Under The Hood (08-14-2020)

From the desk of Steve Strazza @Sstrazza.

Welcome to this week's edition of "Under The Hood." You can read more about the column here.

What we do is analyze the most popular Robinhood stocks over the trailing week and find opportunities to either join in and ride these momentum names higher, or fade the crowd and bet against them.

We have some new additions coming for how we generate the list of most popular names, which we'll explain more each week as we add new data sets. This is a really exciting time for us. There are so many new data sources popping up so it's really just our responsibility to organize it to where it only tells us exactly what we want: An unusual increased level of interest for an asset.

Relatively speaking, it was an uneventful week for the overall market. The S&P 500 did a dead stop at its former highs and has been trading in a tight range since. However, the reason we do this type of bottoms/up work is because there is always plenty going on beneath the surface in individual stocks. So let's look under the hood at what investors were most excited about this week!

To start, I just want to reiterate the abundance of high-quality stocks and secular leaders that are on this list again this week. The narrative that Robinhood investors trade low quality, risky stocks is simply not true.

Apple, Tesla, Microsoft, Amazon, Facebook, AMD, Nvidia, Alibaba, Netflix, Paypal, Zoom, Shopify, Square, and Home Depot are all on the list and have been on and off since we started tracking it. These have all been incredible performers this year and are currently trading at or near all-time highs.

Robinhood investors have been consistently adding exposure to strong names like these. I'd argue they are probably outperforming a lot of Hedge Funds in this year's market environment.

Here is an update on Plug Power $PLUG, which we put out a trade idea on in our first column back in June.

We said we wanted to be buying this one above 6 with a target at 11.70. Our target was hit this week, so now we want to wait and see how prices react at this key level of interest. We'd like to see price consolidate and digest the recent gains in a healthy way, at which point we'd eventually want to be buying a move back above 11.70 with a target above 20. But for now, patience is the best course of action.

This is another name we put out a trade idea on in our first edition back in June, Workhorse Group $WKHS.

I think it's fair to say we underestimated the momentum and interest that was building in this name at the time as it achieved our price target in the low teens in just a number of days, and then tacked on an additional 100% at its most recent peak around 23 in July.

Since making that fresh all-time high, price has been consolidating for over a month now. Notice how price also made all-time highs on a relative basis and has been consolidating sideways against the broader market as well. If and when the current continuation pattern resolves to the upside, we want to be long above recent highs around 18-19 with a 1-3 month target just above 29.

Here is a fun one. This is Penn National Gaming $PENN, which owns, operates, or has an interest in almost 40 gaming and racing facilities as well as an online gambling presence. Despite the majority of casinos around the world remaining closed or at limited capacity, this stock has booked monster gains in recent months.

After enduring a roughly 90% drawdown at the March lows, the stock is up over 1,300% since, and recently broke out to new all-time highs. With price already approaching our first objective, there is nothing actionable to do with this name right now, but we definitely want to keep it on our watchlist for future opportunities.

Let's look at two popular household names now. First is Amazon $AMZN. A lot of investors feel like they "missed the move" as the stock has already doubled off its March lows. We disagree.

If Amazon is above its 261.8% extension and recent closing highs, which both coincide around 3,200, the bias remains higher. Price has been consolidating in a nice pennant formation at this level for a month now. We think you can buy this breakout if/when we get it with a 3-6 month target at 4,365.

The lackluster performance from Transportation stocks has been a major thorn in the side of bulls for several years now. It looks like those days are coming to an end though. Here is United Parcel Services or $UPS, which is the largest stock by market cap among the 20 Dow Transportation components.

This stock has experienced quite the move recently. Look at that beautiful breakaway gap to fresh all-time highs. While we don't want to be buying UPS at current levels as it's already achieved our first objective, this is very valuable information. If the largest Transportation stock in the US is acting this way, it can only be viewed as bullish for the stock market and economy more broadly.

Here is another name we want to keep on our radar for now. This is Antero Midstream $AM, a Natural Gas pipeline operator based out of Colorado. The price of Natural Gas is in the process of undergoing a bearish-to-bullish trend reversal, so we want to pay close attention to the individual stocks in this industry as they could finally start to catch some investor interest.

We only want to be long AM on strength above its former highs around 7.75. If and when this happens, we'll be targeting 11.30 over a 1-3 month timeframe.

Now, let's take a look at our favorite setups for this week.