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The Coachman's Report - Fed Up

Updated: May 6, 2022

Happy FOMC meeting day 2 folks! As we edge closer to a ‘neutral rate’ the market remains extremely choppy, but nevertheless, the Coachmen are here to guide you towards safer harbours. In terms of our picks so far this week, we’ve hit a couple of home runs with our Monday BP trade idea yielding over 10%, and yesterday’s Nutrien trade idea up roughly 7%.


"Many of life's failures are people who did not realize how close they were to success when they gave up."

- Thomas A. Edison.


Market Talk

In terms of the broader market indexes, the S&P 500 closed up 50 bps, the DOW Jones rose 20 bps, the NASDAQ climbed 22 bps, and the Russell 2000 shot up by 85bps.

While these short-term rallies might seem to indicate that we are pulling out of the bear market, one must also consider how erratic the market has been acting over the last few weeks. For example, last week when the US reported a negative GDP growth during the first quarter of the year, the market indexes rallied between 1.5% and 3%. Why would this be a cause for celebration? Well, as the FED has begun discussing QT measures, any roadblock or negative headline provides the opportunity for less tightening or more stimulus. In a sense, after over 14 years of loose monetary policy following the Great Financial Crisis of 2008, the market has grown accustomed to the drug that is “free money” put into the market by the FED. However, with inflation at an all-time high, and the President’s approval ratings at historical lows, the idea that this additional funding will be taken away at a jarringly fast pace gains more credibility each day. As such, savvy investors should be prepared for a drastic decline in the near future, as the junkie that is the equity market begins to experience withdrawal.


Long: ZIM Integrated Shipping Services Ltd (ZIM:NYSE) | Timeline: 1-3 days

ZIM is an Israeli-based shipping conglomerate with a dedication to returning value to investors through the disbursement of large dividends. The company had seen large gains throughout 2022, however, was knocked down in mid-March and trended downwards throughout April, until bouncing off of its key support level of roughly $50. Since bouncing off this support line, the company has trended upwards to its current price of $62.65 in the after-hours trading session on Tuesday. So you may be asking, why go long on this company after it has seen such large gains in the past two weeks? Well, if the stock is able to hold above its key support line of $62.43, it’s likely to rocket back up to its previously achieved highs. Moreover, even with the current gains, the RSI of this stock is currently sitting at 52.76, signalling that it’s neither overbought nor oversold. Additionally, the stock’s MACD has begun a reversal, with a further upward trend likely to follow.


Long: Northern Oil and Gas, Inc (NOG:NYSE) | Timeline: 2-3 Weeks

As oil prices continue to soar, Northern Oil and Gas, Inc (NOG) is our swing play for the next 2 to 3 weeks. Yesterday, the company announced that its Board of Directors has declared a cash dividend on the company’s common stock in the amount of $0.19 per share, representing a 36% increase from the prior quarterly dividend. This is a huge buy signal for NOG, and especially with earnings set to be announced tomorrow, the company’s ability to further reward investors shows stability and strength looking forward.

After the stock hit highs of $30, NOG has had a slight pullback to the $25 to $26 price range, which was once a key resistance level before Q4 2021 earnings sent them on a run. Now, as the RSI and MACD have now cooled down to oversold levels, this stock is poised to be on to the next price channel as bulls prepare to make a run for another win on earnings.


Chart of the Day: Currency fluctuations over a 12 month period relative to the US Dollar

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