The Week Ahead in Stocks – Mar 05

As we begin a new week, stocks are moving in wildly different directions. Even in the usually highly correlated world of FAANG, there are clear divergences in strength and structure. Take Facebook and Netflix, for example:

NFLX / FB shows us where the relative strength lies. Should we then just buy the strongest? Sometimes, but at Matrixtrade we also factor in volatility and clarity. If a strong stock is volatile and lacking clarity, the risks increase. We would rather buy a weaker stock on a clear set-up where we can be more aggressive with position sizing and stop placement.

Not only do the February – March recoveries vary in strength over various stocks, the structures of the rallies are very different, and from this we can make a number of conclusions. Facebook, and perhaps Google, completed corrective looking rallies, and the next decline could make new lows and still recover. Apple on the other hand, made a clear trend sequence higher. If a new low were to be made, the implications would be significant.

The crash scenario is still very much possible and we are lazer focused on staying safe and profiting from this dangerous market.

Over on Hot Stocks we are again looking at possible plays on the new US tariffs using historical guides. If there are retaliatory tariffs from the EU like there were in the 2000s, which stocks would be hit? The rise in yields also continue to create opportunities and a 6% yield in a basket of preferred stocks (PFF) is within reach.

Good luck and good trading next week.

Andrew McElroy
Chief Stocks Analyst