Weekly Update (6/19/2017)

Uncertainty

This is what an uncertain market looks like.


This week we witnessed every end of the sentiment spectrum from market opens to market closes. Large gap downs on some mornings led to dip buys, only to be followed by a slow grind down. Gaps up were sold off aggressively, and multi-day swing trading proved to be more frustrating than ever. Some of our favorite weekly picks like BIDU and NFLX fell below important support levels, and most of the juicy setups that we've been seeing for the past few months have vanished in the last two weeks. 

We played it light, entering a few unfruitful short-term positions, but putting on longer term plays that could be huge wins if this market continues its rotation into biotech and materials. We’ve got plenty of cash on the books and are looking to deploy more capital as this market becomes more certain in the direction it wants to head. 

Our two main biotechs, MYGN and ALXN continue to outperform the market, with each stock up around 9% last week. The yolo calls that we bought in MYGN (Jul 21 $25) are up more than 350% and aren’t showing much sign of stopping on their way to our 50x return dream goal. ALXN does seem to be coming down to fill the gap it created last week, but our $130 price target stands for the next few months.
 

Tl;Dr 

This market needs to get certain. That might mean either more short term drops or some consolidation at these levels. The S&P hasn’t seen a 5% correction in over 150 days, the third longest streak since 2009. While this doesn’t really mean anything, it puts things into perspective about the insane bull run that the market has had and that a pause at these levels wouldn't be out of the question. We’re still confident in our long term investments, but expect some short term pain either in sideways or downward movement. 

 

Short Term

We’re not eager on throwing money towards the market right now, but we’re getting our shopping list ready if more blood comes.

Amazon announced that it was buying Whole Foods on Friday, which sent many retailers into a nosedive. We really like WMT and TGT both fundamentally and technically and will be looking to initiate possibly a multi-month position in either or both of these two.

Banks continue to be market outperformers but, in a market like this, it's hard to get really excited unless they return to the previous upward trend. We'll keep you posted on this.

 

Long Term

General Electric (GE)


Your father probably invested in it, and his father before him probably did the same.  This is one of those blue chip stocks that people have held onto for 30 years through the peaks and valleys of the stock price.

GE has been trading at a range around $30 for quite some time now, and recently dipped as low as $27.36 last month.  A recent shift in the CEO sent the stock back into $29 this week against a tough market environment.  We love where this stock is positioned, even after the recent monster move, and we think the technical set up and the fundamentals supporting the company make this an excellent long-term stock for your portfolio.

 GE has been trading in this range for months and is sitting right at the middle at $29 today.  

GE has been trading in this range for months and is sitting right at the middle at $29 today.  

The Set Up


Ideally, you want to buy a stock at the lower end of its range at a level of support, because this maximizes your potential gain while limiting downside loss.  However, the more conservative among you who are less inclined to sit on a losing trade until it begins to work for you might want some confirmation that the stock is headed up before jumping into a position.

GE is in this exact sweet spot.  It is still on the lower end of the range, but it has had a big move up towards the upper end of the range, which demonstrates positive momentum in the stock. Even if GE stays within this range, you have the opportunity to capture $3 / share when it bounces off of $32.  We think that with the new CEO, and the recent spinoffs, sales and deals coming down the pipeline, this stock is sure to beat $32 and outperform the market over the next several years.  A negative earnings report could send it lower, but we are very confident in this one long-term.

Happy Trading,

- The Minotaur Team