29 Jan Weekly Forecast and Opportunities – 3rd Wave Breakout
Market Forecast Analysis: SP 500, Oil and Energy stocks, Biotech, Gold.
- SP 500 breaks out of 7 week base as part of Major Wave 3 up
- Gold hits 1220 resistance point we laid out and will try to rebound off 1184 pivot
- Opportunities setting up in Energy Stocks, Oil, Biotech- See charts
After an exhausting and at times frustrating 7 week sideways base pattern, the SP 500 and markets broke out as part of Intermediate Wave 3 of Major Wave 3 this past week. We had identified 2252 as key support weeks ago and 2285 and 2333 as our upper end targets ahead. We also have had 2406 as our upper end target we laid out a few months ago, so keep those figures in mind in the coming weeks.
You’ll note the 10 week EMA line (Green) in the chart below also is helping to define the uptrend.
Energy Sector: XLE ETF and OIL Charts
Energy has been stuck in a consolidation both with the Oil itself and the XLE ETF. There are opportunities here if Oil can get out of this 7-8 week base. ERX ETF is one way to play a possible breakout in Oil, it’s a 3x ETF with 3x leverage to the underlying XLE chart we show below: Key here is setting a stop where Oil breaks down to protect your play.
Below we show an ABC Corrective pattern in the XLE ETF, but we will need Oil to break out soon for this to turn up hard:
Oil Update: Needs to break out of this base, but bullish consolidation
Nice pattern here with 10 week EMA line acting as support. Its worth remaining bullish on Oil until this pattern breaks down which would require a drop below 50.71 in our view
Biotech Update: Bullish consolidation patterns abound
The XBI ETF is forming multiple bullish consolidation patterns. A Triangle, a Reverse Head and Shoulder, a higher lows uptrend, and a multi-week base. This means the potential for an explosive upside move remains for the time being. At SRP we positioned into LABU ETF this past week around 35-35.50 to attempt to benefit from a possible breakout.
Gold Update: 1220 resistance hit, 1184 support
This past week we ran into a double top at 1220 on Gold. We had pointed out this would be both a target on the upside as well as resistance point. As we approached we sold out of our NUGT 3x ETF at SRP for nice gains. We had indicated in our weekly report that Gold would have to get through 1220 for the GDX and Gold Miners move up to be confirmed, and it did not.
We would watch 1184 as key support to hold on a closing basis and for the time being we are on the sidelines:
Note below the 38% Fib at 1220 caused major selling and the downtrend line remains intact for now
3x ETF trading for big gains with reasonable risk:
In January SRP Members have banked nice gains on LABU, NUGT and EDC 3x ETF’s. We are long two 3x ETF’s currently per recent alerts sent out this past week.
As we continue this powerful 3rd wave up in the markets, 3x ETF’s continue to be a great way to play upside in various sectors without the single stock risks involved with stock trading. At SRP, we trade both 3x ETF’s and Stocks, which is a great way to mix up the risk reward spectrum. This past week working with ERX and LABU for example, and in past weeks during January making nice gains on LABU, NUGT, and EDC.
- 3x ETF’s work best if you base your trading set ups on the underlying 1x ETF or at at least as close a proxy to it as possible.
- Do not specifically chart out the 3x ETF security (NUGT, DUST, LABU etc) itself because the patterns are thrown off by slippage.
- First look at an underlying ETF like XBI for example in Biotech, then use that analysis to reverse engineer the outlook for LABU (3x ETF).
At SRP this swing trading of 3x ETF patterns is what we pioneered as a group back in the 2007-2009 window of the markets. We spent exhaustive amounts of time testing patterns and also learning how to enter and exit these leveraged ETF’s correctly. A difficult task because they can move 5-10% inside of 1-2 days, however a reasonable mastery of these volatile securities can provide out sized gains with reasonable risk. A Swing Traders dream, but a nightmare if executed poorly as the leverage can go against you fast. You need to know where and how to set the stops, when to add to the position, and when to exit the position and how…. SRP members receive our alerts on these securities on a regular basis.
Watch Lists: 21 Symbols to review for upside potential ahead
This week we have a good sized list of Stocks ripe for further review for Swings:
As we said, all great traders work off watch lists that are active. At SRP we provide these as part of our membership services and try to update them during the week in the morning reports. Nearly every week there are multiple winners on these lists, this saves our members research time and gives them a short list to work off in addition to the actual Swing Trade alerts and details we provide with entry and exit advice. Consider this another arrow in your trading quiver as an SRP Member.
ESNT- This has been on our list multiple times during the base pattern. Mortgage insurance provider, finally broke out of the base this past week but still reasonably valued on fundamentals.
GRUB- Grubhub is the food delivery business that is forming the right side of a cup. Also has rising profit estimates.
IPHI- Also on the list multiple times of late, the Base pattern is now at 12 weeks. Often on the 13th week you get a big move. Involved in the Data Center technology side of the business
EVR- Building an ascending base pattern and breakout for this Business Consulting firm
NTAP- 10 week base pattern for NetApp, strong fundamentals
ORA- 5 weeks tight base pattern with strong fundamentals
AGX- Breakout of 8 week base with strong fundamentals, has been on our list recently
EXP- They beat the earnings estimates, and in construction business benefiting from Trump policies
PLAY- Dave and Busters has been on our list as well weeks ago just before it broke to the upside. 8 week base since to the 10 week Moving Average line, PE Ratio of 27 with strong growth
MXL- Chips are hot, in a 3 weeks tight base
Stocks off a Screen we ran: 500,000 volume or more, PE less than 25, Technology sector, Good fundies
CSIQ- Possible that Solar Stocks are working on a cyclical bottom
GLW- Breakout for Corning as the Fiber business is strong
PLAB- Nice 8 week base pattern
TSL – Solar
Strong Stocks with good accumulation:
LOGI- Logitech broke out, has A+ Accumulation, near 52 week high
ORBK- PE ratio 16, A accumulation, Broke out to 52 week high
RP- B+ accumulation, Breakout near 52 week high
DVMT- Dell Technologies, PE ratio 17, Breakout, A- Accumulation
GKOS- Cup and Handle pattern for Glaucoma solutions provider, recent IPO, 3 weeks tight base
TTD- An SRP Long position, we sold 1/2 this week for 9% gains but holding 1/2. Advertising solutions provider, recent IPO