Stock Newsletter Volume 1 Issue 5

8/13/2019 Stock Newsletter Volume 1 Issue 5

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WRIGHT TIME CAPITAL GROUP

January 26, 2014

Authored by: Liam McMahon

Liam McMahons Stock Newsletter

Sponsored by Wright Time Capital GroupVolume 1 Issue 5 January 26, 2014


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Newsletter|1/26/2014

iam McMahons Stock NewsletterSponsored by Wright Time Capital Group

IntroductionWelcome to my stock newsletter. For those of you that dont know me, my name is Liam McMahon and I

am a strategist at GlobalFxClub.com, a subsidiary of Wright Time Capital Group. While my work over at

GlobalFxClub.com is mostly dedicated to forex, I have been trading stocks since 2008 and though I share alot of my stock setups on twitter (@Duke0777), Ive decided to formalize the process in an effort to

provide more in-depth fundamental and technical analysis. I will be focusing primarily on US equities,

though I will also discuss some foreign indexes, especially the major European markets and the Japanese

Nikkei. The goal of this newsletter is to provide in-depth analysis and point out both longer and shorter

term trading and investing opportunities in the US stock market. I will be rating stocks as buy, hold, or

sell and I will provide possible targets for the setups that I see. I will also be providing time frames to

consider on all the stocks I analyze. The newsletter will focus on the clearest opportunities out there, not

necessarily the most popular stocks. If I dont see a clean setup on Apple, Iwont be talking about Apple,

regardless of how many people love talking about it. I will be releasing the newsletter twice a week, on the

Sunday before the trading week starts and then on Wednesday morning before the US session begins.

Thanks for joining me on this exciting new venture; I look forward to communicating with you throughout

the coming weeks, months and years. You can contact me on twitter (@Duke0777) or at

[email protected]


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DisclaimerLiam McMahon and Wright Time Capital Group LLC are not paid to promote these stocks. Investing in the

stock market is a challenging venture and entails a substantial amount of financial risk. Investing in stocks

may cause you to lose some or all of your investment and should only be done with risk capital. Always

trade on your analysis and within your own risk parameters.

Wright Time Capital Group and Liam McMahon are not responsible for any loss you sustain based on any

advice distributed through this newsletter or through any of our various social media outlets, email, and any

other type of communication, electronic or otherwise.

All analysis and recommendations are solely the opinion of Liam McMahon and Wright Time Capital Group

team, we can be wrong like anyone else. Please understand and accept the risk involved when investing.

These recommendations are intended for educational purposes, to help you understand different types of

technical and fundamental analysis. Only trade with money you can afford to lose.


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The IndexesWe finally saw our first really strong move of 2014 at the end of last week and round one clearly goes to the

bears as an emerging markets sell-off hit US markets. The Dow lost 3.5% on the week, pushing its YTD

loss past 4%. The NASDAQ lost 1.65% and the S&P 500 fell 2.62%, pushing their YTD returns negative as

well. Even more concerning was the high volume numbers we saw to end the week, Fridays volume onS&P 500 futures and SPY(the SPDR S&P500 ETF) was the highest since mid December, and Thursdays

volume was also above the 50 day average. Japanese stocks also suffered this past week as the Japanese Yen

strengthened dramatically. The Nikkei lost 2.18% over the week, and may have actually put in a very

significant top. Ill have more on that later this issue.

Well begin with the S&P 500 which cut through its supporting trend-line on Friday with very little

hesitation. That trend-line had dated back to October and had kept the S&P 500 supported three times

(including this past Thursday) before it finally gave way. Also failing to hold on Friday was the 50 day EMA

(in red), which had been significant several times in the past year. Price is now approaching the 100 day

EMA at 1768.1, which stands as another major test for bears. The 100 day provided significant bounces inAugust and October of 2013, and it may do so again this upcoming week. Below the 100 day the next

major support level comes in at about 1740 or so, where a minor trend-line sits. The break below 1800 has

forced me to shift my market bias from bullish to a more neutral or even slightly bearish outlook. Major

resistance now begins that 1800 figure and extends up to about 1827.

S&P 500 Futures (Daily Chart)

NASDAQ futures held up pretty well on Thursday, but more than made up for that relative strength with avery strong down day on Friday. Futures dropped 2.38% on Friday, and pushed below both supporting

trend-lines and closed on the lows of the day. The first major support level is at 3505.31the 50 day EMA,

but below that there is some room to the downside before the next major trend-line and moving average

confluence area. 3400 is the next major level to watch, should the 50 day fail. The 100 day EMA and a

major trend-line dating back to late June coincide at that level, and should provide some sort of bounce.

The NASDAQ is still in the best shape of the 3 major indexes, and buying off that 50 day EMA (and


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previous low) is actually a relatively decent risk/reward opportunity. Considering the strength and breadth

of the move lower to end last week, however, all longs should be taken with a good deal of caution.

NASDAQ Futures (Daily Chart)

If NASDAQ futures look to be in the best shape, Dow futures look by far the worst. Friday saw the Dow

shed over 300 points, or 1.97%, and Dow futures break below its key supporting trend-line and the 50 day

EMA. Technically futures also closed below the 100 day EMA as well, albeit barely. The sell-off looks

poised to continue, with the next major support level not coming in until about 15.4kthe 200 day EMA

and a major supporting trend-line dating back to November of 2012. The resistance range starts at 16.1k

and extends up to 16.25k.

Dow Futures (4 Hour Chart)


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This WeekEarnings season enters full swing this week, with several major names scheduled to report. Caterpillar,

Apple, DuPont, Pfizer, Chevron, Boeing, 3M, Exxon Mobil, Facebook, and many more are all scheduled to

release their quarterly reports this week, so keep one eye on the earnings calendar. Your other eye should

probably be focused on the Fed this week. The FOMC meets Tuesday and Wednesday to make theirinterest rate and asset purchase decisions. This meeting will be the last one chaired by Ben Bernanke and

investors will be looking at whether the Fed decides to taper an additional $10b (or more, or less) of asset

purchases this month to follow up Decembers taper.

To top it all off, this week also contains a good deal of economic data from the United States, including

New Home Sales, Durable Goods, Consumer Confidence, Quarterly Advance GDP, and Pending Home

Sales. This deluge comes after a dearth of economic data last week so increased volatility seems likely. All in

all, this is a huge week for US equities with many significant events scheduled to occur. The ball is back in

the bears court for the time being, well see if they can do anything with it.

Trade Idea UpdateSO long remains in place despite a sell-off late on Friday, as the stock dropped 0.5%. Price is sitting just

above support right now.

GE continues to sell-off hard, losing over 3.3% on Friday. Our short from Issue 1 hit its first target at 26.1,

and the now the stock is marching toward target 2 at 24.50. 25.5 is now resistance. This move lower is

looking a bit stretched, so if we do see a bounce early next week, dont be surprised. It could provide a nice

opportunity to add back whatever you took off at 26.1.

UPS found some significant downside on Thursday and Friday, dropping 1.64% on Friday. Our first target

remains 95.00, and while the 96.00 area (flat cloud bottom) may provide some support, major resistance

sits at 98.94.

F had a rough day on Friday, dropping 3.65% ahead of its earnings report this week. Our entry range was

between 16.56 and 16.91 (the stocks high was 16.78) so depending on where you entered, this trade is in

your favor between 4.4% and 5.6%, and though our first target is still 15.5, with Ford reporting earnings

before the bell on Tuesday, it might not be a bad idea to reduce position size to lock in some profits ahead

of earnings.

WFC suffered, along with the rest of the financials this past week, highlighted by a 1.88% drop on Friday. If

you entered at market when I put out this idea, youre slightly in the red, but if you waiting for the lowerbuying range, well price has finally reached you. A daily close below 45.10 or so would invalidate the long,

but right now there is still a major supporting trend-line for bulls to rely on. Our other financial stock long

ideas (MS, C) were invalidated by Fridays sell-off.

XRT, OSTK, Mhave been mixed, with our XRT short hitting its first target at 81.15 for a decent 3% gain

(depending on entry) before continuing lower. Our second target still stands at 74.00. OSTKsuffered on

Friday though, losing 3.1%. It remains supported by a key ascending trend-line and still looks moderately


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healthy. M fell down into its key support range mentioned in earlier issues, and has held there for now

longs against 53.00 look good.

BMY, MRKdiverged on Friday as well, with Bristol Myers losing 5.5% and invalidating our long call.

MRK, however, held up very well despite Fridays broader sell-off, and managed to gain 0.74%. Our first

target remains 53.44.

Foreign MarketsI mentioned earlier that Japanese markets may have put in a significant top and I think that the possibility

this has occurred is worth discussing in detail here, as it may offer a nice trading opportunity on this side of

the Pacific. On Thursday, the Nikkei broke below the neckline of a fairly clear head and shoulders reversal

pattern, before finding significant follow through on Friday. Considering this move was confirmed by

significant Yen strength (the Yen and Nikkei are inversely correlated) and that head and shoulder patterns

can often mark the beginnings of very significant down moves, Im looking at getting short EWJ which is

the iShares Japan ETF. The two charts below show, respectively, daily Nikkei futures and daily EWJ.

Nikkei Futures (Daily)

EWJ (Daily)


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You can see that both the futures and the ETF are sitting on significant trend-line support but have been

under pressure the past couple sessions. Im looking for this Nikkei move lower to be the beginning of a

more significant correction, and if that proves to be the case, shorting EWJ is a good way to take advantage

of that.

CALL: SELL EWJ

ENTRY: DAILY CLOSE BELOW 11.70

TARGET 1: 11.00

TARGET 2: 10.50

TIME FRAME: 3-5 WEEKS

INVALIDATION: DAILY CLOSE ABOVE 12.00

Health areXLV,the SPDR health care ETF sold off on Friday, losing 2.35% and is now nearing a supporting trend-line that dates back to early October. Considering the severity of the sell-off on Friday, watch Mondays

open for signs that the market is respecting this trend-line, and wont just cut through it before entering.

Considering the jitters across global markets and the fact that were now entering the heart of earnings

season, all long trades are going to be a little smaller, with targets that are a little bit more conservative.

XLV

CALL: BUY

ENTRY: 56.50

$55.5TARGET 1: 57.00

TARGET 2: 57.50

TIME FRAME: 1-3 Weeks

INVALIDATION: DAILY CLOSE BELOW 55.25


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the stock is retesting its breakout point after breaking out of a downtrend that lasted from August until

earlier this month. The stock lost 1.6% on Friday, but ended up right in a major support zone that

combines the top of the cloud with a retest of that descending trend-line. CSCO is obviously a major player

in the tech realm and with a P/E ratio about half the Tech average; it remains a high value play.

CSCO

CALL: BUY

ENTRY: MARKET

TARGET 1: 23.55

TARGET 2: 24.10

TIME FRAME: 1

3 MONTHSINVALIDATION: DAILY CLOSE BELOW 21.50

Stocks to WatchGM is a stock with a trade for both bulls and bears this week. The stock dropped 4.14% on Friday,

outpacing overall market losses, but is now hitting a key trend-line. Shorter term traders may like this

opportunity for a long near the open on Monday, looking for a small bounce back toward the cloud bottom

at 38.00, while longer term bears should be watching that trend-line for a break to short. With our Ford

short already in the money, I dont have a problem hedging it with a GMlong or adding to short autosexposure it with a GMshort. GM reports earnings a week from Thursday, so there is some time to play

with on this one. Look for an update on GM in Wednesdays newsletter.


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GM

Amazon(AMZN) is another stock to watch this week. The company will report their Q4 earnings onThursday, so Im staying away for right now, but Fridays sell-off (AMZNlost over 3%) send price below a

key supporting trend-line and we may be seeing the beginnings of an ascending wedge break like we saw in

GEa few weeks ago. 380.00 is the first support level, and resistance comes in at 395.60play these levels

for short term trades, and then keep an eye on earnings for a possible longer term setup.

AMZN

onclusionBears have finally shown up this year, moving indexes down below their first key support levels, and

threatening a broader reversal in some foreign markets (namely the Nikkei). This sell-off has volume

supporting it, meaning we may see some significant additional downside in the weeks and months to come.


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Youll notice that I only proposed one additional short, despite the sell-off, and heres why: were still in a

significant uptrend, and we already have several shorts in place. Our UPS, GE, F, and XRT shorts are all in

good shape, and should continue to make money if markets keep selling off. I dont want add to shorts after

a significant pullback that has many key indexes sitting at support. Im being very careful in picking the

longs I want to play, especially since the weakness in Financials has knocked out some of our earlier longs. I

remain bullish on Utilities, and I think cherry picking tech stocks is a good play here considering both the

relative strength of the NASDAQ and the fact that the NASDAQ still looks pretty ok going forward. This

week is a big one for markets, with a whack of significant US data, highlighted by GDP and the FOMC

decision on Wednesday, as well as a bunch of very significant earnings reports. Watch the reports, and

watch how the broader sectors respond to them, especially AAPL. Good luck!

Stock Newsletter Volume 1 Issue 5

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