In this post, I’ll focus on setups that I’m monitoring for both long and short positions. With a chart and short write-up, this is a quick way to scan and plan potential trades.
These ideas are the end result of my process to identify stocks offering the right combination of growth fundamentals along with a proper chart setup. Live alerts are sent to Traders Hub members only.
Stock Market Update
The fallout from the conflict in the Middle East continues having a cascading impact on various sectors of the capital markets. The U.S. and Israel are continuing their strikes against targets inside Iran, while Iran retaliates with missile and drone attacks impacting various countries in the region. From a disruption standpoint, the production and flow of key energy products is being impacted the most. About 20% of the world’s oil and liquified natural gas transits the Strait of Hormuz off Iran’s southern coast, where fears are growing over an extended closure. The chart below shows that traffic in the strait has essentially ground to a stop. It’s also worth noting that the strait is a major chokepoint for ingredients in farming fertilizers like urea where around 35% of global exports pass through.
The threat to rising energy and food prices means the impact of the conflict could be extremely inflationary if a resolution isn’t reached soon. Evidence of inflationary pressures are building even before the turmoil in the Middle East. This week saw an updated report on manufacturing activity from the ISM, where a reading above 50 indicates expansion. While manufacturing sector activity is expanding with a reading of 52.4 in February, the prices paid component surged to 70.5 which is the highest level since mid-2022 (chart below). Price paid tends to lead changes in consumer inflation, with the most recent jump occurring before the Middle East conflict broke out.
While investor attention and headlines are fixated on developments between the U.S. and Iran, I believe the bigger challenge facing equities is the looming rise in inflation and the pressure that would apply to valuations. Keep reading to see:
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Chart analysis for new trade ideas.
