Welcome to our weekly newsletter where we provide an overview of the main US and UK indices, along with analyses of selected assets that are outperforming the market.
Let’s get into this week’s newsletter!
US & UK INDICES OVERVIEW
The S&P 500 closed 2023 with a gain of 24.2%; less than 1% below the all-time high. This is an impressive result, particularly in the face of forecasts by institutions, hedge funds, and many other so-called experts that were so confident that an impending recession, high inflation and the actions of the US Federal Reserve would result in a negative year for the S&P 500 and other main indices.
Regular readers of this newsletter will notice we never consider news topics, macro events or other commentaries. We base our trading strategy on price action, and let the charts dictate our approach. This is why we haven’t fallen into the common trap of going against the trend, nor top calling.
Our long term position, which we have repeatedly stated in this newsletter, is that the equity markets are in a bull trend, which commenced in 2009. Our position has proved correct, despite a series of pullbacks. Our deployment of patience and discipline during these periods bears fruit once the trends returns, as we are witnessing in the equities markets.
We continue to see individual stocks perform well. Our portfolio currently compromises over 20 US stocks. We have compounded a number of these assets, in turn, delivering excellent profit for our Phoenix community members.
The FTSE 100, the UK’s premier index, closed 2023 with an annual gain of 3.8%. Price remains range bound between 7200 and 7750. Should strength return, the next major area of potential resistance is the pivot high from 17 April at 7936. The all-time high is 8047. We continue to monitor this index, waiting for confirmation of direction.
OUTPERFORMING ASSET FOR THE WATCHLIST
Alpha Metallurgical Resources Inc. - AMR
Alpha Metallurgical Resources (ticker: AMR) formerly Contura Energy (January 2021), is a leading resources supplier with underground and surface mining complexes across Northern and Central Appalachia. In the 2012 Forbes Global 2000, Alpha Natural Resources was ranked as the 1847th-largest public company in the world.
We last wrote about AMR in September. Since then the price has gained over 35%. AMR has a history of breakouts with impulsive moves in price. AMR was in a strong trend between May 2021 and May 2022. Price then entered a long period of consolidation, until August, when price has again broken out and could be forming another powerful trend.
On the weekly time frame, AMR is trading above the 50 and 200 SMAs. Our proprietary tool, the Sublime trend filter, is green, reinforcing the bullish outlook.
Similarly, on the daily time frame, the Sublime trend filter is also green, further evidence of a favourable market environment. And price is trading above the 20, 50, and 200 SMAs, which are all aligned and diverging, indicating near-term strength.
Looking ahead, the next notable level of potential resistance is the $400 round number. There is a suitable distance between the current price and this level for a trading opportunity for our Phoenix community members.
OUTPERFORMING ASSET FOR THE WATCHLIST
Merck & Company - MRK
Merck & Company (MRK) is an American multinational pharmaceutical company that develops, manufactures, and markets a wide range of pharmaceutical products, including vaccines, drugs, and animal health products. The company was founded in 1891 and is headquartered in Kenilworth, New Jersey. Merck is one of the largest pharmaceutical companies in the world, with a market capitalization of over $200 billion.
Looking at the monthly chart, MRK has been very bullish since October last year when it broke out from a long period of consolidation. During that period MRK gained over 35%.
On the weekly chart, MRK experienced weakness during the second half of 2023, however price regained strength in December and January with gains of 6.4% and 7.6% respectively. The Sublime trend filter is green and the weekly 50 and 200 SMA are both aligned in an upward direction, indicating bullish momentum.
Looking at the daily chart, the price of MRK is currently trading above the 20, 50 and 200 SMA. The Sublime trend filter is also green, further confirming the bullish trend. As the moving averages are not fully aligned we will apply patience.
Overall, the outlook for MRK stock appears to be bullish, and the stock may continue to trend higher in the coming months. A breakout above the current all-time high could offer our Phoenix community an opportunity in a very strong bullish stock. The next area of resistance is the $150 round number.
Looking Ahead
In January the strength in equities observed in November and December has taken a pause, which is expected following such a large move. The patience we applied during the pullback in September and October is proving to be the correct decision, as the long term trend has resumed in full. As long-term inventors, patience is a key weapon in our arsenal. Our position is the bulls remain in control, resulting in opportunities for savvy investors, such as those in our Phoenix community.
At Sublime, our unwavering commitment lies in conducting thorough analysis based on objective data and factual evidence presented in the charts. By adopting this approach, we aim to provide valuable guidance to our esteemed Phoenix community, collectively exploring opportunities that hold the potential for long-term, profitable trades.
Keep it simple. Keep it Sublime.
The ST Team
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