Home » Watchlist Update: Is Inflation Starting to Cool Down?

Watchlist Update: Is Inflation Starting to Cool Down?

My wife is 39 ½ weeks pregnant, and our little girl could come any second…

So, I’m writing this ahead of the opening bell on Friday to make sure I got this week’s Watchlist done early just in case.

Now, after a strong week to start July, stocks retraced on light volume last week.

In my opinion, the market is trying to form a bottom. 

This tends to be a process with movement back and forth as large traders begin covering shorts and gradually increase their exposure on the long side.

Wednesday’s Consumer Price Index (CPI) report showed that inflation made yet another high at 9.1% for the prior 12 months. 

The Nasdaq opened lower but recovered by the end of session to close down just 0.14% for the day.

Believe it or not, this is positive… 

Silver Linings

The fact that the market can rally or at least hold on amid negative news is a good sign that the market could be nearing the lows. 

Additionally, commodity prices continue to come down. 

Commodities are the inputs of most final products, so it takes some time for those price reductions to work their way through the supply chain. 

But to me, this is a sign that inflation is cooling. Just take a look at these commodity drawdowns from their 52-week highs…

Lumber -58%, Nickel -54%, Aluminum -37%, Natural Gas -31%, Steel -28%, Wheat -28%, Zinc -25%, Lead -23%, Copper -22%, Soybeans -18%, Oil -13%, Orange Juice -11%.

Daily Chart of Invesco QQQ Trust (QQQ) – Source: TradingView

Now, getting back to the Nasdaq, I’ve drawn two horizontal lines on the daily chart above… 

Whichever line is hit first will likely lead the next move.

A breakout above the green line should lead to a rally higher, at least for the short term.

A breakdown below the red line, however, should mean new lows and another leg lower for the markets.

In the meantime, I have three new trades for you this week, each with classic bullish setups that should lead to higher prices…

Molson Coors Beverage Company (Long Idea)

During Thursday’s “State of the Market” webinar with my colleagues Josh Martinez, Anthony Speciale, I pointed out that the alcoholic beverage sector is coming out of a Stage 1 base and is on the verge of breaking out higher.

Daily Chart of Molson Coors Beverage Company (TAP) – Source: TradingView
  • Surge score: 96/100
  • % Above 52-wk low: 39%
  • Sales growth: +17%
  • Return on Equity: 7%
  • Triple momentum: yes 

Molson Coors Beverage Company (TAP) is one of the strongest stocks in this sector and currently finishing a 12-month “cup with handle” pattern.

Consider buying here with a stop at $54.10.

MGP Ingredients, Inc. (Long Idea)

Another alcoholic beverage stock that looks even stronger to me is MGP Ingredients, Inc. (MGPI).

Daily Chart of MGP Ingredients, Inc. (MGPI) – Source: TradingView
  • Surge score: 98/100
  • % Above 52-wk low: 77%
  • Sales growth: +80%
  • Return on Equity: +20%
  • Triple momentum: yes 

The distilled spirit-maker is forming a “base on base” pattern with extremely tight price action over the last two weeks.

The relative strength line is steadily climbing higher even as the broader market chops back and forth.

Consider buying MGPI on a breakout above $103.25 with a stop at $99.05 for a very low-risk trade.

Halozyme Therapeutics, Inc. (Long Idea)

Halozyme Therapeutics, Inc. (HALO) is a biotech stock that has been steadily drifting higher since February.

Daily Chart of Halozyme Therapeutics, Inc. (HALO) – Source: TradingView
  • Surge score: 97/100
  • % Above 52-wk low: 50%
  • Sales growth: +32%
  • Return on Equity: 169%
  • Triple momentum: yes

It broke out to new highs on heavy volume on July 7 but has since pulled back to the 21-day moving average.

Traders may consider a pullback buy here with a stop beneath the swing low at $43.40.

Fly Under the Radar

Institutional investors like pension funds, mutual funds, hedge funds and other large players make massive institutional buys that fly under the radar of most individual investors.

But if you know how to spot those buys in real time, you can potentially follow the big money to big gains.

This is what I focus on inside my premium Stealth Trades research service.

Look, if you haven’t been making money in these markets, it’s time to try something new…

Take a few moments to click here and watch my brand new Stealth Trades video bulletin…

Embrace the surge,

Ross Givens
Editor, Stock Surge Daily

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Ross Givens
Ross Givens

I bought my first stock when I was 12 years old. It was Microsoft. I’ve been a registered financial advisor. I’ve worked as a stock broker. I ran a managed fund. I was a Vice President at JP Morgan with Series 7, Series 66 and Series 3 securities licenses. I’ve been featured on Fox Business, CNBC, Bloomberg, and a bunch of other networks. The only thing I enjoy more than making money, is helping YOU make money.

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