April 6, 2020
Near-term Market Forecast: The market environment is neither favorable or unfavorable for appreciation of these stocks in the weeks ahead.
The S&P 500 generated a bullish confirmation signal over the past week as both the Nasdaq and S&P 500 cleared the prior swing high. A technical trend change signal to the upside. The small cap Russell 2000 continues to lag and is lower since the last update but is looking like it wants to challenge the prior swing high as well. A bullish confirmation signal this soon after a bearish signal often fails to lead to a sustained uptrend. Perhaps the market will still challenge or even go below the March lows before starting a more sustained uptrend. This sometimes occurs initially after a bullish confirmation signal. The market may be rallying into the news that new cases per day in the US are about to peak. The VIX volatility index has been trending lower and is now down about 50% from the highs. It would be a good sign if it fell into the 20s. The strategy is calling for holding positions in the 3 stocks below and we are taking off the RWM inverse Russell 2000 ETF at least until the next update:
This Weeks Stocks:
This week we have no new stocks. So, to follow the system, you would do nothing. If you were using the optional inverse ETF strategy, you would take the profits on it using the same technique we use for the stocks coming off the top 3 list. If you are just starting, you would buy equal dollar amounts of all 3 stocks when the market re-opens in your risk-capital account dedicated to this system. Be sure to view the complete introductory video before getting started.
Stock #1 – REGN
Optional Protective Stop-loss Point: $337.90 (Be aware that a tighter stop-loss will likely severely reduce performance over the long-term based on back-testing for this strategy. See upgrade and performance video for further information and insight on optional stop-loss orders.)
Stock #2 – NFLX
Optional Protective Stop-loss Point: $288.90
Stock #3 – AMZN
Optional Protective Stop-loss Point: $1559
Another market-beating green week for the strategy with all 3 stocks and RWM gaining ground. The gains were led by REGN which added about 8%. The S&P 500 was up less than 2% while the Russell 2000 small cap index was lower over the past five trading days.
As discussed above, a bullish market signal this soon after the start of a correction is precarious so we would not be surprised if we get another sharp pullback and a test of the lows.
If we had to pick the best spot to get more aggressive it would be after the first multi-day pullback after a bullish confirmation signal and then a close above the prior days high on the Nasdaq with some follow-through the next day. Perhaps on good news developing. Picking an exact bottom, though, is often a fruitless pursuit. Its a game of probabilities based on historical tendencies and not certainty.
Brian C Neall
Founder – Investtobefree.com