Welcome to our weekly newsletter, where we offer insights into stock setups that we share with our Phoenix members.
In last week’s newsletter, we discussed the bearish start to the year. And this week the momentum has continued.
For the time since April 2020 all three main US indices – Nasdaq 100, Dow Jones Industrial Average and S&P 500 – are trading below the 200 day simple moving average (SMA). From a technical standpoint we need time to fully assess the overall current position, as the current move may simply be a short-term reversal.
We have discussed on many occasions since the pandemic, savvy investors such as those in our Phoenix community apply patience at these times and let the markets breathe. The equity markets can provide generous returns, more so than bonds and other fixed income assets; the price for that opportunity is the ability to be able to wait out pullbacks, and let price dictate.
At Sublime Trading, we have a clear trading plan that governs our approach. This is the value of our education programme, where we teach members the right techniques to manage in all market conditions.
Let’s get into this week’s newsletter!
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Here are how the best-performing UK & US stocks, as picked out by our scanning process, have
performed this week.
For a glossary of terms click here.
OUTPERFORMING STOCKS COVERED THIS WEEK
UK Stocks
US Stocks
FTSE 100
On the monthly time frame, the strength displayed in December has continued into January. December closed with a 4.6% gain and January’s bullishness has already resulted in a 1.5% gain to date. Price has now broken out of last year’s range and the next major area of resistance is the monthly pivot level at 7727.
On the weekly time frame, the Sublime trend filter is green. Price is trading above the 50 and 200 SMA. This week is displaying an indecision candle.
On the daily time frame below, price has retreated to the 20 SMA. Price remains above the 50 and 200 SMA. The 20 and 50 SMA continue to diverge, a sign of bullishness. The Sublime trend filter is green. Our overall bias remains bullish, and we continue to look for stocks outperforming the Index.
UK STOCKS
3I Infrastructure – 3IN
A stock that originally floated March 2007, price lacked any clear direction until October 2014; price then formed a strong trend until the pandemic in MArch 2020. On the monthly time frame, price has been bullish in recent months, rising by 16% since October last year.
On the weekly time frame, price is trading above the 50 and 200 SMA, and the Sublime trend filter is green. In the first week of January price displayed a strong reversal candle, and since then price has weakened.
On the daily time frame below, the Sublime trend filter is green, and price is trading between the 20 and 50 SMA, and above the 200 SMA. As mentioned, in August price created a fake breakout, and subsequently retreated to the 200 SMA. Since then, price has been in an uptrend, using the 20 SMA as support. A continuation pattern above the current level could offer Phoenix members an opportunity in a stock that has a history of strong trends. The next level of resistance is the £4 round number.
Croda International - CRDA
A stock we have been trading since last year, and discussed on several occasions in this newsletter. Momentum was strong leading into the end of 2021, however December displayed an indecision candle, and January to date has resulted in a large, bearish candle.
On the weekly time frame, price has retreated to the 50 SMA; whilst price remains well above the 200 SMA.This week the Sublime trend filter switched from green to grey.
On the daily time frame below, the Sublime trend filter is red with price trading below the 20, 50 and 200 SMA. We will monitor this position, to assess whether price can find support and regain strength. We will share updates with our Phoenix community.
St James’s Place – STJ
We recently highlighted this stock as one to watch, and it subsequently rewarded our Phoenix community with a strong, bullish move. The momentum in December with a gain of 8.7% initially continued in January resulting in an all-time high at £17.43, however price has subsequently weakened this month by 5.4%.
On the weekly time frame, price is above the 50 and 200 SMA, and the Sublime trend filter is green. Last week price attempted to close above a key pivot level at £16.97, but failed, and that weakness has continued into this week.
On the daily time frame below, this week price has weakened to close below the 50 SMA. Price is trading above the 200 SMA. The Sublime trend filter switched from green to grey, a sign of near term weakness. We will continue to update Phoenix members of compound opportunities if this trend develops further.
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S&P 500
The year has started with weakness in the S&P 500: January is displaying a decline to date of 8.1%. As mentioned in the opening statement of the newsletter, January is often a weak month for the S&P 500, particularly following strength into the end of the previous calendar year.
On the weekly time frame, price continues to trade above the 50 and 200 SMA. This week the Sublime trend filter switched from green to grey. Following last week’s indecision candle, this week is displaying a large bearish candle.
On the daily time frame below, price made a new all-time high at 4820 on 4 January, before price retreated to the 50 SMA. Price has since weakened further to close below all moving averages – the 20, 50 and 200 SMA. As a result, the Sublime trend filter is red. As stated in our initial commentary, we will wait to see if this is a short-term drop in price, or a more sustained period of weakness.
US STOCKS
Aflac - AFL
This stock has a history of strong trends but deep pullbacks and trend reversals. Since the pandemic price formed a strong move, gaining 68% between November 2020 and May last year. A period of consolidation then formed, before breaking out in December with a 7.9% gain. January has also been bullish with a gain of 4.2% to date, although, to date, a long wick has formed above price.
On the weekly time frame, price is trading above the 50 and 200 SMA, and the Sublime trend filter is green. This week price has reversed the previous week’s gains with an engulfing candle.
On the daily time frame below, the Sublime trend filter is green, with price trading at the 20, and above the 50 and 200 SMA. The next area of major resistance is the $100 round number. With earnings on 2 February, we will monitor this stock to assess whether a linear trend can form, and we will update our Phoenix community accordingly.
Ameriprise – AMP
Price was in a strong trend between November 2020 and April last year, gaining some 60%. Price subsequently went into a period of consolidation until October where it broke out and has since been in a strong trend, gaining 23%. Last week price created an all-time high at $332 whilst this week price has retreated, resulting in an indecision candle.
On the weekly time frame, price continues to trade above the 50 and 200 SMA. The Sublime trend filter remains green.
On the daily time frame below, price is currently trading below the 20 and 50 SMA, but above the 200 SMA. The Sublime trend filter is grey. Price is currently at the $300 round number and we will wait to assess if this level will act as support. Overall, price is in a strong trend and members of our Phoenix community have multiple positions in this asset. The next area of resistance is the $400 round number. We will continue to update our Phoenix community members on further opportunities.
Berkshire Hathaway - BRK.B
A stock with a history of trends lasting 1-2 years. We discussed this stock last week and in December’s newsletter – where we noted a potential breakout month. This assessment was correct, and price has subsequently made light work of the $300 round number, to create a new all-time last week at $323.
The Sublime trend filter is green on the weekly timeframe, and price is trending above the 50 and 200 SMA.
The daily time frame below shows an impulsive move since price bounced off the 200 SMA in early December. Price is currently trading above the 50 and 200 SMA, and this week pulled back to the 20 SMA. The Sublime trend filter remains green. The longer the consolidation, the larger the breakout. With price breaking out from consolidation going back to May last year, we anticipate a strong trend to develop. We will update our Phoenix community on further opportunities in this trending stock.
Brown & Brown - BRO
BRO is the stock that our Phoenix community has been trading since price broke above the $50 round number and previous year high in July this year. On the monthly time, price is currently displaying a pullback with a decline of 10.2%, reversing the gains made in November and December.
On the weekly time frame, price is trading above both the 50 and 200 SMA, and a Sublime trend filter is green.
On the daily time frame below, price is trading below and 20 and 50 SMA, but above the 200 SMA. As a result the Sublime trend filter is red. This stock has earnings to be released on 24 January. The next area of resistance is the $100 round number. With a pattern of long-term trends, BRO is a stock that is high on our Phoenix community watchlist and we will continue to provide updates if new trends emerge.
Extra Space Storage - EXR
Extra Space Storage is a stock that we have traded in our Phoenix community throughout 2021. Price suffered a pullback during September, but has since regained strength, with a gain in October of 18%. November and December have both displayed indecision candles, which is to be expected as price is at the $200 round number. This month price has reversed with a decline of 13.8% and an engulfing candle to date.
On the weekly time frame, price is trading above the 50 and 200 SMA, and the Sublime trend filter is green. This week price weekend to minor pivot level at $195.
On the daily time frame below, as mentioned with other stocks, price suffered during January with a pullback. Price is trading below both the 20 and 50 SMA, but remains above the 200 SMA. The Sublime trend filter is red. Phoenix members will again be carefully monitoring this stock, to assess how price responds. A continuation pattern above the current level could offer another opportunity in this trending stock.
McKesson - MCK
A stock with an interesting mix of strong trends and periods of consolidation. Between November 2012 to June 2015 price was in a very strong trend, gaining 150%. More recently, since price broke above the monthly pivot at $179 in March last year, price has also shown strength, with a gain to date of 38%.
On the weekly time frame, price is trading above the 50 and 200 SMA, and the Sublime trend filter is green.
On the daily time frame below, the Sublime trend filter is green. This week price weakened to close below the 20 SMA. Whilst price remains above the 50 and 200 SMA. In the past two weeks price has traded above both the previous all-time high set in May 2015 and the $250 minor round number. A continuation pattern above the current level could offer Phoenix members an opportunity in a stock with a history of strong trends. The next area of resistance is the $300 round number.
Constellation Brands - STZ
A stock with a mixed history of long trends, but reversals and pullbacks. Between July 2012 and February 2018 price was in a very strong trend, gaining some 715%. Since then price action has been mixed. More recently, since October last year price has displayed bullishness with a gain of 15% and an all-time high on 6 January.
On the weekly time frame, the Sublime trend filter is green, and price is trading above the 50 and 200 SMA.
On the daily time frame below, price is trading between the 20 and 50 SMA, and on Friday the Sublime trend filter switched from green to grey, an indication of near term weakness. The next area of support is the 50 SMA and then 200 SMA at at $228. We will monitor this stock to assess if the recent breakout is a head fake. A breakout and continuation patterns above the all-time high could offer Phoenix members an opportunity in a stock that has a history of multi-year trends.
This week the markets have continued their bearish move. However one week or even one month does not constitute a broad market reversal, and we will wait upon price action. We will continue to monitor our positions, and act according to our trading plan.
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Keep it simple. Keep it Sublime.
The ST Team
