Top Trades? Resources, Tech and Shorting Bonds

06/03/2020 5:00 am EST

Focus: MARKETS

Omar Ayales

Editor, Gold Charts R Us

Safe haven demand may give in to riskier assets; as such, our current strategy is to further reduce exposure to precious metals, explains Omar Ayales, resources expect, editor of Gold Charts R Us — and a participating speaker at MoneyShow's Virtual Event on June 10-12.

But don’t sell all. Keep an amount you are comfortable holding during weakness. Silver is favored over gold, given growing demand for resources as lockdowns ease. Buy some stocks too. The rebound rise is poised to extend further as the dollar stays weak.

Our exposure to resources has been through solid companies: BHP Billiton (BHP) and Exxon Mobil (XOM). Both offer great dividend yields and are best equipped to navigate through global uncertainty.

The continued rebound rise in resources is pushing our resource portfolio into positive territory for the first time. If resources and energy continue to rise, we could see bullish price action in both BHP and XOM. In the meantime, and while we wait for stronger capital gains, we continue to receive an attractive dividend yield.

Outside of the resource sector, Broadcom (AVGO) is a leading semiconductor company involved in the development of technology infrastructure. Broadcom is a great company offering a very attractive annual dividend yield of nearly 5%.

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It’s also a company that will remain protected by the U.S. government and it'll no doubt play a key role with the implementation of 5G technology during ongoing trade wars between China and the U.S.

Notice AVGO reached a new high and it remains on a solid upward path. The recent bullish jump up above $280 confirmed support at the Mar uptrend. Buy some at market.

Meanwhile, rising bond yields are also very telling. They’ve formed a base at an extreme as demand for bonds has plateaued.  Current demand for bonds is not enough to continue fueling a rise. This means a fall in bond prices and a rise in bond yields is likely.

The charts suggest it’s time to short bonds. I'm adding ProShares UltraShort 20+ Year Treasury (TBT) to my positions. It’s an inverse ETF to TLT (another ETF that tracks long term U.S. government bonds).

TBT is the equivalent to shorting long term U.S. bonds (or betting that long yields will rise).  TBT has been basing. It has just confirmed support above the March uptrend by breaking above the January downtrend.

Momentum is picking up steam. Price action suggests a rise to the $20 initially is likely. Buy at market.

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