As Broad Market Weakness Continues, Be Selective; Trends In Berkshire and Hershey.
Welcome to our weekly newsletter, where we offer insights into stock setups that we share with our Phoenix members.
In recent weeks we have observed continued weakness in the main US indices and FTSE. Our trading principles are based on price and price action. We do not try to explain, nor predict, price movements. Price is always right; the most reliable indicator.
We continue to stand aside during this period, whilst we await clear direction. As standing aside is a conscious action in itself, we continue our daily routine of monitoring the markets.
As we said last week, our position remains that the bull market, which commenced in 2008, remains intact. During this bull run, we have seen multiple instances of reversals, but price has repeatedly recovered. Whilst this instance is deeper than many, our position would only be reconsidered by a sustained reversal; measured by both time and depth, along with price in the main indices displaying patterns such as lower highs and lower lows.
At Sublime Trading, we have a clear trading plan that governs our approach. This is the value of our education programme, where we teach members the right techniques to manage in all market conditions.
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 displayed a large indecision candle. March has made a volatile start with a 6.3% decline in the first week of trading.
On the weekly time frame, the Sublime trend filter remains grey. Price is trading below the 50 and just above the 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, including the 200 SMA. The Sublime trend filter has subsequently switched from grey to red. Our overall bias remains bullish, and we continue to look for stocks outperforming the Index.
UK STOCKS
3I Infrastructure – 3IN
A stock that originally floated March 2007, price lacked any clear direction until October 2014; price then formed a strong trend until the pandemic in March 2020. On the monthly time frame, in recent months price action has been mixed, and in March price has been weak with a 5.9% decline to date.
On the weekly time frame, price is trading above the 50 and 200 SMA, and the Sublime trend filter is grey. In the past two weeks, price has displayed two very volatile candles, with large wicks.
On the daily time frame below, this week the Sublime trend filter initially switched from red to grey, but weakness returned and it switched back to red. Price is currently trading below the 20, 50 and 200 SMA, but there is a significant pivot level at £3.20. We will monitor this stock to assess whether this level acts as support, and update our Phoenix members accordingly.
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 was an indecision candle with a 1.6% decline. March has also commenced weak with a 3.3% decline to date.
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 and 50 SMA but above the 200 SMA; as a result, the Sublime trend filter is red. With earnings next week, we will monitor this stock; along with assessing whether the 200 SMA will act as support. We will continue to share trading opportunities in this stock with our Phoenix community 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 displayed weakness with a decline of 7.5% and March to date is also weak with a large bearish candle and a decline of 12.2%.
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 red.
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. Price has reached a major pivot level and we will wait to assess whether this level acts as support. We will continue to monitor and update our Phoenix members of opportunities.
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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. The weakness continued into February resulting in a 2.8% decline, but with a large wick below price. March is also displaying weakness with a 1.2% 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. 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
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 and February with further gains of 2.5% and 4.7% respectively.
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, and price is trading above the 20, 50 and 200 SMA. This week’s price created a new all-time high at $148. This stock is evidence that there are stocks performing well, despite broad market weakness. We will monitor this stock and 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 this week at $329. Similar to ABC, 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 above the 20, 50 and 200 SMA, and this week the Sublime trend filter switched from grey to green. 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.
CF Industries Holdings - CF
A stock with a history of strong trends, but also periods of price reversals and declines. Since price broke above the previous year’s high at $75 price has been bullish, gaining 22%. March has been particularly bullish with a gain to date of 12.4%.
On the weekly time frame, price is trading above the 50 and 200 SMA, and the Sublime trend filter is green. This week’s candle is very large, reflecting the strength of the recent move.
On the daily time frame below, the Sublime trend filter is green, and price is trading above the 20, 50 and 200 SMA. As mentioned above, since the breakout on 24 February price has been bullish. The moving averages are all aligned and angling up consistently, indicating momentum. This week price created a new all-time high at $92. Again, this stock is evidence that there are stocks performing well, despite broad market weakness. We will monitor this stock and update our Phoenix community accordingly.
ConocoPhilips - COP
A stock with a mixed history of trends and long periods of weakness. Price this week created a new all-time high of $100, confirming the breakout from January this year.
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. Price is trading above the 20, 50 and 200 SMA. With price now reaching the significant $100 round number, we will monitor this stock to assess whether this level acts as resistance. A break and close above this level, followed by a continuation pattern could offer an opportunity, which we will share with our Phoenix community.
Hershey Company - HSY
Hershey is another stock with evidence of a trend forming in 2022. Whilst the historic performance is mixed, this stock has evidence of trends lasting 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 19% 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, this week price moved back above the 20 and 50 SMA; price is also trading above the 200 SMA. The Sublime trend filter this week switched from grey to green. 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 in January, and this week showed a clear breakout pattern higher. We will update our Phoenix members of any opportunities in this stock.
L3Harries Technologies - LHX
An interesting stock, with a mix of periods of trends, but also long periods of consolidation. Price in 2022 has performed well to date, with a bullish breakout. A gain in February of 21% has been followed up to date with a gain in March of 5.8%. This week price created a new all-time high of $270.
This week displayed a very large breakout bar, resulting in the Sublime trend filter switching from grey to green. Price is trading above the 50 and 200 SMA.
The daily time frame below shows an impulsive move since price broke above a key pivot level at $231 on 25 February. Price is currently trading above the 20, 50 and 200 SMA, and this week the Sublime trend filter switched from grey to green. The longer the consolidation, the larger the breakout – the major pivot level price recently broke above was formed in February 2020. With price breaking out, we anticipate a strong trend to develop, but patience is required. We will update our Phoenix community on further 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 57%.
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. Last week price pulled back to trade below the 20 SMA, but price subsequently bounced resulting in price now trading above the 20, 50 and 200 SMA. the next area of resistance is the $300 round number. A continuation pattern above the current level could offer Phoenix members an opportunity in a stock with a history of strong trends.
This week the markets have displayed continued weakness, with prices trading below the 200 SMAs. We are currently standing aside, waiting for prices 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 the markets, and act according to our trading plan.
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Keep it simple. Keep it Sublime.
The ST Team
