Client Newsletter Example: Suggested Profit Taking In ZS, LTHM, CHWY, DT and PLTR - BMRN Trade Update - A Look at Metals, Oil and the Dollar

Published on May 12, 2023 @ 7:01am

Suggested profit taking and removing ZS, LTHM, CHWY, DT and PLTR from our current open trading list, and moving up our previously suggested protective stop on BMRN. Based on where the major indexes are now, it's time to get a little more defensive. Here's why, along with a look at metals, oil and how the dollar is likely to affect both.

Suggested Profit Taking In ZS, LTHM, CHWY, DT and PLTR - BMRN Trade Update - A Look at Metals, Oil and the Dollar

It's been a pretty darn good run from early April to now for all of our previously suggested trading ideas. Collectively, between ZS, LTHM, CHWY, DT and PLTR, we've managed to amass about an 80% total gain between all five. That's depending on where you bought them though, because that rough calculation was based on the day we suggested them to yesterday's close. Meaning, had you wait at least a few days on most of them before buying them, the returns should have been even better.

I bring up that last point for a very important reason. Everything we suggest, outside of very short-term index ETF trading suggestions we make from time-to-time, does not necessarily require that you buy the idea in question the exact same day we suggest it. While some will start performing right away, every single idea we suggest is designed to potentially be picked up at any point in the days that follow our initial suggestion.

Why? We want to suggest ideas within buy ranges that we deem to be acceptable, so that everyone doesn't rush out to pick something up the same day we suggest it. This not only prevents market makers from working against a buying rush, it gives those who are busy time to consider an entry, which oftentimes can end up being at lower levels than where we initially suggested them.

There's usually no such thing as a perfect entry price anyway - especially in the type of extremely volatile market environment we're in these days, so it's far more about identifying a high quality name at a reasonable valuation that looks technically attractive at the time we suggest it. From there, all we can do is let the markets do what they're going to do, and control our own decisions along the way. In other words, it's always going to be more about controlling what you/we can, and then letting the markets do what they're going to do.

With that, we've decided to suggest profit taking in ZS, LTHM, CHWY, DT and PLTR around current levels, or at the very least suggest you move your protective stops way up in any of them in an effort to protect the gains, while still giving them some room to potentially work their way higher. As for our only open trade left right now in BMRN, we're going to suggest moving your protective stop up to just behind a daily close of $90 per share.

Like we say at the time of every single individual company we suggest, we'll only ever suggest an individual company on a short-term basis that we also believe has very good long-term potential. However, considering all of the ongoing headwinds that these markets are likely to face in the weeks/months to come, we definitely want everyone to be aware of what this current market environment is capable of, which is a whole lot of volatility in both directions.

Therefore, we're going to suggest profit taking in the above, remove them from our current trading list, and look elsewhere for other potential gains. It's not to say any of the above can't go even higher, but based on the way these markets continue to behave, the ongoing volatility in just about everything out there is going to continue to be an issue with most names.

Provided here are daily charts of both the NASDAQ 100 tracking QQQ and S&P 500 tracking SPY. As you can see, QQQ is fast approaching that $330 level - a level we suspect could produce another sharp pull back. As for SPY, depending on whether or not it can test its recent high before first closing back below its 3X3 DMA (dark blue curved line) is going to be an important technical event. Meaning, if it does not test its high, and more importantly closes back below its 3X3 DMA today or Monday, that could spell trouble for the benchmark ETF.

We'll see, but for now we're going to turn our attention to a few sectors that we will be starting to keep a much closer eye on in the days/weeks ahead. I'm referring to gold, silver and oil, but first provided below is a weekly chart of UUP, the primary ETF tracking the dollar.

As you can see, UUP seems to have found a base recently, and has started moving higher. However, you can also see it has been beaten up pretty good since its October top, so all we're expecting is a retracement back up to one of the levels I've pointed to here. It will be at any one of those retracement levels that we'll likely suggest at least a little exposure to metals and/or oil again.

With that, you can see on these weekly charts of GLD, SLV and WTI Crude Futures that while the two primary ETFs tracking gold and silver have done well in recent weeks, oil has not. Instead, the price of WTI not only tested its March low last week, it broke through that low before snapping back in very sharp fashion.

Now, it all remains a bit dicey based on the fact that the dollar has started to find a bid again. Honestly though, it's just a whole lot of massive rotational type activity out there these days in everything from metals to energy, tech and more. Meaning, when tech rallies, other sectors get left alone and vice versa, which is enough to drive most traders and investors out there crazy.

However, we continue to eye literally every single sector out there for potential opportunities day-to-day, but we're still very careful as to what and when we'll actually suggest something. I know I continue to sound like a broken record, but our theme continues to remain the same until proven otherwise - take the profits when they're there, and continue to help you manage risk all along the way best we can.

While there's definitely a lot to like about the long-term future for US stocks, something continues to tell me the worst isn't over yet, so I'm still not convinced we should be buying and holding much of anything without incorporating some protective stops on everything we continue to suggest.

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John Monroe - Senior Editor and Analyst