Welcome to our weekly newsletter, where we offer insights into stock setups that we share with our Phoenix members.
Last week we observed the markets regaining their footing following September’s pullbacks. This week the markets have consolidated, with ‘Big Tech’ leaders Microsoft and Nvidia leading strong recoveries.
The markets move at their own pace. As traders, to be successful, we must be fiercely disciplined, including applying patience. Many inexperienced traders don’t understand that standing aside is a position, just like buying and selling.
Many inexperienced traders and investors would have panicked during the recent pullbacks, in turn, closing positions at a loss or closing positions prematurely. However, our approach to trading is to take advantage of long term trends, using a ‘Big Picture’ focus. This helps us keep positions open during pullbacks, and often take advantage of these market conditions by seeking pullback opportunities.
This is the simple, yet stark difference between unsuccessful day trading and successful trend trading.
During the current bull run, which commenced back in 2009, there have been numerous examples of similar pullbacks, generally to areas of support, followed by the markets making new highs. This pattern has repeated itself so many times it is expected by seasoned trend traders such as those in our Phoenix community.
We expect the current pullbacks, where price has retreated to areas of support, to offer our Phoenix members opportunities, in both existing and new stocks.
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
On the monthly time frame, September displayed an indecision candle, with large wicks both above and below the closing price. In October price has, to date, shown bullishness with a gain of 1.7%. As we have discussed for several months, price has struggled to break above the pivot high from 2015 at 7124 – price is currently above this level, but we must wait until the completion of the month to fully assess the situation.
On the weekly time frame, price has maintained its position above 7000 round number and 200sma. The Sublime trend filter is currently green indicating potential strength building. However, at its current level, price remains in a period of consolidation, which commenced in April this year.
On the daily time frame below, this week price traded above all moving averages; 20sma, 50sma and 200sma. The Sublime trend filter this week turned green, a further sign strength is building. Our overall bias remains bullish, and we continue to look for stocks outperforming the Index.
Big Yellow Group – BYG
This stock has a history of trending, but it can swing and create deeper than desired pullbacks. On the monthly time frame, May was a particularly strong month with a gain of 9% and this was followed up by strong gains in June and July. However, September saw a deep pullback with a decline of 8.5%. In October, price appears to have stabilised with a gain to date of 3.9%.
On the weekly time frame, price is trading above the 50sma and 200sma, and the Sublime trend filter is green. This week price is displaying a bullish engulfing candle.
On the daily time frame below, this week price closed back above the 50sma but is trading below the 20sma. Importantly, price remains above the 200sma. With deep pullbacks in September, the Sublime trend filter was red but a bullish end to the week has turned the filter grey. This is a stock to watch but not one that is high on our watchlist, given its history of performance. We will share any signals with our Phoenix members.
Howden Joinery Group - HWDN
Another stock with a mixed history, however, price has been bullish over the past year, with a gain of over 70%. As with most stocks, price declined in September, with a drop of 5%. Price in October could be stabilising and preparing for its next move.
On the weekly time frame, price continues to trade above the 50sma and the 200sma. The Sublime trend filter remains green.
On the daily time frame below, as a result of September’s pullbacks, price is trading below the 20sma and 50sma. As a result, the Sublime trend filter is red. This week price appears to have found support at a key pivot level and subsequently has shown a strong bounce. Phoenix members will be watching this price action closely, to assess if a linear trend can be formed from this level. The next area of resistance is the £10 round number.
Rentokil Initial - RTO
On the monthly time frame, price has been in a long-term trend since May 2015. More recently, price has displayed bullishness since closing above the £5 round number. Price extended this bullishness to close above the £6 round number to create an all-time high, however, price has subsequently retreated.
On the weekly time frame, price is trading above both the 50sma and 200sma, and the Sublime trend filter is green. As mentioned, price in the past three weeks has been pushed down by the bears to retest the pivot level at £5.80.
On the daily time frame below, price is currently trading back above the 20sma and 50sma and is using both the pivot level previously mentioned and 50sma as support. These levels appear to be holding and, as a result, Phoenix members will be looking to see if price can regain its strength and continue the long-term trend.
The month of September closed with a bearish engulfing candle and a decline of 4.9%. This represents the first monthly decline since January this year. In October the bulls to date have halted the decline. However, as the month has yet to close we need to apply patience, to await the month to close.
On the weekly time frame, price continues to trade above the 50sma and 200sma, and the Sublime trend filter remains green.
On the daily time frame below, this week price initially traded below the 20sma, however a bullish close to the week has pushed price beyond the 50sma. As a result, this week the Sublime trend filter has been interchanging between red and grey. Phoenix members will now apply patience, to assess whether price will find support, and then regain its position above the moving averages. Our overall view remains unchanged, that the bulls remain in firm control of the S&P and, as a result, we continue to look for stocks that are outperforming the index.
AON – AON
On the monthly time frame, price is looking bullish overall, with a gain of 29% since price broke above the previous year high at $238 in April this year. Whilst September was an indecision candle, October has been bullish with a gain of 7.9%.
On the weekly time frame, the Sublime trend filter is green and price is above the 50sma and 200sma.
On the daily time frame below, AON is a stock that was less affected by the broad weakness seen in September. On 23rd September price reached the $300 round number, however price subsequently pulled back to the 20sma. This was not unexpected given the importance of the round number. This week price has regained its bullishness and broken out above the $300 round number and created a new all-time high. Looking ahead, a continuation pattern above the current level could offer Phoenix members an opportunity in a good trending stock.
Brown & Brown – BRO
The overall trend in this stock has been strong over several years. Before the pandemic price rose to the $50 round number. This level became a strong area of resistance which price failed to breakthrough in the latter part of 2020. In April price broke out of resistance with a 16% gain. Price action has been mixed over recent months, until October where this month price has been bullish with a 13.9% gain to date.
On the weekly time frame, price is above the 50sma and the 200sma and the Sublime trend filter is green.
On the daily time frame below, price is above the 20sma, the 50sma and the 200sma and the Sublime trend filter is also green confirming alignment with the weekly time frame. With earnings imminent, Phoenix members will apply patience and assess price action thereafter. The next area of resistance is the $100 round number.
Avis Budget Group - CAR
A stock that has a mixed history of impulsive trends along with long periods of consolidation. In early 2013 this stock created a trend that ran for two years. Price subsequently went into a long period of consolidation before breaking out again in February this year. In September price was extremely bullish with a gain of 28%, and this has been followed up in October with a gain to date of 26%.
On the weekly time frame, price is trading above the 50sma and 200sma, and the Sublime trend filter is green.
On the daily time frame below, price created an all-time high in June this year but subsequently went into a period of consolidation. In September price initially broke out but pulled back to retest the pivot level and 20sma before breaking out again. Price is now in a linear trend, trading well above the 20sma and 50sma, and the Sublime trend filter is green. Phoenix members will be watching this stock closely and considering new opportunities.
First America - FAF
A stock with a mixed history of performance; periods of bullish trends along with deep pullbacks. On the monthly time frame, price has been particularly bullish in October with a gain to date of 10.9%, resulting in a new all-time high at $75.
On the weekly time frame, price is trading above the 50sma and 200sma. During September price pulled back to retest a significant pivot level at $67. During the last two weeks price has shown bullish momentum. The Sublime trend filter is green.
On the daily time frame below, price is trading above the 20sma, 50sma and 200sma. The Sublime trend filter is green. Importantly, this week, the 20sma has crossed the 50sma. With earnings imminent Phoenix members will be watching this stock closely, to assess whether a linear trend can develop. The next level of resistance is the $100 round number.
Hilton Worldwide Holdings - HLT
HDL is a stock with a mixed history of trends followed by deep pullbacks. However, there is some evidence that a linear trend could be forming. Price in September performed well with a gain of 5.8%, whilst in October to date price has also performed well, also with a gain of over 7%.
On the weekly time frame, price is trading above the 50sma and 200sma, and the Sublime trend filter is green.
On the daily time frame below, price has been in a period of consolidation since February this year, however, price has recently shown signs of momentum, particularly as the recent pullbacks have failed to reach the 20sma. Price is currently trading above the 20sma, 50sma and 200sma, and the Sublime trend filter is green. Given the length of time of the recent consolidation period, Phoenix members will apply patience and assess further price action.
Nike - NKE
Nike is a stock that we have discussed several times in this newsletter and is currently in an interesting position. Price recovered strongly following the immediate impacts of the pandemic and was bullish throughout the remainder of 2020. In June and July price was particularly bullish with strong gains, however, these have been pared back during September. During October, price has rebounded strongly, with a gain to date of 8.2%.
On the weekly time frame, in the past two weeks price has bounced off a key level being the zone around a major pivot level, $150 round number and 50sma. Price is above the 200sma and this week the Sublime trend filter turned from grey to green.
On the daily time frame below, price is trading between the 20sma and 50sma and, as a result, the Sublime trend filter is red. However, crucially, as mentioned, price is trading above a strong area of support. Phoenix members will be watching this stock closely, to assess whether support will hold. The next area of resistance is the all-time high at $174 followed by the $200 round number.
Red Rock Resorts - RRR
A relatively new stock, having floated in April 2016. To date, this stock has displayed a mixed history. Initially, the stock increased in price, however, the stock suffered as a result of the pandemic, with an all-time low in March 2020 at $2.76. Since May 2020 price has performed strongly, initially creating an all-time high in June 2021, followed by a further impulsive move, culminating in an all-time high this month at $57.
On the weekly time frame, price is trading above both the 50sma and 200sma, and the Sublime trend filter is green.
On the daily time frame below, price is also trading above the moving averages; 20sma, 50sma and 200sma, indicating alignment with the higher time frame. The Sublime trend filter is also green. On 2 September, price created an all-time high, however, this resulted in a fake breakout (a ‘head fake’), where price subsequently retreated to the 50sma. Since then price has performed a bullish move. Phoenix members will be assessing this stock, to establish whether a linear trend can develop.
Whilst the markets have been broadly weak during September, this was to be expected given the bullish moves in July and August. During the first two weeks of October, the markets have stabilised and shown signs of bullish momentum building. The economy is showing good signs of recovery and a good number of stocks continue to have record growth. As a result, our Phoenix members will continue to compound and add more positions to their already profitable portfolios.
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Keep it simple. Keep it Sublime.
The ST Team