An Update on CVS

Many of you may remember that a while back I shouted very loudly on multiple platforms about the value which was hidden away in CVS.

That was at $53 a share.

Looking at where we are now, we can see that so far some of this value has been realised. I bought my CVS shares early this year and have held them ever since. By far, in my long-term investment portfolio, they have the greatest weight.

It all started when the Aetna acquisition led to a massive increase in the amount of debt on the balance sheet and various announcements like dividend freezes appeared. The stock price tanked. What an opportunity to buy.

Lately, I've been taking a more analytical approach to the CVS share price by creating a DCF valuation of the company. The more I look at the financial reports, the more I am convinced that the company could see another 40% increase in the share price.

I am not the only one who is bullish, the company's management announced its second earnings increase forecast for the year and once again the share price rallied.

I'm not solely here to gloat, I do firmly believe in this company, and will continue to hold it.


However, there is a slightly more important reason why I am going to be holding this stock over this volatile period. Historically, CVS has performed very well against the S&P500 during times of recession. In the 2008 financial crisis, the S&P lost over 50% of its value, whereas CVS lost only just under 2%. What this tells me (especially with the already subdued valuation) is that this stock could be very good as a defensive play for a downturn.


Once my DCF valuation has been completed, I will be uploading a Google Drive which will be available to readers to analyse my assumptions more closely.



Thanks

Gap Trading GBPUSD

Hey again everyone.

I know I just said I was going to exit my position immediately on GBPUSD. But, today we have found ourselves a remarkable gap trade opportunity.

So those who don't know, when the market for currencies (and to an extent indices) opens, there is often discontinuation in the candlesticks. More often than not, this reverts back to the point where the gap opened.

The other thing which interested me about this open was the incredibly low volume and subsequently, the massive spread which exists in the market - nearly 20 pips between the buy and sell price! This is something I've not noticed before. But, it does make me more confident that this gap is going to close.

Anyway, I'm staying in this market to see if we can close the gap, and at least until volume returns.

The £ and its never-ending decline.

Source: liesbusS.jpg

 Hi everyone, I thought today we'd have a little bit more of a detailed analysis of the pound.


It's that time of year again when the Brexit deadline is drawing closer, this semi-annual celebration of all things Brexit always makes the politicians excited for a while, and then we delay and delay and delay.



Well today, I've decided to analyse both the technical and fundamental developments which I have identified over the last week.

Fundamentally, nothing has changed. Except for the fact that the rhetoric on no-deal continues to be emphasises and the government has now identified thousands of businesses which could be at risk in the event of a no-deal.

The pound continues to weaken as you can see int he chart below, and we are gradually (although compared to other currency pairs it has been quite a vicious move) moving towards the $1.20 handle. Brilliant.

Guess who's about to go to the States at the weekend.

Ah well, as you can see from the bottom of my screen I am currently short the pound, and on another platform with lower leverage I have been short for the last few weeks and have picked up a tidy profit. (More than covering the exchange rate depreciation I will suffer when I exchange for dollars).

However, the main reason why I have chosen to speak about the pound today is because I have just identified a trend line which may soon come into play which also offers a potential price target. Whenever I find a TL like this on the weekly, it always makes me slightly excited because this has been perfect technically. As you can see, we have had four tests in total with two acting as resistance (one of which, eerily, was directly before the Brexit vote) and two have acted as support.

I have also drawn on a potential higher TL which may continue to act in future.

The last blue circle indicates a potential target where we could see this TL come into play again, and with the level of the pound's aggression to the downside, and no resolution with the EU in sight (BoJo hasn't even been there) it seems likely the move will continue to be lower.

The reason why I have left the RSI up however is for a little risk management. I do firmly believe that we will see something of a bounce of the $1.20 and may recover a while back towards $1.21 - $1.22. Thus, when the market opens in half an hour, I will be exiting from my most levered shorts. This is backed up by the RSI which has just moved into oversold territory on the weekly and is very oversold on the daily, 4 hour, 1 hour, and even 15 minute chart (below).

So, I hope this has provided an interesting possible development to watch over the coming weeks (and I stress, we are talking weeks here - potentially may get a nice test on the week of October the 31st, wouldn't that be fascinating!).

Potential Gold Set-Up

Hi all, thought I'd take some time today to illustrate a gold trade I have been watching for the last two or three days.

As you can see in the chart above, we are clearly in a kind of bearish wedge on the hourly chart. This is illustrated by the classic narrowing of the channel.

Now, I understand fully that gold has been rising based on the back of fundamentals and not technicals and primarily as a result of the increased trade tensions and monetary easing by central banks (i.e. lower interest rates = less return on money --> investors buy gold).

However, when we consider the confluence of factors involving the wedge, and the relative strength index is overbought. It could be possible that gold is about to enter a kind of downtrend, or at the very least, a correction back to the $1450 level.

We must also remember that the wedge now also encapsulates the $1500 level for gold, and this could act as a very significant resistance level.

Gold is trading at multi-year highs and therefore, some kind of correction could be in order.

In the chart below, I have indicated (using the white arrows) some potential entry points which may materialise, and I have zoomed in and added some trend lines to show direction. This is on the 15-minute chart (which admittedly, is not overbought).



The white lines show the path which I currently consider most likely; a break of the bottom segment of the wedge and then a return to the trend only to fail to pass the resistance. This would then cause a greater wave of selling.

If you zoom in, you can probably see the location of my pending trades and can then make a judgement about whether I have been overtly risky in my positioning. I tend to prefer aggressive entries when trading rather than trying to guess whether resistances or supports will continue to hold. However, this does make me vulnerable to false breakouts - which is why we must always manage risk with stop losses.

The red line shows a less likely scenario in my opinion, whereby we push up slightly towards $1500 only to fail and push back downwards. At this point, the wedge could continue to hold, or we could break down in a scenario similar to the first.


Anyway, that's my gold set for the week, and in terms of time frame I would expect this to occur by the end of the week - the wedge really is narrowing aggressively by this point.