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Trade Recommendation: Dow Jones

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I have a feeling that Dow Jones is just hitting the resistance at 21650+ and that it will not be able to climb to a new ATH. I could be wrong, but I got this weird feeling that we will see a sharp drop in the coming days.

As I enjoy to take high risks, I’ve shorted Dow Jones at 21650 with a stop loss at 21670 to 21680 and a take profit at 21567. I might move both the SL and the TP up or down 10+-points. This might be a stupid trade (and recommendation) as all signs points upwards. But I do not understand why Dow Jones would climb even higher. There are a few things that concerns me with the american markets:

  1. The Debt Ceiling must be raised in October or the US will come to a stand still
  2. The tax-reform hasn’t been introduced since Trump is trying to pass a health care bill
  3. The VIX (Volatility Index) is at its lowest in many years (trend reversal?)
  4. Gold price is stable at 1250 USD
  5. IMF reported that they see the US market as the most overly valued market in the world

Let me know your thoughts.

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5 Comments

5 Comments

  1. robmonty

    July 25, 2017 at 7:13 pm

    12*** ?

    • Jonas Borchgrevink

      July 25, 2017 at 7:24 pm

      21*! Thanks for the notice. Wrote that piece a bit too fast to get it as current as possible.

  2. SimplyConphuzed

    July 25, 2017 at 7:37 pm

    1. Your article has 12650, 12670, etc. which should be 21650, 21670, etc.
    2. Playing a 100 point roll in the DOW is less than 1/2 of one percent, which seems quite insignificant. Why would you bother?
    3. Lack of tax reform is not a surprise to the market, and is thus already priced in.
    4. The DJIA is nowhere near the 50 day MA, and is showing no signs yet of moving closer to it.
    5. August/September are usually slow to negative months for the DOW, so I will look at trimming my positions soon. For now, I am tightening my stop losses. I would not bet on the downside yet though. There are several positives probably yet to come from earnings this week that will likely drive the market a bit higher.

    • Jonas Borchgrevink

      July 25, 2017 at 10:43 pm

      1 is fixed!

      Yes, let’s see what happens!

  3. Mauro

    July 25, 2017 at 10:08 pm

    Youre right jonas…

    I see the dax @ 10k too…

    And i hope for silver 20$ but silver is used for industry, so if industry falls siler normaly cant rise

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Analysis

Buy FDS, PPC, BERY, and IIVI for the short-term

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The US tax reforms received a major boost on Thursday when a measure approved by the Senate, enabled the Republicans to proceed with the tax cuts, without the support of the Democratic party.  Suddenly, passage of the tax cuts looks more plausible.

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Key observations

  1. Positive news is flowing on the tax reforms front.
  2. Tax reforms are likely to boost the S&P’s earnings significantly
  3. The stocks are likely to remain buoyant in the final quarter of the year
  4. Buy FDS
  5. Buy PPC
  6. Buy BERY
  7. Buy IIVI

Goldman Sachs believes that if corporate tax rates are reduced from 35 percent to 20 percent, it will increase the annual per-share earnings of the S&P 500 by $15. Consequently, the stock market will look a lot less richly valued on a forward price to earnings basis.

With this bullish backdrop, the stock markets are likely to remain buoyant in the short-term. However, we don’t advise investing for the long-term at these levels. We believe that the markets will fall within the next few months, offering an opportunity to buy stocks at lower levels.

Therefore, we shall trade this market and attempt to ride the momentum. We have selected stocks that are making new 52-week highs because they have a favorable tailwind and are likely to participate in the rally, along with the S&P 500.

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So, without further ado, let’s check out the stocks.

FDS – Buy 185.76, Stop Loss (SL) 174, Target 204 and 216

Weekly chart

The stock’s history shows that it tends to rally for a few years and then enters into a shallow correction or consolidation. We find three such instances in the past decade. The stock has been in a consolidation since end-2015. Two attempts, one in September 2016 and the second in March 2017, failed to sustain the breakout.

However, the stock again broke out in end-September and extended the rally last week. It is likely to start a new uptrend now and we plan to hop along for a ride.

Daily chart

The stock broke out of the bullish ascending triangle formation on September 26. Thereafter, it faced resistance at the $184 levels, from where the bears attempted to sink the stock, back into the triangle.

However, the bulls provided support at the $176 levels and the stock broke out of the overhead resistance on Friday. It is now likely to rally towards its first target objective of $204. The pattern target on a breakout from the ascending triangle, however, is higher at $216.

Therefore, we recommend a buy on the stock at the current levels with a stop loss of $174. We don’t want to hang on to the stock if it falls back into the triangle once again. The stock has a risk to reward ratio of 1:1.5 at the first target objective and a ratio of about 1:2.5 at the second target objective.

PPC – Buy 31.04, SL 27, Target 37

Weekly chart

The stock rose sharply from end-2012 to end-2014. Thereafter, it corrected and entered into three-year long consolidation, during which, it remained range bound between $17 on the lower end and $27.5 on the upper end. PPC formed a double bottom at $17.3 levels and the pattern completed when the stock broke out of $27.5 in mid-August of this year. Subsequently, the stock completed a successful retest of the breakout levels of $27.5 and rose to multi-year highs last week. We, now, expect the stock to start a new uptrend.

Daily chart

The stock broke out of the overhead resistance on August 15. However, the stock faced considerable resistance following the breakout. It remained sandwiched between $28 and $30 for almost two months. Finally, on October 18, the stock broke out of the range and extended its rally on October 20.

It has a pattern target of $37, which is close to the lifetime highs. There is no significant resistance in between, therefore, we recommend a buy on PPC at the current levels of $31.04. The stop loss can be kept at $27, a level not seen for more than two months. The trade offers us a risk to reward ratio of about 1:1.5.

BERY – Buy 59.88, SL 56, Target 67

Weekly chart

BERY has been in a strong uptrend since 2016. It has a clear pattern. It rallies and then corrects towards the 20-week exponential moving average (EMA) and occasionally to the trendline drawn. On completion of the correction, it again resumes its uptrend.

Recently, the stock had again corrected to the trendline, from where it found support and broke out to new lifetime highs last week. We expect this trend to continue until the stock breaks and closes below the trendline support. We want to enter this stock as it has re-established its uptrend.

Daily chart

The stock broke out of the overhead resistance of $58.95 on October 06. Afterwards, it successfully retested the breakout levels and has resumed its uptrend. We can buy the stock at the current levels of $59.88 and keep a stop loss of $56. We shall close the position if the stock falls below the trendline. Our target objective is $67. The trade offers us a risk to reward ratio of about 1:2.

IIVI – Buy 43.3, SL 39, Target 52

Weekly chart

The stock bottomed out in October-2014 around the $10.78 mark. Thereafter, it started a new uptrend that continued till February of this year, after which, the stock entered a period of correction. $41.1 has acted as a stiff resistance on the way up. However, last week, the stock broke out to new highs and we expect it to continue higher.

Daily chart

On the daily chart, we find that the stock has formed a bullish inverse head and shoulders pattern. The pattern completed with a breakout of the neckline on September 27. Thereafter, the stock successfully completed a retest of the neckline. The stock has a pattern target of $52. We want to enter the stock at the current levels and keep a stop loss of $39, which is just below the low created on October 19. This gives us a risk to reward ratio of greater than 1:2.

 

 

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Cryptocurrencies

Trade Recommendation: Monero

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The market moves in a horizontal channel between 85.00 and 100.00 levels. Now the price is at the bottom and we have a buy opportunity. RSI confirms price reversal and MACD histogram supports upward movement. DMI allows opening long trades. Pending orders for buy should be placed above the local high at 89.50 level. Stop orders must be placed at 84.30 level. The main profit target is 100.00 level. The part of trade volume can be left for long run. If you don’t use leverage, recommended trading volume for this trade is up to 5% from your deposit.

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Market: XMRUSD
Buy: 89.50
Stop: 84.30
Profit Targets: 100.00

The trading signal is based on Poloniex chart.

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Cryptocurrencies

Trade Recommendation: DigiByte

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This is a new attempt to catch a trend reversal and open long trades on good levels. We have double bullish divergence which confirms price reversal with further upward movement. RSI confirms price reversal in the oversold zone. MACD supports upward movement and DMI allows opening long trades. It’s a buy opportunity based on the confirmed trend reversal signal. Entry level is 0.00000170 with stop orders at 0.00000125 level. Profit targets are 0.00000300 and 0.00000450 levels. If you don’t use leverage, recommended trading volume for this trade is up to 5% from your deposit.

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Market: DGBBTC
Buy: 0.00000170
Stop: 0.00000125
Profit Targets: 0.00000300 and 0.00000450

The trading signal is based on Poloniex chart.

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