Watchlist 28th February 2022

It’s time to start trading again…

For the last fews weeks we’ve been sat on the sidelines as war tensions increase, inflation fears increase and the market tries to find a bottom. Todays gap down will no doubt have some investors a little sweaty palmed assuming we fail to reclaim by open.

Now this is a good thing and here’s why:

Pretty much all of the fears circulating since the beginning of this year have come true. The markets gap down last Thursday AM was followed by one of the biggest rallies we’ve seen in years. Investors pilled in heavily with a risk on attitude, much to the dismay of many who sold and then flipped short.

As almost all of the fears have come true we can worry less about large gap downs meaning volatility should fall. Making it far easier to time entires and exits.

We’re seeing a lot of nice set ups in many sectors and a lot of blue chips trading at fair valuations. Most growth names (good and bad) have been obliterated and are now 80-90% from ATH. A lot of solid blue chips companies are also 40-50% from highs.

The creme de la creme companies are 20-30% from highs.

Now whilst it’s possible we enter into a bear market I feel a long consolidation period for the indexes most likely. From a technical side certain sectors look incredible, my favourite currently being semi conductors.

$SOXL – The chart clearly shows extreme buying activity below $38 with a daily primed to retest the 200ma. Heavily weighted names inside the fund are showing strong charts on their own, with the exception of $INTL. This is a sector which has witnessed extreme growth with most of the worlds current innovation relying on their expansion and success. My idea behind the trade is simple. If we break Fridays high I’ll go long risking just below the 10ma. If it fails and sets back up I’ll try again.

$MU – This chart is frankly ridiculous, with a hold far above the 100ma of which is now passing through the 200. It’s stronger than almost any other semi conductor whilst almost remaining stronger than QQQ, SPY, TSLA and AAPL. It’s beat earnings 27 times in a row and trades at multiples about 1/4 of its peers. I’ll be looking for the opening range highs risking LOD.

In the event that we flush today my plan is to head out for a late lunch and a dip in the pool.