08 Jan Forecast and Ideas Report- Breakout Nigh?
In this Sunday Edition:
- 19 day consolidation could lead to breakout this week in SP 500
- GOLD hits 1183 resistance
- Biotech may lead again?
- Post IPO Base trading and List to consider
- Swing Trade ideas list
The Big Picture:
A nice 5 week base pattern in the SP 500 should setting the markets up for another leg up as we work towards our high end 2406 target we put out several weeks ago. We project that we are still in a Major Wave 3 up from the Intermediate 2 bottom near the Election at 2083. The rally for Intermediate Wave 3 can take us as high as 2406 in our view, and the next pivots are at 2285 and 2333 as our SRP Members have been advised on a regular basis. Most recently the dip to 2233 was within 1 point of our 2232 support target and then we have managed to lift up to the resistance zone you see on the chart below
We calculate trading day 19 of this base ended Friday, and we expect a large move within a few days out of this base
Daily chart below shows 19 day base as part of Intermediate Wave 3 from 2083 pivot
Weekly Chart below updates everyone on our long term Wave Count
Sentiment measures are still running at extremes with 3 Bulls to 1 Bear in Advisory Surveys, but as we have said in our reports, this would be confirming of the nature of a 3rd of a 3rd Elliott Wave pattern. This is also why pullbacks are pretty shallow as buy the dip mentality is common during this pattern. Once we reach as high as 2406, we would then expect the potential for a much deeper pullback as Intermediate Wave 4 would commence, this is likely somewhere between 2333 and 2406, but one week at a time.
Oil completed a sloppy 7 wave sideways corrective pattern, sometimes referred to as a Triple Three or ABC-X-ABC pattern. These work off overbought conditions and sentiment. In the case of Oil, it rallied from $26 to $52 and then spent a lot of time completing the Triple three pattern. We can project 67-70 as our longer term trend target for Oil.
Below we show again the 7 wave pattern, though sloppy, the final C wave was truncated which as a Bull signal.
GOLD Update: When it’s trending it’s ending, how to trade on crowd patterns
Gold ran right up to our 1183 resistance target zone we laid out in our Weekly chart last week. We were tweeting on Stocktwits during the week that “when it’s trending it’s ending”. What we meant was that when we see NUGT, GLD, JNUG, GDXJ and the usual suspects all top trending on Stocktwits, it means the bulk of the near term upside move is ending and you should either take profits or go for a reversal trade if aggressive like JDST or DUST. The day after our tweet, JDST was up 20% in a 24 hour window.
We used a Fibonacci human behavioral pattern calculation to come up with the 1183 issue on GOLD before it got there, so again if you were long NUGT or UGLD or JNUG for example you would have thought to sell as we approached 1183.
GOLD of course will trade in a large part off the US Dollar, earlier this past week we posted up this Weekly Dollar chart, and you can perhaps expect that the total upside move in the Dollar is not yet over, hence giving Gold some resistance to deal with:
Biotech Update: XBI triggers buy signal on LABU ETF for SRP
SRP members got long LABU 3x Bull ETF this past week once we got a small pullback and rest pattern in the XBI ETF which we base this 3x trade off. We missed the first spike move up off the 58.60 bottom area, but then upon the pullback and rest we had another opportunity to act mid week.
Below you can see our XBI Chart we sent out on Thursday afternoon, so far LABU has continued higher and we will see if it can reach our 33% gain potential target or not. At SRP we tend to take profits on the way up on 1/2 our position to reduce risk in case of unexpected reversals.
Updated XBI Chart as of Friday Close
The POST IPO Base- ICHR- QTNA Samples
Last week we had a few Post IPO Base stocks on our Weekly watch list . Post IPO Base patterns are some of the best to swing trade off assuming the fundamentals and valuations are meeting our standards.
This past week ICHR and QTNA broke out big after nice consolidations. The reason we look for Post IPO Bases at SRP is that often the trading float is still fairly small within the first 180 days after an IPO when shares are still locked up. In addition, there is more excitement and interest due to the recency of the company listing their shares. In the case of QTNA we have the buzz over wireless technology and modems for various IOT Devices. ICHR is a component supplier for the fast growing Chip Equipment industry and the IPO went off below the initial expected range. Often when the underwriters price below the range, its due to market being soft at the time. Therefore you can often get good companies at a better valuation post IPO than in a hot market.
Some recent IPO’s worth looking further into:
POLA INSW GDS ARNC ZTO FRTA CRSP
Swing Trade Ideas: We like to provide a list each week worth further near term review
AQMS- 8 week base pattern, Aqua Metals we first covered at $8.80 at SRP, now at $12.75 we would love a pullback to 12-12.25 to re-enter here for a breakout. Building plants that process used car batteries in an efficient manner, Interstate owns 20%.
X- US Steel, the Steel stocks have been consolidating and this is in a nice 6 week base pattern
CLF- Iron Ore producer, plays off the Steel market. A consolidating and breakout test in play here, an 8.25 pivot holding could be bullish
IPI- Intrepid Potash, mostly a chart pattern call here but also in the Agricultural sector. Currently at $2.11, a pullback test to 1.90 area would be a good entry if not here for a swing. Set a stop below 1.87 if so.
LOXO- Loxo Oncology. A 3 week base pattern following a huge move to the upside could be bullish. We would not be shocked to see a brief spike down to 30-31 area from $34 area here, which could be a good entry for swing.
IPHI- Coming up in a 5 month base pattern, if this can hold the $42 area it could lead to a nice breakout. They help companies build large-scale cloud data centers, service provider networks and virtual data centers.
CARB- Carbonite provides cloud and hybrid backup solutions. This is in a 6 week corrective pattern and a hold near 15-15.50 could be a good re-entry
AMAT- Chip equipment maker in an 8 week base and a nice entry point here near 32 with strong growth
TEDU- 18 week base for this Professional Services education provider out of China with strong growth.