Welcome to our weekly newsletter where we provide an overview of the main US and UK indices, along with analyses of selected stocks that are outperforming the market.
Let’s get into this week’s newsletter!
US & UK INDICES OVERVIEW
This week the S&P 500 gained 2.5% to close the week at 4516, which follows last week’s modest gain of 0.8%. August was a month of standing aside and applying patience – a key skill of trend traders. This is commonly required over the summer months when markets can correct and pullback. The month of August closed with a decline of -1.8% – but off the lows of the month of -5.3% – where the bulls stepped in during the last two weeks of August. Price is 30% above the October 2022 lows, and the bull trend remains in place. This week there were 122 breakouts, a significant increase from last week’s 24 breakouts. On a sector basis, all eleven sectors are in a breakout position, again demonstrating the broad strength of the market.
This week we have added 5 US stocks to our watchlist. We currently hold 11 US stocks and 2 currencies. We have compounded a number of these assets, in turn, delivering excellent profit for our Phoenix community members.
On the weekly time frame, the S&P 500 remains above both the 50 and 200 SMAs (Simple Moving Average). The moving averages are aligned, indicating a consistent trend. Our proprietary tool, the Sublime trend filter, is presenting a green signal. Whilst on the daily time frame, price is respecting the August support level. Our view is price action in August is simply a pullback in a broader pattern of higher highs and higher lows which commenced in October. We will let price dictate our next move.
The FTSE 100, the UK’s premier index, followed up last week’s modest gain with a further gain of 1.7%. However, price remains in a range, with price below the 50 SMA and above the 200 SMA. Strong support is at a key pivot level at 7207. The all-time high is 8047. We continue to monitor this index, waiting for confirmation of direction.
PERFORMANCE REVIEW
Arthur J. Gallagher & Co - AJG
Arthur J. Gallagher & Co. (ticker: AJG) is an American global insurance brokerage and risk management services firm headquartered in Chicago, Illinois. The firm was established in 1927 and is one of the largest insurance brokers in the world.
We first entered AJG in April after the stock broke out above last year’s high and the $200 round number. Following the initial entry, price pulled back to a key pivot level, before resuming the trend. Since then price has been bullish, gaining over 11%. We have captialised on this trend by compounding multiple times, whilst maintaining only 2% portfolio risk. The moving averages are aligned on both the weekly and daily timeframes, and price making a series of higher highs and higher lows. The next area of potential resistance is the $300 round number. Looking ahead, we can anticipate the trend will continue, and will let price dictate.
The total performance to date is a 176% Return On Investment and 4% Return On Capital, applying a full portfolio risk of 2%.
AJG is another example of how a stock can form a bullish trend following a breakout from a key level. The total amount of time required to set up and manage this trade has been less than 3 hours over 5 months – this is the benefit of trend trading; using higher time frames such as monthly and weekly charts to avoid the noise and stress of shorter time frames. This approach enables busy professionals the freedom to pursue other interests and avoid hours each day in front of a trading screen.
OUTPERFORMING ASSET FOR THE WATCHLIST
Alpha Metallurgical Resources Inc. - AMR
Alpha Metallurgical Resources (ticker: AMR) formerly Contura Energy (January 2021), is a leading coal supplier with underground and surface coal mining complexes across Northern and Central Appalachia. Contura owns large coal basins in Pennsylvania, Virginia and West Virginia which supply both metallurgical coal to produce steel and thermal coal to generate power. In the 2012 Forbes Global 2000, Alpha Natural Resources was ranked as the 1847th -largest public company in the world.
AMR is a relatively new stock, commencing trading in 2016. We have included it in this week’s newsletter as its price pattern is very interesting. A key tenant of trend trading is being able to identify periods of trend along with periods of consolidation. 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, indicating positive market sentiment. 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 $300 round number. There is a suitable distance between the current price and this level for a trading opportunity for our Phoenix community members.
Looking Ahead
Price action on higher time frames, such as monthly and weekly, tells us the momentum in the main indexes continues despite the recent pullback. Our position is the bulls are 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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