The System & the week ahead

Important: this is not investment advice. Consult a licensed financial advisor before making any investment decision.

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Quick update before heading into next week.

The SP500 is right at the 200 days simple moving average, a level where the index has been rejected 3 times since April 2022.

On the other hand, we made a low in October and a higher low in December.

I am not predicting what is going to happen, for sure it is a critical point that may be resolved on the upside or the downside.

Best course is to observe and proceed with caution.

The narrative is about having a hard landing coming (deep/significant recession) that will compress earnings and valuations (=lower stock prices) or a soft landing (shallow recession or just a temporary slowdonn of economic activity), hence the bottom of the stock market is behind us.

I am in the camp of a soft landing because of the incredible amount of stimulus that the economy had since March 2020.

On the other hand, valuations are not cheap, so in any case either wie’ll see a melt-down (worst case) in 2023 with valuation reaching reasonable or cheap levels or, we’ll see a sideway / uptrend where investors will focus on high quality first: companies with healthy and possibly growing profits at reasonable valuations.

We’ll observe ad adjust accordingly.

The System - a momentum trading strategy

As shared with paid members last week, I just started a momentum portfolio where I expect to make about 30 trades per year, looking at weekly charts.

I shared a document that describes the entire strategy and shared the first 3 stock picks. Here they are:

I’ll be sharing a link to the Google sheet with paid subscribers soon. BTW above you can see my entry price and Stop Loss prices.

The idea is to pick small cap stocks (75m to 1Bn Market Cap) with strong fundamentals and good momentum (upside trends) and ride them as long as the momentum stays positive.

This week Stock Pick and updated Strategy document.