Pick Of The Week – Analysis On Medtronic (Week 26, 2022)

"The interest rates announcement spooked the markets, therefore the slide experienced in the US stock market isn't over." 

I happened to overhear this conversation as I was having my brunch. My ears are tuned to listen to all things about the stock market. 

I'm not too sure if the market will continue to slide so soon, but I foresee a short relief rally. And this brings trading opportunities - long and short.

All these while, I've been sharing about strong stocks to buy for a quick swing trade. This week's stock pick of the week is unique as it involves shorting it. The stock? 

Medtronic. 

Let's see why!

Performance Of US Stock Market vs Medtronic

Using the top down approach, you'll start off by having a look at the overall US stock market (represented by the S&P 500 futures) to have a sense of its sentiment. 

In the past week, the overall US stock market enjoyed a rally, depicted by the green arrow. This is against the backdrop of a downtrend which started in Jan 22.

How did the shares of Medtronic (MDT) perform last week?  

Its price went sideways, marked out by the gray box. 

From the chart above, you may think that MDT's downtrend only started in late Apr 22. Is this the case?

Zooming out, you'll notice that MDT has been in a downtrend since mid Sep 21. That's earlier than the start of the downtrend in the S&P 500 futures! This is significant because when you would like to find candidates to short-sell, you'll want the candidate to be weaker than the overall US stock market. 

The opposite is true when you're looking for opportunities to buy stocks for a quick swing trade. 

Now that you've established that MDT has been weaker and is still weaker than the overall US stock market, the next move is to evaluate if the down moves are explosive enough for a quick short sale. 

How Explosive Is MDT?

Looking at the chart of MDT above, you can see that there're 3 explosive down moves. Each down move measures between 6.8% to 17.15%! 

Do you notice something about the magnitude of the down moves?

Yes, the magnitude of each down move is increasing! 

If the price of MDT were to bounce up as a pullback, there's a high chance of it sliding further thereafter as this downtrend continues.  

I see that you're licking your lips. 

Before you pull the trigger, let's have a look at the key price levels of MDT, shall we?

Key Price Levels

Plotting the key price levels is crucial as these key price levels are price zones where prices are likely to turn at. Yes, they're also known as support and resistance zones. 

Referring to the chart of MDT above, you can see that the immediate support zone for MDT is at $88. The candlesticks of MDT are resting nicely on that support zone. 

Above it are 2 resistance zones, at $101.50 and $107. This means that if the price of MDT were to rise, it's likely to reach around $101.50 before facing a push back from the bears. 

However, if the bulls were able to overcome the bears at $101.50, the bulls could even push prices to $107. Is this likely? I don't think so. 

I think that the price of MDT is likely to rise, but not to the price zone at $101.50. I think that the price of MDT is likely to reach around $95 before heading lower. 

After analyzing the overall US stock market and MDT, it's time to talk about strategy.

The Strategy You Can Use To Trade MDT

Here, you'll be planning your entry, profit taking, and stop loss levels. 

In every trading strategy, you must know your entry, profit taking, and stop loss levels to stay in business. Yes, trading is a business indicating that the strategy you use must be well formulated too. 

Using The Art of Explosive Profits framework (AEP for short), I'd like for the price of MDT to pull back to around $95. 

As its name suggests, you'll be looking to catch an explosive move in a short period of time consistently. 

In the AEP course, you'll be coached on how to search for strong stocks like MDT instead of relying on news and hear-say.

You'll also become fluent in reading charts to shortlist stocks that are about to have an explosive move.

Finally, you'll learn how to identify the optimized entry, stop loss, and take profit level to capture these explosive moves that you've been waiting for (in a safe manner, of course)! 

Have a look at the AEP framework and add this explosive trading strategy to your arsenal to seize more trading opportunities.

Why Is MDT The Stock Pick Of The Week?

Source: https://www.medtronic.com/us-en/index.html

MDT has been in a downtrend since late 21. This is in contrast to the overall US stock market's downtrend which only started in early 22. 

This meant that MDT is far weaker than the overall US stock market, therefore making it a good candidate for a quick short-sale. 

Each of its down moves has been explosive and increasing in magnitude over time. You can infer that the downtrend isn't going to be over yet and you can capitalize on this fabulous opportunity using the AEP framework.

Please note that I'm no financial advisor, so I encourage you to treat this edutainment and do your own research.

Lastly all photos and images are from unsplash.com, pexels.com, pixabay.com, and tradingview.com, otherwise stated.

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