Introducing: "Under The Hood", Trade Ideas from Robinhood

JC Parets
June 17, 2020

We're adding a new feature to the Premium Membership of Allstarcharts. We're calling it 'Under the Hood'.

Traditionally, we've approached the market using a top/down approach. In other words, we start by looking at stocks globally, the intermarket relationships between them all, and only then do we come to the U.S. and analyze the Indexes, then the sectors and ultimately we drill down to individual stocks. But all of those opportunities in stocks come within the framework of all the other analysis we've done to guide us into those particular names.

With few exceptions, this is our approach. And it's worked well because this process helps us identify the direction of primary trends, and we err in that direction. This keeps the probabilities of success on our side, and not just the favorable risk vs reward that we always harp on.

The IBD 50 has been a great universe of stocks, but it has an earnings and sales growth component to it, so that limits the list. And quite frankly, I couldn't give a damn how much money a company makes or loses. That isn't my problem.

Which brings us to today....

We have data these days that we didn't have 20 years ago, or 10 years ago or even last year. And we will most certainly have new data in the future that you can then choose ignore or use to your advantage.

In the case of Robinhood data, we've been using it to help us. I'm not going to get into the whole back and forth about Robinhood. I don't care what you think about what they're doing. I don't care how much money you made or lost using the app. Respectfully, and I say this as nicely as I can, none of that means anything to me.

What interests me are a few things. First, these "small traders" get attacked, but the truth is that a lot of them are doing a hell of a lot better than many of the largest and "smartest" institutions in the world. I know that because I talk to these hedge funds and banks.

Will it end badly? Maybe. But why is that our problem?

With that in mind, do extremes in Robinhood buyers into particular stocks signal that a sentiment unwind may be due and we can bet against this group? Absolutely!

I find this list to be a good idea generator from both the long side and the short side. We're a firm that incorporates a strict and intentional top/down approach. This universe is the best way I've found to throw a wrench in all that and force us to look at things differently and in more absolute terms.

I've been working with my coding team and they're helping us "scrape" the data, and do things with "APIs" and all sorts of fancy words that make you sound smarter when you say them to people. The truth is I really don't know what the hell they're talking about. All I know is that we're getting a heads up when a bunch of lunatics on their iPhones are buying a ton of a specific stock.

We're putting out a review of about 10 Robinhood stocks and we'll go "Under The hood" once a week.

For today, as an example, we're looking at shares of Tesla, which is a stock that has treated us very well this year here at Allstarcharts. We were buyers in early January, and buyers once again last month.

Currently, $TSLA is #2 on our fancy scan. They're buying this thing very aggressively. And they're making money. We want to continue to join them on this endeavor:

I like $TSLA long if we're above 917 with a target up near 1267. The bet we're making is that this is a fresh breakout and we're going to reach the next upside objective. This thesis is only valid if we're above those early 2020 highs. If we're not, then we'll just move on to something else:

I like $TSLA long here.

Who's with me?

You like this bottom's up approach? I think we'll find good longs and good shorts. It's a nice bonus for Premium Members and it's helpful for us in our process as well.

JC

 

 

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