Rotation is underway…
Rotation is when money flows from one area of the market to another.
It’s a vital process. In fact, many call it the “lifeblood” of bull markets. Without it, rallies quickly run out of steam.
Right now, we’re seeing money shift from high-flying stocks to areas of the market that have been underperforming.
One area that’s starting to catch a bid is energy. We’re also seeing money move into small caps.
But those aren’t the rotations I’m most interested in. Instead, I see the biggest opportunity in the rotation into fintech stocks.
That brings me to my latest Trade of the Week: Shift4 Payments (FOUR).
FOUR offers payment processing solutions to retail, restaurant, and ecommerce businesses. It provides technology that makes it easy to accept payments through various methods—like credit cards or online payments—and helps ensure these transactions are secure and efficient.
We’re picking up shares of FOUR today for a couple of reasons. For starters, fintech stocks have woken up in a big way.
Both the Global X FinTech ETF (FINX) and the ARK Fintech Innovation ETF (ARKF) recently broke out of multi-month bases and hit new 52-week highs.
FOUR also has a beautiful chart of its own. As you can see below, FOUR broke out to new 52-week highs on heavy volume.
This is what I call a “change of character” move. Breakouts like this often ignite powerful uptrends that can last many months, if not years.
Source: StockCharts
I suggest picking up a half position in FOUR today. I believe it can hit $115 within the next 12 months.
Exit your position if FOUR closes below $75. That gives us a risk/reward ratio of 4:1 on this trade.
Action to take: Buy FOUR at current market prices.
Risk management: Exit your position if FOUR closes below $75.
Justin Spittler
Chief Trader, RiskHedge
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