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 price trading within a range but below the main technical indicator – the 200-day simple moving average (SMA). And, as a result, we stated we were standing aside, waiting for price to dictate its next move.
This week the main US indices have moved lower, breaking out below the range discussed last week. As a result, these indices; S&P 500, Nasdaq 100 and Dow Jones Industrial Average, are all at least 10% lower in 2022.
As we said last week, our position remains that the bull market, which commenced in 2008, remains intact, but we are currently standing aside until a clear direction is formed in the main indices. During this period we have seen multiple instances of reversals, but price has repeatedly recovered. Whilst this instance is deeper than recent instances, our position would be reconsidered by a sustained reversal – measured by both time and depth.
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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 initially continued into 2022, however, weakened this week. December closed with a 4.6% gain, whilst January’s initial bullishness ultimately resulted in a modest gain of 1.1%. February also has been mixed, with initial strength paring back this week resulting in a decline to date of 3.4%.
On the weekly time frame, the Sublime trend filter has switched from green to grey. Price is trading above the 50 and 200 SMA. This week’s price retreated with a large bearish bar.
On the daily time frame below, during January price retreated to the 50 SMA where it found support. Price subsequently bounced to trade above the 20 SMA; however, this week price has weakened to trade below all moving averages. The Sublime trend filter is grey. Our overall bias remains bullish, and we continue to look for stocks outperforming the Index.
UK STOCKS
Diageo - DGE
This stock has a history of trends, however, there have been long periods of price reversals. On the monthly time frame, price retreated throughout January a key pivot level at 3634. Price in February has declined 5.3% to date.
On the weekly time frame, price is trading at the 50 SMA and above the 200 SMA; the Sublime trend filter is grey. This week displayed a large bearish candle.
On the daily time frame below, as mentioned, weakness in price resulted in it retreating this week below the 200 SMA. The Sublime trend filter remains red. This is a stock to watch, but not one that is high on our watchlist, given its history of performance. We will share any signals with our Phoenix members.
Ferguson – FERG
A stock that has moved higher over time, but in the past has suffered deep pullbacks. On the monthly time frame, January displayed a sharp decline, whilst February is also displaying weakness to date with a 4.4% decline.
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, price is below the 20, 50 SMA but above the 200 SMA; as a result, the Sublime trend filter is red. This week price continues to trade at the 200 SMA; we will wait to assess whether this level holds. We will continue to share trading opportunities in this stock with our Phoenix comm, unity members.
St James’s Place – STJ
In early 2021 we highlighted this stock as one to watch, and it subsequently rewarded our Phoenix community with a strong, bullish move. Until recently price has been in a range, however, February to date is displaying a large bearish candle and a decline of 11.8%.
On the weekly time frame, price initially retreated to the 50 SMA, but this week broke through that level; price is above the 200 SMA. The recent weakness has resulted in the Sublime trend filter switching to grey.
On the daily time frame below, this week’s price continues to trade below all MAs: 20, 50 and 200 SMA. The Sublime trend filter is red. Price reacted negatively to earnings this week. We will continue to monitor and update our Phoenix members of opportunities if a trend re-forms.
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S&P 500
The year has started with weakness in the S&P 500; January declined by 5.8%. January is often a weak month for the S&P 500, particularly following strength into the end of the previous calendar year. Whilst February is also displaying weakness with a 6.6% decline to date.
On the weekly time frame, price continues to trade above the 200 SMA, but price has weakened to now be trading below the 50 SMA. The Sublime trend filter is grey.
On the daily time frame below, price made a new all-time high at 4820 on 4 January, before weakening. Price is now trading below the 20, 50 and 200 SMA, and this week the 20 SMA crossed below the 200 SMA. The Sublime trend filter is red. As stated in our initial commentary, we will wait to fully assess the market. Our view is the long term bull trend from 2008 remains intact.
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 was bullish with a gain of 7.6%, whilst February has reversed these gains with a 6.5% decline.
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 continued to weaken, but support is below in a key pivot level.
On the daily time frame below, this week the Sublime trend filter switched from green to red, indicating the size of the decline. As a result, price is trading below the 20 and 50 SMA but remains above the 200 SMA. We will monitor this stock to assess whether support will hold, and update our Phoenix community accordingly.
AmerisourceBergen - ABC
This stock has an interesting mix of strong trends and long periods of consolidation. Price showed strength in a trend from January 2013 to May 2015. However, since then price action has been mixed, despite a recent all-time high. December was the first month in several years which displayed a bullish breakout bar, culminating in a 14.8% gain. That momentum continued into January with a further 2.5%, and February initially displayed a healthy gain before retreating, resulting in a decline to date of 0.8%.
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, this week the Sublime trend filter switched from green to grey. Price is trading below the 20 SMA and above the 50 and 200 SMA. In December last year price broke above a pivot zone at $129 – $130, before retesting the level. We will monitor this stock to assess whether a linear trend can form, and we will update our Phoenix community accordingly.
American Express – AXP
A stock with a good history of trends that our Phoenix community has taken advantage of in the past. Price was in a period of indecision throughout December and January, but in later January and February (to date) strength has returned with gains of 9.9% and 2.2% respectively. February has a long wick above price and we will await the end of the month to fully assess it.
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, last week price created a new all-time high at $196; whilst this week price has weakened to close below the 20 SMA. Price is trading above the 50 and 200 SMA, and the Sublime trend filter is also green. Price has failed to break through the $200 round number. We will wait to assess how price responds; we will update our Phoenix community accordingly.
Berkshire Hathaway - BRK.B
A stock with a history of trends lasting 1-2 years. We have discussed this stock in recent weeks, along with 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 high at $326. Similar to AXP, this stock has, to date, bucked the trend of weakness in the main indices.
The Sublime trend filter is green on the weekly time frame, and price is trending above the 50 and 200 SMA. Following the breakout described above, price retreated to the $300 round number and major pivot level and subsequently regained strength.
The daily time frame below shows an impulsive move since price bounced off the 200 SMA in early December. Price is currently trading below the 20 and 50 SMA following a negative response to earnings this week. Price is trading above the 200 SMA; the Sublime trend filter has switched to red. 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, but patience is required. We will update our Phoenix community on further opportunities in this trending stock.
Expedia Group - EXPE
EXPE is a stock that has moved higher over time, but price has been a mix of impulsive moves combined with sharp declines. February has been an example with price initially making an impulsive move higher before price declined to result in a long wick above price.
On the weekly time frame, the Sublime trend filter is green. Price has shown indecision over the past two weeks, with a break out from the pivot high, followed by a full reversal this week. Price is trading above the 50 and 200 SMA.
On the daily timeframe below, price is trading below the 20 SMA, but above the 50 and 200 SMA; as a result, the Sublime trend filter is grey. Given the erratic price action described above this stock is not high on our watchlist, however, we will monitor it and update our Phoenix community should a trend emerge.
Hershey Company - HSY
Hershey is another stock with a strong performance in December that initially continued into 2022, but pared back recently. Whilst the historic performance is mixed, this stock has evidence of trending for long periods, such as the trend that occurred between February 2011 to March 2014. Since December last year price has been bullish with a gain of 9.9% to date.
On the weekly time frame, price continues to trade above the 50 and 200 SMA, and the Sublime trend filter remains green.
On the daily time frame below, price is trading below the 20 and 50 SMA, but trading above the 200 SMA; the Sublime trend filter is grey. Since price broke above a key pivot level at $183 on 8 December, price has made an impulsive move higher. Price reached the $200 round number, but this level could hold as support. We will update our Phoenix members of any opportunities in this 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 47%.
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 pulled back to trade below the 20 SMA. 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.
This week the markets have shown signs of further short-term weakness, with price closing below the 200 SMAs. We are currently standing aside, waiting for price to give evidence of a clear direction. As mentioned above, we anticipate the bull trend, which commenced in 2008, will continue. 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
