If you missed it, we provided an introductory video that summarizes the Trader Membership and its strategy. We also explain our strategy on potential stop losses here, and entry points in this report.
We have two new setups this week.
New Setups
- iShares MSCI Eurozone ETF (EZU)
- SPDR S&P Regional Banking ETF (KRE)
Asset Classes
Equities
- Alphabet Inc. (GOOG): Pending
- JPMorgan Chase & Co. (JPM): Pending→Monitoring (Divergence no longer valid as both price and RSI made lower low last week).
- NIKE Inc. (NKE): Pending
- Adobe Inc. (ADBE): Pending
Equity ETFs
- iShares MSCI Eurozone ETF (EZU): New Setup
- SPDR S&P Regional Banking ETF (KRE): New Setup
- SPDR Energy ETF (XLE): Pending
- iShares US Home Construction ETF (ITB): Pending
Commodities
- Corn Futures: Pending→ Active (Turned active September 11)
Equities
Short: Alphabet Inc. (GOOG)
-Bearish divergence setup with price making higher high in September and RSI lower high compared to late July.
-A break below the trendline extending from July would activate an objective sell signal.
-Target one is aligned with horizontal support, and would see price fall below the 50-DMA. Target 2 would meet the top of the unfilled gap from May.
-Target 3 would see price back to the 200-DMA, which would need a sharp reversal lower in order to be met.
-Despite the sell-off in stocks in August, GOOG has been relatively resilient thus far, but another move higher in rates could ignite some potential weakness.
-The potential stop loss is placed slightly above the YTD highs.
Long: NIKE Inc. (NKE)
-Bullish divergence setup with price making lower low and RSI higher low in August compared to beginning of June levels.
-Divergence has extended with RSI continuing to make higher lows.
-A break above the 50-DMA and the downward trendline that extends from June would activate the buy signal.
-Target 1 aligns with the summer highs and is close to the 200-DMA. Targets 2 and 3 are at key horizontal resistance levels.
-A potential stop loss is placed slightly below the YTD lows.
Short: Adobe Inc (ADBE)
-Bearish divergence setup with price making higher high in September and RSI lower high versus end of July levels.
-A break below the short term trendline and 50-DMA would provide an objective sell signal.
-Target 1 is slightly below the 50-DMA, while target 2 is at a horizontal support level. Target 3 would fully fill the gap from June.
-A potential stop loss is placed slightly above the YTD highs.
Equity ETFs
New Setup: Long: iShares MSCI Eurozone ETF (EZU)
-Bullish divergence setup with price making lower low and RSI higher low in September compared to middle of August.
-A break above the short-term downward trendline from July would provide the buy signal.
-Target 1 aligns with horizontal resistance, target 2 would meet the YTD highs, and target 3 would see price reach back towards the 2022 highs. A significant reversal would need to be experienced for price to reach target 3.
-Price has trended lower of late, recently failing at the 50-DMA. Price is now testing the 50-DMA from below, so a move above that would be a step in the right direction.
-Macro Catalyst: Recent weakening macro data in China and Europe have caused concerns over the economy, so any positive economic news going forward could cause a rally.
-A potential stop loss is placed right below recent levels, as if price were to retreat back to there we would expect it to test the YTD March lows.
New Setup: Long: SPDR S&P Regional Banking ETF (KRE)
-Bullish divergence setup with price making lower low and RSI higher low in September compared to August.
-A move above the short-term trendline dating back to beginning of August and the 50-DMA would prompt the long trade.
-Target 1 aligns with the recent local peak and the 200-DMA, while target 2 and 3 are at horizontal resistance levels.
-KRE has been able to make higher lows since the March banking crisis, which can be seen as a positive sign.
-Macro Catalyst: A steepening yield curve led by higher long-term interest rates could be seen as a positive sign for banking stocks as it widens net interest margins.
-A potential stop loss is placed right below recent levels, as a tighter stop loss is recommended on this trade.
Short: SPDR Energy ETF (XLE)
-Bearish divergence setup with price making higher high in September and RSI lower high versus middle of August levels.
-A break below the trendline starting in June would activate the short trade.
-Target 1 aligns with horizontal support, target 2 with both the 50 and 200-DMA, and target 3 would need price to revert substantially lower in order to be met.
-Macro Catalyst: Recent gains in oil prices have been driven by supply cuts from Russia and Saudi Arabia. A weakening demand backdrop or a supply boost that would counter the production cuts and could stall the oil price rally, and Energy stocks with it.
-Potential stop loss is placed at the YTD highs.
Short: iShares US Home Construction ETF (ITB)
-Bearish divergence setup with price making higher high in late July and RSI lower high versus end of June levels.
-A break below the trendline that extends from the end of May would provide the signal to go short. Price has fallen through the 50-DMA and is close to testing the trendline.
-Price would fall below the 100-DMA before it hits target 1.
-Target 2 aligns with horizontal support and the 200-DMA, while target 3 would need price to substantially reverse course.
-Macro catalyst: Homebuilders have seen significant upside in 2023 given the constructive backdrop for low housing inventory. Continued higher rates and a potential falloff in home prices could contribute to downside for the industry given a lot of good news is already priced in.
-A potential stop loss is placed slightly above the all-time highs.
