Alert! Buy Set-Up for 800-pound Stock on Sector Breakout

December 26, 2019
By Vlad Karpel

RoboStreet – December 26, 2019 

Market Sets New Milestones as 2019 Comes to a Close 

For the greater part of 2019, the stock market was beset with fear and trepidation over the potential economic impact the trade war between the U.S. and China would have on financial assets. Record amounts of cash rotated into fixed income and money markets by the end of the third quarter, exceeding $3.4 trillion. 

Just as it seemed there was no solution in sight to end the trade war and a December 15 deadline looming for even more tariffs, both sides came to terms on a phase one deal that on the surface is not that impressive, but was received warmly by global stocks markets. Since the announcement of the deal, the S&P 500 has recorded a string of new all-time highs and is currently on run of 11 up trading sessions, the best winning streak in a decade.

As the market indexes are setting new milestones in what is the longest bull market on record, now in its eleventh year, it’s important for investors to recognize what looks attractive near term and what not to chase as investors pile in for fear of missing out. I am getting a number of overbought readings from my AI indicators on several leading sectors and stocks, that could trap some late entrants into the Santa Claus rally. 

 “I’m investing my own money in each and every stock as my AI platform identifies.”

And remember we’re not talking about day-trading here.  I’m looking for 50-100% gains inside of the next 3 months, so my weekly updates are timely enough for you to act.

Click Here – To See Where I Put My RoboInvestor Money

It is rare when a market rally will extend beyond three weeks without a bout of selling for purely purposes of relieving the very short-term overbought condition. At the moment, upside momentum is strong and may undergird a rally right into the first week of January as fund managers window dress portfolios for year-end performance. 

But this kind of year-end mini-melt up has historically led to correction the first week of January followed by resumption to the upside as pension funding fuels further buying activity. I do anticipate a shallow correction in the next two weeks and thus investors should pay close attention to my alerts to determine proper exit and entry points. 

One sector gets a lot of press, but has actually been trading in a protracted trading range has been the consumer discretionary sector. After putting in a strong rally from January to July, the sector traded sideways until this past week when it finally broke above resistance. 

Shares of the S&P 500 Consumer Discretionary Sector SPDR Fund (XLY) led by (AMZN) as its top holding, finally clipped the $125 level on the third attempt, and are now poised to commence a new bullish uptrend that could easily produce a 10%-15% advance in the weeks and months ahead. 

The one-year chart of the XLV below shows a textbook “ascending pennant formation” where there are a series of higher-lows converging with a horizontal overhead line of resistance. That resistance is now being penetrated and the compression from the higher-low activity is a bullish set up for a new rally phase. 

The top 10 holdings in the XLV make up 63.77% of the total weighting with by far and away from the lead component with a 22.37% weighting. 

Taking a closer look at Amazon, the company has really started to monetize its business model following years of rapidly growing sales, but also a pattern of negative earnings. As of 2019, the company will generate around $20.50 per share and then something in the range of $27 per share for 2020, which could be well below or above forecast. Its earnings history has been erratic and giving the massive undertakings that require vast sums of capital, forward earnings are difficult to predict. 

What we do know is that the company is a juggernaut and a monster threat to anyone in a space that Amazon wants to enter. The very idea that Amazon would enter the real estate market or healthcare industry would have a widespread impact on those businesses for sure as their power to commoditize a marketplace is well known. 

Going back six months when the stock topped out $2,035 after a nearly 800-point run-up from the December 2018 sell-off, the stock settled back to its 200-day moving average, traded below it for the past several months and is just now re-taking that key technical level this week, trading up almost 4% in Thursday’s session that also marked a new high for the Nasdaq after it crossed 9,000 for the first time. 

At its current price of $1,855 the stock trades with a forward P/E of 68x, which is a bit on the high side for a company growing earnings by 20%-30%. But for such a game-over dominator of any space, it enters, the premium for many investors and fund managers is well worth it. 

The move for Amazon shares back above its 200-day line has not yet been confirmed by my AI-driven indicators as seen by the Seasonal Chart below, which shows four lower probability readings for the next 20, 30, 40 and 50 days. However, if the stock closes above this key level, holds it and starts to build on this reversal, I’m sure my indicators will turn positive – and it could be just a matter of a couple of days. 

I intend to add Amazon back to our RoboInvestor Portfolio when my signals turn positive and each time we’ve traded Amazon in the past two years, we’ve made solid profits. To get in on this next trade with Amazon, I highly encourage all readers to join RoboInvestor today and make a new resolution for 2020 to harness the power of AI for your portfolio. 

We’re already long consumer discretion with our purchase of Target Corp. (TGT) as of September 3 and are up 21% and one of the top 10 holdings in XLV. Now with XLV breaking out, I’ll be pressing our exposure with Amazon in the coming days. Don’t miss out on this opportunity and dozens more. In fact, we make money 88.79% of the time we put capital at risk. Make RoboInvestor, your 2020 trade of the year. 

 “I’m investing my own money in each and every stock as my AI platform identifies.”

And remember we’re not talking about day-trading here.  I’m looking for 50-100% gains inside of the next 3 months, so my weekly updates are timely enough for you to act.

Click Here – To See Where I Put My RoboInvestor Money

*Please note: RoboStreet is part of your free subscription service. It is not included in any paid Tradespoon subscription service. Vlad Karpel only trades his own personal money in paid subscription services.  If you are a paid subscriber, please review your Premium Member Picks, ActiveTrader, MonthlyTrader, or RoboInvestor recommendations. If you are interested in receiving Vlad’s personal picks, please click here.

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