Under The Hood (10-30-2020)

From the desk of Steve Strazza @Sstrazza.

Welcome to our "Under The Hood" column for the week ended October 30, 2020.

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

We use a variety of sources to generate the list of most popular names. There are so many new data sources available that all we need to do is organize and curate them in a way that shows us exactly what we want: A list of stocks that are seeing an unusual increase in investor interest.

Whether we're measuring increasing interest based on large institutional purchases, unusual options activity, or simply our proprietary lists of trending tickers... there is a lot of overlap.

The bottom line is there are a million ways to skin this cat. Relying on our entire arsenal of data makes us confident that we're producing the best list each week and gives us more optionality in terms of finding the most favorable trade setups for our clients.

With the market coming under increasing pressure in recent weeks, in this report we're going to do something we've shied away from since launching the column this summer... we're going to outline some short setups. Don't worry, there are also plenty of longs.

Here's this week's list. Let's dive right in.

Click table to enlarge view.

We put out a long idea in Pinterest in a late September edition of Under the Hood. We said we wanted to be buyers above 36.80 with a target at 53.

PINS gapped well above our target on a nice earnings beat this week, giving us a perfect opportunity to take profits. Here's an updated look.

With that said, we never want to take a trending leader like this off our radar. Although, we still have to consider that the stock is up about 75% just since breaking out of its base in September and likely needs some time to digest these recent gains.

We'll be watching to see how price consolidates in the coming days/weeks

We have a lot of biotechs again this week.

Here's Scholar Rock Holdings $SRRK, which was up almost 200% on the week after its phase 2 clinical results knocked the socks off investors.

While we love seeing this huge move to fresh all-time highs on both an absolute and relative basis, we definitely wouldn't be buying this stock here. It needs a breather and some time to digest these recent gains. In the meantime, the levels we're watching are potential resistance at 44 and support at 30.

Now let's take a look at this week's setups, starting with the shorts.