Welcome to Real Vision’s Trade Ideas. Today, we’re sitting down with Patrick Dunuwila
of The Chart Report. Great to have you here. Thank you. So this is your first time on Trade Ideas. Can you give us a little bit of your background
and what you do? Sure. I’m a trader, technician, and editor-in-chief
of The Chart Report. The Chart Report is a website that aggregates
and curates the best technical analysis from the smartest analysts out there, and it was
kind of born out of the idea that we think there’s a lot of bad technical analysis out
there and just overall market analysis in general. And what we do with the chart report is we
separate the bad from the good, and we find common themes that people are talking about,
and we try to connect those themes, and find threads, and pull them together so that our
readers have actionable ideas and have a better chance of navigating the market. So with that, what sort of themes or ideas
do you see going on in the markets right now? Sure. Well, the trade idea I brought for you today
is Visa. That’s ticker symbol V. And we think it’s
really a story of relative outperformance. And before I get into Visa I want to touch
on the overall market real quick. And one theme that we’ve been talking about
a lot on the chart report and hearing a lot of technicians talk about is this flat 200-day
moving average. And what that means, what that’s indicating
is that there’s no clear trend in place. There’s not a good way to have clear conviction,
bullish or bearish, one way or the other, right now. It’s what that flat 200-day moving average
is suggesting is that all we can anticipate here is choppy, sideways, messy price action. And in that sort of environment, it’s all
the more reason to be long the strongest quality names. And we think a large cap name like Visa presents
a great opportunity right now. The first chart I want to look at is large
caps versus small caps. And we have the Dow Jones relative to the
IWM, which is the small cap Russell 2000 ETF. And you can see that it’s outperforming here,
and we expect large cap to continue to outperform in this environment. This is really top-down technical analysis,
and so you want to be in the strongest names in the strongest areas of the market. And as far as sectors go, it might surprise
some people to learn that this is actually a technology stock. It strikes a lot of people as a financial
stock understandably, but it’s actually the third largest component in the XLK, the tech
sector SPDRs ETF, behind Apple and Microsoft. So when you take a look at how tech has fared
relative to the overall market, the S&P, we have a chart here of XLK relative to the S&P
500. You can see that relative to the S&P 500,
tech is hitting all-time highs, certainly a bullish thing. Now, tech has really been outperforming since
going back to pre-financial crisis. It’s been the best performing sector year-to-date. Not only that, going back 5 years, it’s been
the best performing sector of the S&P 500 sectors. So again, it’s an area of the market that
you want to be in. And we’re just trying to find ways that you
can swim with the trend here. And that top-down approach helps you nail
down to the strongest names within the strongest sectors. So then if you look at Visa relative to the
overall tech sector, you find that it’s been outperforming the tech sector. This is going back to 2011. So that’s certainly another bullish thing,
and we think that trend will continue. It’s more likely to continue than to reverse. So what levels are you looking at for Visa? Sure. Let’s take a look at the daily candlestick
chart of Visa for a more tactical approach to this trade, and we’ll talk about some specific
levels here. On this chart, you can see that Visa’s broken
out to all-time highs, and it’s reached those highs that it previously had made in October
of last year. And since then, that previous resistance level
from the October highs is now acting as support. And that goes along with classic technical
analysis and the principle of polarity, whereas when resistance is broken to the upside, it
then tends to act as a floor. It tends to act as support. And you can even see on that chart, once it
broke out, it threw back. we call that a throwback. When it revisits that support level, it threw
back to support, and that level has been holding pretty well. So we think that that presents a good clear
level to trade against and shows you a good risk and reward opportunity. It clearly defines where your risk level is. So how high do you see the stock potentially
going? Yeah. So as we’ve mentioned, it’s at all-time highs. It’s very close. I mean, it’s trading a little off them. But in uncharted territory like that, one
of the tools we use is the Fibonacci extension. So we took the Fibonacci extension from the
October to December 2018 decline, and that projected up to the $170 level. We took the 161.8% Fibonacci extension, and
that brings you to the $170 level almost exactly. And that represents about 10% upside from
current prices. If you use 149 as a stop, we think that’s
the more conservative stop. But you could go all the way down to 144 with
your stop. I wouldn’t put it any lower than that. And as an entry, an ideal entry would be around
151.50, so $151.50. And we think that you could be buying any
weakness adding on dips here. And what’s the time horizon on this trade? Sure we think it’s good for the next quarter,
really. Again, as long as you stick to those risk
management levels, we see plenty of reason to be buying as long as it’s above that, call
it 150 level, that zone. We draw support and resistance with a crayon,
not a pen or a pencil, because you want to have it be more of a zone than a specific
hairline level, if that makes sense. And another thing is back to what I was talking
about the broader market environment right now being a little bit choppy, this trade’s
very prone to whipsaws, meaning you could get stopped out, and just to have price return
back above your level. Very frustrating kind of environment. But we see no shame in getting back long as
long as it’s above that level. Those former highs from October present a
clear now support level. And yeah, we think you can be buying on dips
here. Do you see market volatility as the potential
biggest risks of this trade? Potentially. But we think that’s all the more reason you
want to be– if you have to be long stocks, you want to be in the strongest names in the
strongest areas of the market. So it’s all the more reason to be in these,
so we think. Do you see any major risks here? None other than the broader market risk. And as long as you stick to your stock levels,
we think it presents a good risk and reward opportunity. Great. Can you summarize this Visa trade in 30 seconds? Yes. I would point to the specific levels. First of all, again, story of relative outperformance. The trend is up. That’s the principal reason. And 149 would be your stop. Again, you can go all the way to 144. Obviously, position size accordingly. And you would use 170 as your target price. Be taking profits on the way up and be buying
on dips. 151 would be an ideal entry. Great. Patrick, thank you so much. Thank you. So Patrick is bullish on technology. Specifically, he likes buying Visa, ticker
symbol V, between 149 and 151.50, with a stop loss of 144 and a target of 170 over the next
3 months. Just remember that this is a trade idea and
not investment advice. You should do your own research, consider
your risk tolerance, and invest accordingly. For Real Vision, I’m Justine Underhill. [MUSIC PLAYING]

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6 thoughts on “One of the Tech Sector’s Top Dogs (w/ Patrick Dunuwila) | Trade Ideas | Real Vision™”

  1. This guys is a total chump. He should be proposing a long short pair trade if he doesn't have see a directional bias for the market.

  2. One of the great secrets of forex success is that those who win most are often those who do things differently. The IQD momentum strategy by Lukasz Wilhelm, filled with compelling evidence and evocative information when back-tested.

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