MARKET UPDATE #156
Free weekly stock market education service with 3 stock ideas.
Disclaimer: The content is for educational purpose only. No investment advice. Please read the full disclaimer. |
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Hi ,
this week I read on social media a couple of tweets which predicted a top in the stock market. I highly recommend to ignore such predictions! Every time the stock is extended, people try to call it a top and they are often wrong. Trend lasts longer as you think.
If we are close to a top, the stocks we observe gives us the right clues. Yes, the stock market uptrend is still thin and large caps are in favor of the market participants, but that can change anytime. We have a thin market for months now! Remember that the broad market indices like Russell 2000 broke out of their multiple months consolidation two weeks ago. So be patient and follow your rules! Don't get scared out of your best stocks and trust your system.
Here is what you will find in this newsletter:
- Questions and answers from the subscribers forum
- Comment on the current market situation: Pullback or breakout?
- Stocks I am watching at the moment: $MNDY, $SI, $TSLA.
- Trading tips:Buy right and sit tight – Winners of 2021
If you have questions, please use the subscribers forum.
Thank you and good trading,
Julian
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MARKET CONDITIONS
Pullback or breakout?
There is a clear divergence in the stock market: NASDAQ and S&P 500 reached new highs while the broad market retested the upper prior resistance line of the sideways consolidation. We observe this behavior for months now.
Always remember that every index is weighted. The Russell 2000 has a strong weighting towards financial stocks while the NASDAQ is weighted towards the technology mega-caps (Apple, Amazon, Facebook. Tesla …). If you only look at the indices, you will make bad decisions. Instead use the on a higher time frame (weekly, monthly) to see if we are in an uptrend, downtrend or sideways, then look at your watchlist and portfolio. If you find enough good setups, there is nothing wrong to put positions on.
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NASDAQ composite (weekly chart): The index went sideways close to the upper resistance line. Will wee see another pullback or is the index able to break out of the channel? The probabilities are high that we will see a breakout, because all the mega caps started to move up last week. |
3 LEADING STOCKS
This week I have 29 stocks on my watchlist, 3 less as last week. I try to focus on the leaders now and ignore everything else.
Would you like to learn how to find stocks like below? Look into my video course Growth Traders Toolbox. |
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$MNDY: The company offers a new project management and collaboration software. It perfectly fits into the digitalization and work-from-home area.
They are growing very fast in large accounts: More than 230% with accounts larger than 50k ARR (annual recurring revenue). That's outstanding and high growth in large accounts is needed to run such a company.
The company already has a market cap of 16bn. That's very high, but remember how fast the business is growing.
Sales growth in the last 3 quarters: 85%, 94%, 95%. No positive EPS or EPS estimates.
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$SI: I think this is one of the best stocks and ideas when it comes to the crypto business. $SI provides services for crypto currency companies without having the volatility risk of the crypto currencies itself. They offer brokerage services, settlement and lending solutions to brokers, miners and hedge funds.
Although all crypto mining stocks pulled back sharply last week, $SI held up like a shining star.
Sales growth in the last 3 quarters: 26%, 82%, 123%. EPS growth in the last 3 quarters: 139%, 176%, 138%. EPS estimated for 2021 and 2022: 109% and 25%.
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$TSLA: This is the most innovative mega-cap company available. $TSLA is engaged in electric vehicles, solar and batteries, robotics, AI, space and holds crypto currencies!
The selling of shares by Elon Musk is a funny joke for the masses and was a good buying opportunity for institutions. Selling a $10 bn stake in a stock which trades $23 bn on average per day (!) is not so difficult. It maybe takes some days, but there was so much liquidity the last days that it's not a big deal to sell all the shares in 1 or 2 days. I am sure that so many institutions waiting for the chance to take over all the shares from Elon Musk.
Sales growth in the last 3 quarters: 74%, 98%, 57%. EPS growth in the last 3 quarters: 304%, 230%, 145%. EPS estimated for 2021 and 2022: 164% and 42%.
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TRADING TIPS
Buy right and sit tight – Winners of 2021
The year will end in almost 5 weeks! It's important to do a deep analysis of your own trading and look at the big winners you maybe missed.
I made the experience that as long as the markets are going sideways or up, it's possible to catch multiple stocks with a performance over 100% per year! That means you have the chance to make a return of 50-100% per year in an average year. The problem: If you don't buy right and sit tight, you will never ever realize the full potential of those big winners.
That's sound so simple if you write it but it's very hard to do it. I am not perfect and I do a lot of mistakes and I know that I am not realizing the full potential of those winners too. But in some cases I do that because of risk management rules. Big winners can have huge pullbacks and you have to protect your capital. That's why I often trade around a core position and increase it / decrease it over time.
Here are 20 stocks with a strong performance in 2021. I highlighted them during the year and traded some of them by myself:
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