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RoboStreet – October 29, 2020
Flash Alert! Vlad’s Top Home Sweet Home Trade
Investors are hunkering down in reaction to rising COVID-19 data, lack of Congressional stimulus, and the prospect of a contested election outcome. The latest polls have Trump and Biden literally tied at 49%, similar to when George W. Bush and Al Gore were deadlocked back in 2000.
That election was finally settled on December 15 by the U.S. Supreme Court. How surreal it would be if the winner came down to who takes Florida again. At this point, trying to predict the outcome of the Senate and White House is pure speculation, and though there will be policy changes if Biden wins, the market is more focused now on the notion of local and state lockdowns coming back.
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.
In regards to earnings season, it has been very impressive, with two-thirds of S&P 500 companies surpassing estimates by 20%, well above the historical 5%-7% average. The strength has been fairly broad-based with the obvious exception of the epicenter stocks within the airlines, hotels, cruise lines, casinos, theme parks, live event entertainment, and restaurants. These stocks are very cheap but could stay cheap for some time.
As to the market technical landscape, the SPY has approached the key support level at $320 formed in September. The $320 level is key support for the bulls. All the sectors are oversold and due for a bounce-back this week.
As long as the SPY is trading below the $342-345 level market is range-bound between $318-$345 levels for the next 2-3 weeks.
I would be a buyer using any short-term corrections and use a dollar-cost averaging strategy to accumulate positions at this level. If you are trading options consider selling premium with February and March expiration dates.
Based on our models, the market (SPY) will trade in the range between $318 and $360 for the next 4 weeks. Based on monthly predictions, the market will break through the $360 level in December of 2020/first quarter 2021.
Market corrections provide excellent opportunities to buy into the strongest sectors at attractive levels. And one of the most bullish sectors of 2020 has been in the homebuilding industry. New home sales have been on a torrid pace driven by low supply, low mortgage rates, and a secular trend of moving from the cities to the suburbs.
The SPDR S&P Homebuilder ETF (XHB) offers investors a way to cast a net over the hot housing sector with a nice blend of home builders and suppliers in the mix. The top ten holdings show appliance maker Whirlpool Corp. (WHR) in the #1 spot, resin decking maker Trex Co. Inc. (TREX) in the #4 spot, HVAC manufactures Trane Technologies PLC (TTC), and Carrier Global Corp. (CARR) in the #5 and #6 spots, flooring supplier.
Mohawk Industries Inc. (MHK) in the #9 spot and three homebuilders and two big-box retailers rounding out the top 10 positions that account for about 42% of total assets.
When we apply our Tradespoon AI platform to XHB, the Stock Forecast Toolbox gives this ETF a “B” Model Grade rating with a solid six-month outlook. Currently trading at $53, our AI model has a predicted resistance target of $70.46 implying a 33% upside.
Within the top holdings of XHB is my favorite homebuilder trade at this time. Shares of Pulte Group Inc. (PHM) traded to a new high earlier this month and have pulled back to where the stock is filling the huge gap created in June, testing its 200-day moving average.
Pulte is a major acquirer of land and developer of primarily residential communities. The company operates throughout the U.S. and has grown rapidly this past year with demand outstripping supply. Earnings are forecast to rise by 30% this year as a surge by as much as 46% next year to $7.00 per share.
Assuming the domestic economy regains momentum in 2021, home buying trends will continue to show robust growth. The fact that the company is enjoying such strong demand during the pandemic builds a very bullish case for the company and the stock into next year. As we say in the business, the base case is fundamentally solid.
It’s exactly these types of blue-chip opportunities that I’m looking to bring to our RoboInvestor advisory service. We apply our AI platform tools to filter out all the market noise, hype, and emotions to ferret out the best investments that have the highest probability of generating profits over the next few weeks and months.
True to form, our vaunted AI models have churned out winner after winner. In fact, the RoboInvestor Portfolio boasts a stunning Winning Trades Percentage of 89.94%.
Just during what has been a very dicey month of October, RoboInvestor has booked 10 winning trades. The last time RoboInvestor posted a losing trade was back in March. When a system is generating profits 9 out of every 10 times you put capital at risk, it makes sense to not just take notice, but to put that system to work.
I’m always working to improve our algorithms to where our AI platform gets as near perfect in its execution as possible. My system is always thinking and always learning to bring the best strategies available in equities and ETFs in specific sectors, currencies, interest rates, commodities, volatility, and shorting opportunities.
RoboInvestor is an unencumbered and unrestricted investment service designed to provide long-term wealth creation in all markets, domestic and foreign as well. It’s this open-ended approach that I and my team are committed to bringing to our members every day, and I’m happy to say – so far, so good.
“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.
*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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