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 reversed the decline of the past two weeks with an impressive gain of 5.9%. This is the largest weekly gain since November last year. On the monthly time frame, October closed with a decline of -2.2%, following declines in August and September. However in November, the bulls have stepped back in. As we mentioned last week, successful trading is a game of discipline and patience.
On the weekly time frame, price is now trading above the 50 SMA (Simple Moving Average), whilst price remains above the 200 SMA. On the daily time frame, price is trading back above both the 50 and 200 SMAs. Price is now 24% above the October lows and, given the return of price above key moving averages mentioned above, we are actively seeking new positions from our watchlist.
We continue to see individual stocks perform well. Our portfolio currently compromises 15 US stocks and 3 currencies. 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, similarly countered recent weakness with a gain this week of 1.7%. On the weekly time frame, price remains below the weekly 50 SMA, but remains above the weekly 200 SMA. Looking at the bigger picture, price remains in a large range of consolidation between 7200 and 7700. 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.
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 21%. We have capitalised 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 to continue, and will let price dictate our next move.
The total performance to date is a 402% Return On Investment and 8% Return On Capital, applying a full portfolio risk of 2%.
AJG is an excellent 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 6 hours over 8 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
Microsoft Corporation - MSFT
Microsoft (ticker: MSFT) needs little introduction. as the most prominent software seller dominating the PC market with its uber-popular Windows operating system and Office software packages. They also broke into gaming in 2001 with the Xbox. Microsoft ranked No. 14 in the 2022 Fortune 500 rankings of the largest United States corporations by total revenue; it was the world’s largest software maker by revenue as of 2022. It is considered one of the Big Five American information technology companies, alongside Alphabet, Amazon, Apple, and Meta.
Since July 2016, MSFT has maintained a robust long-term trend, solidifying its status as a noteworthy stock. Over this period, the price has surged by an impressive 535%. For trend followers, MSFT undeniably stands as the king of stocks, exemplifying its remarkable market returns.
Closing the week at $353, MSFT gained 7.0% over the past week; its biggest gain since April. Throughout 2022 price experienced an uncharacteristic decline, resulting in a bottom in November at $213. In 2023 price has been bullish resulting in an all-time high in July at $367. Price declined in the months following, however, since October, the bulls have stepped in, resulting in gains of 7.0% and 4.3% respectively.
On the weekly time frame, MSFT continues to trade above the 50 and 200 SMAs. Our proprietary tool, the Sublime trend filter, is green, reinforcing the bullish outlook. Additionally, the alignment of the moving averages further emphasises the prevailing strength.
On the daily time frame, the Sublime trend filter also remains green. MSFT is also trading above the 20, 50, and 200 SMAs. Furthermore, the moving averages are aligned and diverging, indicating near-term strength.
Looking ahead, the next notable level of potential resistance is the $400 round number. Should a continuation pattern emerge above the all-time high, MSFT could present an opportunity for our Phoenix community members, who have profited handsomely in this stock for a number of years.
Looking Ahead
This week has seen the bulls step back in, to counter the declines seen since September. As long term inventors, patience is a key weapon in our arsenal. We continue to apply the necessary patience, and await price to dictate our next move. Despite the recent pullback, 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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