Feels like market conditions are improving a bit for the bulls, but we're still going to be picky here. One way we can improve our odds of success is to align our trades with relative strength.
Today's trade is in a sector that has seen both improving absolute price strength, and a widening relative strength gap compared to the broader stock market.
That's a blog post title I never thought I'd write. LOL.
Even more strange, the trade we're putting on today is in a public company with an unusual name I've never heard of before!
Weird times, indeed.
Steve Strazza and I looked at it a bit on Tuesday during our "Flow Show" on twitter and I was less than enthusiastic at the time. But as the trade has marinated around my brain a little bit since then, it has grown on me.
As Strazza mentioned in our Telegram live chat this morning: "Not too many charts look as good as this one right now."
It feels hard to comprehend that we're finding leadership in Chinese tech, internet, and auto stocks, but it's happening. Politicians lie. Prices don't.
And one name we've got an eye on has been coiling in an extremely bullish high flag pattern.
We've seen some bullish thrusts in sectors with ties to the medical and healthcare spaces, and if the broader market has designs on moving higher deeper into the summer, we think leaders will continue to emerge from this area.
Today's trade is a bet on one of those next leaders.
The title of this post is a takeoff from one of my favorite ongoing SouthPark bits involving our friendly Canadian neighbors :)
There seem to be better bearish setups on my radar than bullish ones. This makes sense as I prefer to trade with trends and the overall stock market trend in 2022 has been down. Ballsier traders than me like to step in and "buy the dip." But I'd rather let the market prove itself to me first.
One of the most beaten-down sectors has been tech stocks. Steve Strazza summed up this sector with one word: "Awful." Yeah.
The stock in my crosshairs today comes from this area.
I'll cut right to the chase: JC put out a piece this morning highlighting the relative outperformance of the Healthcare space.
The XLV sector ETF for the space has more or less been consolidating sideways as the broader markets sold off, and one of the bellwethers here is already making new all-time highs. Feels like we'll start to see more candidates here begin to participate as well.
The stock market has breathed a much-needed sigh of relief this week.
Are we out of the woods? I wish I knew.
But in case we're not, I'm hedging a little bit by taking this bounce opportunity to get into a bearish position in an Electric power generation stock that appears to be dead-cat bouncing.
Taking losses is never fun. But it's the most important thing we do.
I wish it were different. I wish smart risk management was an exciting endeavor that made us happy. The kind of thing that makes us want to high-five our friends and adoring fans.
Unfortunately, it's more like that menial task that you have to do over and over again, hating every minute of it, but knowing it just has to be done (like the doing the dishes or laundry).
Stocks are heavy out there. Everything is getting sold (except Coca-Cola $KO).
But even in selling down, strong stocks and future winners can and will begin to reveal themselves, first through relative strength.
Today's idea, while down on the day like everything else, is a stock that has been quietly gathering relative strength for some time now. And if we think the selling pressure in the broader markets is close to exhausting itself, this International stock may be one of the next leaders when markets calm down.
Well helloooo again volatility! It's been an interesting week.
There are not a whole lot of charts out there that have me too excited to put any aggressive risk on here. But thanks to the jump in volatility, we do have an opportunity to sell some premium in a staple with a nearby risk management level that should help keep losses minimal if we're wrong.
And until new information presents itself to get us looking elsewhere, the strongest names, best bases, and most impressive relative strength continue to be found in the energy space. Who am I to fight the facts?
Today's trade is in an Oil & Gas company that has been in an unrelenting uptrend since mid-2020 that is showing no signs of reversing.
Chemicals and Fertilizing stocks have been among the sectors that seem to be "benefiting" from supply shocks in the system stemming from the war in Ukraine, as well as just general inflation touching the price of everything (except tech stocks, heyooooooooo!)
The team put out a "Trade of the Week" last week in this sector that now has my attention as the stock has held on to recent gains.
Stocks in the right sectors, making multi-year highs are stocks I can't ignore.