Want to start the week ahead of the pack? Check out ‘Momentum Mondays,’ where I cover the leading breakout stocks in the market, summarize the major events of the week ahead, and prepare investors for profitable trading.
Stock Indexes Consolidating
After running up aggressively into August, stock indexes have taken a much-needed breather, trading sideways in a rather wide trading range. This is welcome action, as it shows stocks are correcting over time, rather than price.
Furthermore, a consolidation like this indicates that another breakout higher may be in the works. If the S&P 500 can regain the 4500 level, the market should begin a year end rally. Alternatively, it should be noted that we are currently in the weakest period of the year from a seasonality perspective, and if the index loses the 4350 level of support, may see more downside.
However, I think investors should continue to look for appealing stocks to buy, as the incredible strength of the market this year leads me to believe there will be another rally into year end.
Week Ahead
The primary market moving event of this week is the Federal Reserve’s interest rate decision meeting on Wednesday. Although it is almost a certainty that the Fed will leave rates unchanged there is still huge anticipation preceding the event.
What is even more critical is the press conference after the announcement, where Fed chair Jerome Powell will answer questions, and investors can hopefully decipher what he and the committee may do going forward.
As of today, there is a 99% chance that the FOMC will leave rates unchanged, but the November meeting still leaves a possibility for them to raise again. Currently, the market prices the odds of a rate increase in November at 31.3%.
Also, on the docket this week are initial jobless claims on Thursday morning. The resiliency of the labor market remains one of the key factors leading interest rate decisions. If employment continues to be robust, investors can expect rates to be higher for longer, but if we start to see cracks in the employment market, there could be a quick pivot to interest rate cuts.
Trade Setups
I will say that I am currently seeing fewer momentum breakout setups than in prior weeks, indicating that there is some weakness in the market. A handful of leading stocks have broken their bullish patterns and may need some more time before setting up another trade.
Nonetheless, there are still some nice trading setups in the market. Additionally, all the stocks I am sharing here today are Zacks Rank #1 (Strong Buy), meaning they have upward trending earnings revisions. A strong earnings revisions trend is one of the strongest leading indicators for a bullish move in stocks.
General Electric GE is breaking out from a very tight consolidation on Monday morning. It is already trading above the upper bound of $116, signaling the breakout. Although General Electric hasn’t been an exciting stock for many years, it looks like now may be the time to own it.
So long as GE stock doesn’t trade back below the breakout level, it should make a strong move higher over the next few weeks.
Another stock amid a breakout this morning is AppLovin APP. AppLovin stock has cleared the $43 level and made new YTD highs after drawing in buyers Monday morning. So long as the stock holds above the breakout level it should continue to rally.
Vistra VST is a stock that has been featured on past Momentum Mondays and is setting up for another breakout trade. On Monday morning, it traded above the $33 level indicating a breakout. So long as it doesn’t trade back below that level, it should continue higher.
Vistra makes for a nice addition to an investor’s portfolio at the moment because as a utility company, it is a defensive stock. Utilities have led the market over the last couple weeks suggesting market participants are rotating into more defensive stocks. If a more severe sell-off does occur, utility stocks should outperform.
One stock that has not yet broken out from its pattern yet is Vertiv VRT. Vertiv has been one of the strongest performing stocks in the market, continuously building and breaking out from bull flags. Often the stocks that lead the market continue to lead so investors would be wise to follow them even after a winning trade, as is evident from Vertiv stock.
If VRT can break out above the $38.15 level, it should make another bull run and new all-time highs. Alternatively, if the price trades below the $36 level, the setup is invalid, and investors will want to wait for another opportunity.
Bottom Line
There is always a bull market somewhere! If tech stocks start to roll over, investors can focus on defensive names like utilities. Good traders must always remain flexible and should let price guide them.
Of course, even the best trading setups can fail, so investors should keep risk management top of mind, and always stick to the trading plan. Best of luck this week!
Top 5 Dividend Stocks for Your Retirement
Zacks targets 5 well-established companies with solid fundamentals and a history of raising dividends. More importantly, they have the resources and will to likely pay them in the future.
Click now for a Special Report packed with unconventional wisdom and insights you simply won’t get from your neighborhood financial planner.
See our Top 5 now – the report is FREE >>
Want to start the week ahead of the pack? Check out ‘Momentum Mondays,’ where I cover the leading breakout stocks in the market, summarize the major events of the week ahead, and prepare investors for profitable trading.
Stock Indexes Consolidating
After running up aggressively into August, stock indexes have taken a much-needed breather, trading sideways in a rather wide trading range. This is welcome action, as it shows stocks are correcting over time, rather than price.
Furthermore, a consolidation like this indicates that another breakout higher may be in the works. If the S&P 500 can regain the 4500 level, the market should begin a year end rally. Alternatively, it should be noted that we are currently in the weakest period of the year from a seasonality perspective, and if the index loses the 4350 level of support, may see more downside.
However, I think investors should continue to look for appealing stocks to buy, as the incredible strength of the market this year leads me to believe there will be another rally into year end.
Week Ahead
The primary market moving event of this week is the Federal Reserve’s interest rate decision meeting on Wednesday. Although it is almost a certainty that the Fed will leave rates unchanged there is still huge anticipation preceding the event.
What is even more critical is the press conference after the announcement, where Fed chair Jerome Powell will answer questions, and investors can hopefully decipher what he and the committee may do going forward.
As of today, there is a 99% chance that the FOMC will leave rates unchanged, but the November meeting still leaves a possibility for them to raise again. Currently, the market prices the odds of a rate increase in November at 31.3%.
Also, on the docket this week are initial jobless claims on Thursday morning. The resiliency of the labor market remains one of the key factors leading interest rate decisions. If employment continues to be robust, investors can expect rates to be higher for longer, but if we start to see cracks in the employment market, there could be a quick pivot to interest rate cuts.
Trade Setups
I will say that I am currently seeing fewer momentum breakout setups than in prior weeks, indicating that there is some weakness in the market. A handful of leading stocks have broken their bullish patterns and may need some more time before setting up another trade.
Nonetheless, there are still some nice trading setups in the market. Additionally, all the stocks I am sharing here today are Zacks Rank #1 (Strong Buy), meaning they have upward trending earnings revisions. A strong earnings revisions trend is one of the strongest leading indicators for a bullish move in stocks.
General Electric GE is breaking out from a very tight consolidation on Monday morning. It is already trading above the upper bound of $116, signaling the breakout. Although General Electric hasn’t been an exciting stock for many years, it looks like now may be the time to own it.
So long as GE stock doesn’t trade back below the breakout level, it should make a strong move higher over the next few weeks.
Another stock amid a breakout this morning is AppLovin APP. AppLovin stock has cleared the $43 level and made new YTD highs after drawing in buyers Monday morning. So long as the stock holds above the breakout level it should continue to rally.
Vistra VST is a stock that has been featured on past Momentum Mondays and is setting up for another breakout trade. On Monday morning, it traded above the $33 level indicating a breakout. So long as it doesn’t trade back below that level, it should continue higher.
Vistra makes for a nice addition to an investor’s portfolio at the moment because as a utility company, it is a defensive stock. Utilities have led the market over the last couple weeks suggesting market participants are rotating into more defensive stocks. If a more severe sell-off does occur, utility stocks should outperform.
One stock that has not yet broken out from its pattern yet is Vertiv VRT. Vertiv has been one of the strongest performing stocks in the market, continuously building and breaking out from bull flags. Often the stocks that lead the market continue to lead so investors would be wise to follow them even after a winning trade, as is evident from Vertiv stock.
If VRT can break out above the $38.15 level, it should make another bull run and new all-time highs. Alternatively, if the price trades below the $36 level, the setup is invalid, and investors will want to wait for another opportunity.
Bottom Line
There is always a bull market somewhere! If tech stocks start to roll over, investors can focus on defensive names like utilities. Good traders must always remain flexible and should let price guide them.
Of course, even the best trading setups can fail, so investors should keep risk management top of mind, and always stick to the trading plan. Best of luck this week!
Top 5 Dividend Stocks for Your Retirement
Zacks targets 5 well-established companies with solid fundamentals and a history of raising dividends. More importantly, they have the resources and will to likely pay them in the future.
Click now for a Special Report packed with unconventional wisdom and insights you simply won’t get from your neighborhood financial planner.
See our Top 5 now – the report is FREE >>
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