Weekly Update: Here’s What Comes Next for Inflation
My wife is 39 ½ weeks pregnant, and our little girl could come any second…
So, I’m writing this ahead of the opening bell on Friday to make sure I got this week’s Watchlist done early just in case.
Now, after a strong week to start July, stocks retraced on light volume this week.
In my opinion, the market is trying to form a bottom.
This tends to be a process with movement back and forth as large traders begin covering shorts and gradually increase their exposure on the long side.
Wednesday’s Consumer Price Index (CPI) report showed that inflation made yet another high at 9.1% for the prior 12 months.
The Nasdaq opened lower but recovered by the end of session to close down just 0.14% for the day.
Believe it or not, this is positive…
Silver Linings
The fact that the market can rally or at least hold on amid negative news is a good sign that the market could be nearing the lows.
Additionally, commodity prices continue to come down.
Commodities are the inputs of most final products, so it takes some time for those price reductions to work their way through the supply chain.
But to me, this is a sign that inflation is cooling. Just take a look at these commodity drawdowns from their 52-week highs…
Lumber -58%, Nickel -54%, Aluminum -37%, Natural Gas -31%, Steel -28%, Wheat -28%, Zinc -25%, Lead -23%, Copper -22%, Soybeans -18%, Oil -13%, Orange Juice -11%.
Now, getting back to the Nasdaq, I’ve drawn two horizontal lines on the daily chart above…
Whichever line is hit first will likely lead the next move.
A breakout above the green line should lead to a rally higher, at least for the short term.
A breakdown below the red line, however, should mean new lows and another leg lower for the markets.
Join Me on Monday
Before we get to this week’s Watchlist, I want to remind you to join me on Monday afternoon for our Stealth Trades Live Class at 3:00 p.m. ET…
I’m going to outline our plans for dealing with whatever the market happens to throw at us next, and we’ll take a look at our Watchlist stocks and other potential ideas in more detail.
So again, please join me right here on Monday at 3:00 p.m. ET!
In the meantime, I have three new trades for you this week, each with classic bullish setups that should lead to higher prices…
Molson Coors Beverage Company (Long Idea)
During Thursday’s “State of the Market” webinar with my colleagues Josh Martinez, Anthony Speciale, I pointed out that the alcoholic beverage sector is coming out of a Stage 1 base and is on the verge of breaking out higher.
- Surge score: 96/100
- % Above 52-wk low: 39%
- Sales growth: +17%
- Return on Equity: 7%
- Triple momentum: yes
Molson Coors Beverage Company (TAP) is one of the strongest stocks in this sector and currently finishing a 12-month “cup with handle” pattern.
Consider buying here with a stop at $54.10.
MGP Ingredients, Inc. (Long Idea)
Another alcoholic beverage stock that looks even stronger to me is MGP Ingredients, Inc. (MGPI).
- Surge score: 98/100
- % Above 52-wk low: 77%
- Sales growth: +80%
- Return on Equity: +20%
- Triple momentum: yes
The distilled spirit-maker is forming a “base on base” pattern with extremely tight price action over the last two weeks.
The relative strength line is steadily climbing higher even as the broader market chops back and forth.
Consider buying MGPI on a breakout above $103.25 with a stop at $99.05 for a very low-risk trade.
Halozyme Therapeutics, Inc. (Long Idea)
Halozyme Therapeutics, Inc. (HALO) is a biotech stock that has been steadily drifting higher since February.
- Surge score: 97/100
- % Above 52-wk low: 50%
- Sales growth: +32%
- Return on Equity: 169%
- Triple momentum: yes
It broke out to new highs on heavy volume on July 7 but has since pulled back to the 21-day moving average.
Traders may consider a pullback buy here with a stop beneath the swing low at $43.40.
Join the Insiders
Now, if you’ve ever wondered how I developed a proven track record of trading along the insiders like corporate CEOs, CFOs, executives and board members…
Do yourself a favor and check out my latest Insider Effect presentation!
Corporate insiders are always buying or selling shares in the companies they operate. These folks have a footing of knowledge that Main Street investors simply do not.
I covered my strategy for trading alongside corporate insiders and generating potentially massive gains as a result.
Live Coaching Session
Monday, at 3:00 p.m. EDT, we’ll be hosting our regular weekly coaching session for Stealth Trades.
We’ll send you a login reminder that morning, just so you don’t forget.
We’ll cover all of our new stocks on the Watchlist as well as the rest of the stocks inside Stealth Trades.
You need to attend this session to get the most from your subscription!
In the meantime, you can watch the replay of our latest Stealth Trades session right here.
Best wishes for your trading,
Ross Givens
Editor, Stealth Trades
P.S. Click here to learn more about my Insider Effect strategy and see what you could be missing out on.