The Powerful Wave 3 of 3 continues!
SRP Members have hit 15 of 18 swing trades for profits this year as Wave 3 rolls on. We closed out LABU ETF for a 16% gain this past week and saw our MOMO position rip higher this past week as well. Two new Swing Trades were alerted late in the week in the Technology and Energy sector as well.
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We have been projecting a rally to 2333 and 2406 pivots since December in our Forecast models and we have not deviated. This past week we finally broke out of yet another 2 week base pattern and rallied well over the 2295 barrier on the way to 2333. 2406 is a higher end pivot we have also discussed for a few months and remains intact, but we expect resistance at 2333 area- Dave
Here was our Jan 6th Chart analysis of the SP 500: You can see our 2406 note… so far so good. We had been projecting 2333 and 2406 pivots as far back as Post Election in November. These are Elliott Wave based projections
Here is the updated daily chart notes as of Friday’s close:
Market Forecast Analysis: SP 500, Gold, Oil, and Biotech, Financials
- SP 500 continues in Major Wave 3 with 2333 and 2406 targets intact
- Gold rebuffed at 1246, but we still see 1256 ahead
- Biotech looking strong for big breakout here shortly
- Oil in 9 week base pattern, refuses to break down
- ETF ideas
- Watch List Trading ideas
- SRP results and methodology for Swing Trading and more
SP 500: Int Wave 3 of Major Wave 3 continues- 2333, 2406
The beauty of Elliott Wave Theory can only be apparent when its kept simple as possible. We use weekly chart patterns and Fibonacci sequencing to pinpoint the most likely high and low pivots and make our forecasts. Keeping an open mind along the way and setting boundaries that we outline that are key to continue the current trend. During this rally up in the markets, the SP 500 index has performed as expected and now we are getting that breakout as Intermediate Wave 3 of Major Wave 3 continues higher. 2333 should be next, then a shot at 2406 remains.
Gold Update- 1220 taken out, now 1256 on tap
No change in our opinion from last weeks report. We see 1256 as most likely before a larger possible pullback. That said, we did get a pullback this past week to near the 1220 pivot, former resistance point.
The weekly chart below keeps it simple, the trend is still in the Bulls favor. 1256 is just a Fibonacci resistance window for now, and higher levels beyond that are in the cards. The key support is now 1220 to validate this forecast.
Oil Update- 9 week base pattern appears bullish, ERX ETF may finally move soon
Nothing has changed in our Oil forecast either, as we said last week “We want to see $50.70 hold”.
This past week it dipped down hard again, throwing off the Bulls briefly but still held. During the week in our Morning Reports we showed our SRP members an ABC-x-ABC pattern we felt was displaying once again. Often referred to as a “triple three” pattern. These are bullish when confirmed, and the final pullback this week was followed by a spurt higher late in the week. We may finally break out of this triple three pattern and 9 week base. If so, it has strong implications for ERX ETF and for Energy Stocks, and at SRP we will act accordingly.
Biotech Update- Looking strong for a breakout ahead- XBI, LABU ETC
We also continue to lean bullish on the Biotech Sector. This past week at SRP in the Morning Report we laid out some charts showing a possible small pullback and then surge coming. We repeat those below:
First the XBI ETF chart we sent to SRP members in the Friday morning pre market report is below. Under this chart is an LABU chart we did on Stocktwits on Friday showing a possible dip ahead, which did begin Friday afternoon.
Miscellaneous notes:
The NASDAQ 100 Index is leading the markets this year with a 7.1% gain year to date
Chinese stocks are in an uptrend, last Sunday in our Weekly report we outlined multiple names. BABA, NTES, JD, MOMO etc. and all were strong of late. MOMO is an SRP position and we are up smartly on that swing and still riding.
Sentiment indicators continue to run hot, which is common in a 3rd wave up. Bulls are near 4 to 1 over Bears now, this will begin to correct the other way once Major Wave 3 tops out.
Thoughts and opportunities: ETF’s, Energy, China, Biotech, Steel etc.
ETF’s are a great way to avoid single stock trading risk and also to use leverage to capture individual stock like gains at the same time. At SRP we use 3x ETF’s to piggyback on our Forecast Models for sectors such as Energy, Emerging Markets, Biotech, Gold and others as they come up. In the past 6 weeks we have had 4 11-15% gainers on 3x ETF trades alone which supplements our Stock trading alerts nicely.
Right now some ETF areas that are ripe for opportunity include Energy which has been beat down during the 9 week Oil base. This could include ERX 3x ETF, which would work off the XLE ETF. We do not have a position in this now but remains on our Watch list. If we see Oil break over $54 hard we would expect this sector to catch fire. We did pick up an Energy Stock swing trade late this past week to establish an initial position in this sector.
XBI ETF is the base security we analyze to determine LABU entries and exits. Right now we continue to see multiple Bull set ups emerging here as well.
China ETF’s are strong, along with the aforementioned Chinese stocks we brought up last week. FXI is a base ETF to monitor
Thoughts on Swing Trading Methods: Fundies and Charts combined are key!
We are primarily a Swing Trading service at SRP. A few of our tenets and disciplines…
- We prefer to look for stocks in multi week base patterns that have been dead money but we think are about to emerge out of a base. Recent samples include MOMO and IDCC which we are long.
- Using weekly charts often reduces the noise of a daily chart and helps you see the bigger picture.
- We prefer to use 13 day and 34 day EMA lines for both daily and weekly charts as these are human behavioral and Fibonacci sequence numbers.
- We focus 100% on the fundamentals AFTER we see a chart or sector pattern we like.
- We never trade a chart with out first drilling down and doing the homework on each company assuming its not an ETF trade.
We have seen too many traders eventually lose capital because they hunt for chart patterns all day long without a clue as to underlying fundamentals. Recent samples of breakdowns on charts many traders were chasing include TWTR, GRUB, YELP, and IRBT. A chart that looks good can be the siren that beckons you to take your money. At SRP we always trust but verify a chart pattern by reviewing metrics, balance sheets, product lines, relative valuations, management, and more.
Watch List for near term ahead: 12 ideas
This list below is where we start, vast majority of these companies have strong fundamentals and decent charts. We will use this list to do further drilling and culling of the names but often this list we put out weekly turns up big winners ahead. At SRP we cant alert every swing trade idea on the planet, but we can give our members some help with initial research work to build their own lists as well.
MT- Arcelor Mittal is a Russian Steel company, nice breakout on Friday and in a good sector
GGB- Steel stock
THO- Recreational vehicles are hot due to Baby Boomers. Breakout of 10 week base.
RDN- Mortgage insurer, 9 week breakout, PE ratio 12
FN- Contract manufacturers in the Electronics industry are strong. They beat estimates, PE ratio 16, near highs
PLXS- Also Contract manufacturer. PE 19, 10 week base pattern
COMM- On our list too many times to count of late. 2 weeks tight pattern, PE 16, Earnings due 2/23
AL- Air Lease we first covered post IPO around $15 a share a while back. Break out of 11 week base, PE 12, Growth 20%
BABA- 3 weeks tight base for the leader in Chinese E-Commerce, close to breakout
TLND- Recent IPO that many top money managers like
IPHI- 13 week base pattern, earnings were out this past week and strong. Has been on list multiple times
MS- Morgan Stanley- Financial sector could have another leg up after base building. PE 15, strong growth, 10 week base.
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