From the Desk of Steve Strazza and Alfonso Depablos
With investors and executives scrambling to figure out what the geopolitical events of the weekend mean for their portfolios and companies, all was silent on the insider filings front.
There were no Form 4s, Form 13s, or political reports that meet our materiality threshold.
Many investors think it's not coming and that the market is going to crash instead.
In fact, CTAs have never been this short. The last few times they were anywhere near this bearish, stocks went on to have some of the greatest rallies in history. I remember them well:
We've had some great trades come out of this small-cap-focused column since we launched it back in 2020 and started rotating it with our flagship bottom-up scan, Under the Hood.
For the first year or so, we focused only on Russell 2000 stocks with a market cap between $1 and $2B.
That was fun, but we wanted to branch out a bit and allow some new stocks to find their way onto our list.
We expanded our universe to include some mid-caps.
To make the cut for our Minor Leaguers list, a company must have a market cap between $1 and $4B.
From the Desk of Steve Strazza @sstrazza and Alfonso Depablos @Alfcharts
This is one of our favorite bottom-up scans: Follow the Flow.
In this note, we simply create a universe of stocks that experienced the most unusual options activity — either bullish or bearish, but not both.
We utilize options experts, both internally and through our partnership with The TradeXchange. Then, we dig through the level 2 details and do all the work upfront for our clients.
Our goal is to isolate only those options market splashes that represent levered and high-conviction, directional bets.
The utilities sector has been schmeissed (technical term) over the past couple of months. Its like all of a sudden investors all woke up en masse to finally decide the rising interest rates environment offers better alternatives for their investing dollars than relatively riskier dividend paying stocks.
This may be true, but is it possible investors may have overreacted a bit?
On a sector level, the Utilities ETF $XLU has potentially put in a tradeable bottom -- at least one we can lean against for risk management purposes. And considering their is upcoming earnings announcement risk in many of the biggest names in this sector, playing the ETF feels like the safest way to play.
Energy stocks have been the best-performing group thus far during the second half of 2023. However, they have given back some of their gains in recent weeks as selling pressure resurfaces.
With energy indexes rolling over at their old highs yet again, the question we’re asking (and have been asking) is simple…
What is it going to take for these stocks to finally break out?
Here is a dual-pane chart showing the Equal-Weight Energy Sector testing the upper bounds of a multi-month basing pattern on both absolute and relative terms.
