Many of you have likely heard the old Wall Street adage, “Don’t fight the Fed.”
Usually, this phrase is uttered by bullish investors warning their bearish counterparts not to short a rising market being fueled by easy monetary policy.
But at this point, with the Federal Reserve seemingly set to defeat rising inflation by any means necessary, it’s taking on a different meaning.
For me, fighting the Fed right now would mean trying to buy stocks in the face of tightening monetary policy.
Instead of taking on that risk, I am starting to look for more ways to go with the market flow.
Therefore, on today’s Watchlist, I’m including just one bullish idea and two bearish ideas.
Both technically and from a fundamental perspective, I think we’ll have more success trading with the Fed rather than against it.
With that in mind, let’s get right to our newest ideas…
Jackson Financial Inc.
Jackson Financial Inc. (JXN) is a $3.7 billion financial planning firm showing huge growth in both sales and earnings.
Here’s how the chart is setting up…
Here’s how the stock is setting up with my Stock Surge Indicator (SSI)…
- Surge score: 97/100
- % Above 52-wk low: 98%
- Sales growth: +170%
- Return on Equity: 32%
- Triple momentum: yes
Growth stocks have been hammered over the last six months, but JXN has held up better than most.
It is also a recent initial public offering (IPO), so this would be the first base breakout for the stock.
The stock has compressed nicely with pullbacks shallowing from 25% to just 8%.
I am looking to buy the stock on a break above $44.10 with a stop beneath the swing low at $42.05.
MaxLinear, Inc. (Short Idea)
MaxLinear, Inc. (MXL) is a $3.9 billion semiconductor company focused on communications chips.
Here’s how the chart is setting up…
And here’s how the stock is setting up with my SSI…
- Surge score: 77/100
- % Above 52-wk low: 59%
- Sales growth: +26%
- Return on Equity: 49%
- Triple momentum: yes (short)
This stock was a big winner in 2020 and 2021, climbing over 800% in less than two years.
But the bullish run appears to be over.
Shares have rolled over hard, making a decisive break of the 200-day moving average and plummeting to new lows.
The stock popped up on earnings last week, but I would use this as an opportunity to sell the stock short.
Try to sell near the $50 level and use the 200-day moving average as your stop loss.
RH (Short Idea)
RH (RH), also known as Restoration Hardware, is an $8.5 billion luxury home furnishings retailer.
Here’s how the chart is setting up…
And here’s how the stock is setting up with my SSI…
- Surge score: 18/100
- % Above 52-wk low: 8%
- Sales growth: +11%
- Return on Equity: 95%
- Triple momentum: yes (short)
Restoration Hardware is getting destroyed.
It’s down more than 50% over the last six months, with no sign of coming back to life.
So far, RH has found support at the $320 level.
But it has been tested four times so far, and I don’t expect it to survive a fifth test.
If the stock makes new lows, this would be a good short opportunity.
I would use the 50-day moving average as my initial stop and then bring it down as the trade moves lower.
Before I go, if you’d like a step-by-step walkthrough on how to best take advantage of trades like these…
Be sure to check out my article, How to Follow My Weekly Trades, to know where I’m buying or selling so that you can follow along.
Finding a Bottom
Now, you can see that this Watchlist is tilted to the bearish side with two short ideas.
Until we find a real bottom, I feel this is the appropriate strategy.
And we won’t know for sure that the bottom is in until we start to see massive buying by institutions.
These are hedge funds, pension funds, endowments and other trillion-dollar organizations that are eventually going to start scooping up stocks at value levels.
And when they put their money to work, following their lead can pay off big time.
This is exactly what I focus on in my premium Stealth Trades research service.
So, if you’re interested in giving it a try, click here now to view my latest presentation.
Embrace the surge,
Ross Givens
Editor, Stock Surge Daily
The post Watchlist Update: Don’t Fight the Fed appeared first on Stock Surge Daily.
