9 out of 10 trades. This is how real wealth is created. Winning 90% of the time your money is at risk. Come alongside me at RoboInvestor and let’s make 2020 a year to make serious financial progress with your portfolio and a year to remember. 

 “I’m investing my own money in each and every stock as my AI platform identifies.”

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.

Click Here – To See Where I Put My RoboInvestor Money

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