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 the week at 5649, marking a gain of 1.0%. The index has risen 11.0% since the August lows and this week closed with a new high. As August comes to a close, the index has increased by 2.3%, a notable recovery from the earlier misinformation and unwarranted pessimism circulated by so-called analysts and experts at the start of the month.
Year to date, the S&P 500 has delivered an impressive 19% gain. The bullish momentum in equity markets remains strong, with the S&P 500 surging 36% since the October 2023 low and 59% since the October 2022 low.
While major indices like the S&P 500 provide broad market direction, they do not capture the entire picture. We continue to observe strong outperformance from individual stocks such as PGR, MCK, UNH, KO, GDDY, and MMC – all of which we have analysed in recent months.
The Nasdaq 100 declined by 0.7%, although momentum remains with the bulls. The Dow Jones gained 0.9%, setting a new all-time high of 41604.
The FTSE 100, the UK’s leading index, gained 0.6%, closing at 8377. After breaking above its all-time high in April, the index consolidated between 8100 and 8300 from June to August. Price is now showing signs of breaking out, potentially retesting the all-time high of 8474 set in May.
PERFORMANCE REVIEW
Progressive Corporation – PGR
Progressive Corporation (ticker: PGR) is an American insurance company, the third-largest insurance carrier and the largest commercial auto insurer in the United States. The company was co-founded in 1937 and is headquartered in Mayfield Village, Ohio. The company insures passenger vehicles, motorcycles, RVs, trailers, boats, PWC, and commercial vehicles. Progressive also provides home, life, pet, and other insurance through select companies. The company is ranked No. 74 on the 2021 Fortune 500 list of the top American corporations.
Sublime Trading’s breakout strategy first entered PGR in October 2023 after the stock broke out to new highs. Following the initial entry, price pulled back to retest the $150 round number, before resuming the trend. Since then price has been bullish, gaining over 67%. This strategy has capitalised on the trend by compounding multiple times, whilst maintaining only 2% portfolio risk. Following a period of consolidation between April to June, price has again broken out, resulting in further positions being added to the portfolio. 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 1,605% Return On Investment and 32% Return On Capital, applying a full portfolio risk of 2%.
PGR is an excellent example of how a stock can form a bullish trend following a breakout. The total amount of time required to set up and manage this trade has been hours over 10 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
Visa Inc. – V
Visa Inc. (ticker: V) is an American multinational financial services corporation headquartered in San Francisco, California. It facilitates electronic funds transfers throughout the world, most commonly through Visa-branded credit cards, debit cards and prepaid cards. Visa is one of the world’s most valuable companies.
Visa has exhibited a robust bullish trend since February 2012, establishing itself as a top-performing stock with gains exceeding 850%. In March, the stock reached an all-time high before experiencing a pullback to the pivot high from July 2021. However, the bulls have since regained control, leading to a 4.0% gain so far in August.
On the weekly timeframe, Visa is trading back above the 50-day SMA. Our proprietary tool, the Sublime trend filter, has turned green, indicating a positive outlook. After testing the 50-day SMA on 22 July, the stock has gained 6.5%, continuing its bullish trajectory.
On the daily timeframe, the stock has recently moved back above the 200-day SMA. While the price is currently above the 20- and 50-day SMAs, patience is warranted as the moving averages have yet to fully align.
Looking ahead, the next potential resistance levels are at the pivot points of $280 and $291, followed by the $300 round number. If a continuation pattern develops above these levels, it could present a promising opportunity for our Phoenix community members in a stock with a strong history of long-term trends.
Looking Ahead
The US indices continue to recover from August’s volatility, with the overall strength in U.S. equity markets remaining intact. Our calm and measured approach earlier in the month allowed our Phoenix Community to maintain nearly all positions in U.S. stocks, which are benefiting significantly from this momentum. As always, we will let price action guide our next move.
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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