"We’re buying $CSCO January 70 calls for approximately 23 cents. These options are priced as a long shot and we’ll be treating it as such. I’m fully prepared to lose 100% of my capital on this trade if $CSCO doesn’t make the move we need. So I’ll be sizing my position accordingly.
But if it goes our way, we should get plenty of opportunity to take our original risk off the table along the way. My best practice is to sell half of my position when the value of the options have doubled. And I will do that in this case. Then I’ll hold the rest, looking for the big move.
If $CSCO gets to our 74 price target, those 70 strike calls will be worth at least $4.00 — probably more, depending on when that price is reached. $4.00 per contract would be 20x what we originally paid. YAHTZEE!"
As many of you know, something we’ve been working on internally is using various bottom-up tools and scans to complement our top-down approach. It's really been working for us!
One way we’re doing this is by identifying the strongest growth stocks as they climb the market-cap ladder from small- to mid- to large- and, ultimately, to mega-cap status (over $200B).
Once they graduate from small-cap to mid-cap status (over $2B), they come on our radar. Likewise, when they surpass the roughly $30B mark, they roll off our list.
But the scan doesn’t just end there. We only want to look at the strongest growth industries in the market, as that is typically where these potential 50-baggers come from.
Key Takeaway: Sentiment is teetering on the edge of a complete unwind. Six months of choppy markets has taken its toll on optimism and now pessimism is starting to move higher. This week’s II data could just be a shot across the bow in terms of a more cautious stance from investors, especially if the struggles seen beneath the surface make their way to the S&P 500 and NASDAQ Composite. Volatility has started to pick up but there is plenty of room for price weakness to prompt fear and re-positioning on the part of investors. For stocks, the weakest part of the sentiment curve is after optimism peaks and as pessimism becomes more widespread.
What we do here is take a chart that’s captured our attention and remove the x and y-axes as well as any other labels that could help identify it.
This chart can be any security, in any asset class, on any timeframe. Sometimes, it’s an absolute price chart. Other times, it’s on a relative basis.
It might be a ratio, a custom index, or maybe the price is inverted. It could be all three!
The point is, when we aren’t able to recognize what’s in front of us, we put aside any biases we may have and scrutinize the price behavior objectively.
While you can try to guess the chart, the point is to make a decision…
So let us know what it is: Buy, Sell, or Do Nothing?
We’re not really expecting much more than tumbleweeds and a few winners here and there while Bitcoin’s stuck below the upper-end of this range near 47,500.
But if we see a breakout above that level, we’ll be deploying some more cash into new long positions.
It looks like we could be getting a resolution this morning, with Bitcoin trading back into the 47,000's.
For those with a shorter timeframe, the bias is higher above 47,500 toward the former crash highs of 53,000:
This is not something we do often -- usually because these types of opportunities don't present themselves frequently. But we've identified an under-appreciated potential for a 20x gain on our invested capital if the markets cooperate.
Its the perfect storm of a megacap stock emerging from an long base, options flow showing people are starting to position for "something" and an ASC price target that doesn't appear to be priced in by the crowd.
Of course, part of the reason for the elevated options activity is due to an "Investor Day" event happening today, but the action still has been raising some attention.
We debuted a new scan recently which goes by the name- All Star Momentum.
All Star Momentum is a brand new scan that pinpoints the very best stocks in the market. This time around, we have incorporated our stock universe of Nifty 500 as the base. Among the 500 stocks that we follow, this scan will pump out names that are most likely to generate great returns.
While we go through our lists of sectors and stocks on a weekly basis, we thought of launching a product that would highlight the names that are the strongest performers in our universe and those that are primed for an explosive move.
Just like The Outperformers scan, this is a list of stocks belonging to the sectors that display relative strength in the market at any given point in time. Since sector rotation is the lifeblood of a bull market, we will be ahead of the curve before the gears keep shifting.
From the desk of Steven Strazza @Sstrazza and Ian Culley @IanCulley
The US Dollar has been trapped in a sideways trading range for the trailing 12 months now. The primary trend is lower, and we continue to see near-term weakness from the DXY Index as well as most USD crosses.
Commodity-centric currencies have been some of the best performers versus the Dollar since early last year, although most of them have been correcting since Q1 or Q2, giving back a good deal of their earlier gains.
So, will we see a resurgence back to those risk-on pairs, or will they keep sliding lower against the Dollar?
Today, we’re going to focus specifically on the currencies of some of the largest oil-producing countries in the world.
This should give us information not just about currency markets, but also commodities and risk assets in general.
Let’s talk about it.
An easy way to aggregate and measure their performance as a group is by analyzing our Petrocurrency Index. It includes currencies like the Canadian Dollar $CAD, the Russian Ruble $RUB, and the Brazilian Real $BRL, among others.
This All Star Charts +Plus Monthly Playbook breaks down the investment universe into a series of largely binary decisions and tactical calls. Paired with our Weight of the Evidence Dashboard, this piece is designed to help active asset allocators follow trends, pursue opportunities, and manage risk.
In yesterday's note, we outlined that this looks very much like a "wait and see" week, with Bitcoin still in this messy sideways range.
44,000 is a big level of interest that the market respected, with prices trading back above our long-term macro risk level of 46,000 this morning.
But we're not really expecting much more than tumbleweeds and a few winners here and there while Bitcoin's stuck below the upper-end of this range near 47,500.
But if we see a breakout above that level, we'll be deploying some more cash into new long positions.
We're seeing this play out with the number of new monthly highs dwindling recently:
Base Metals have long been a part of our conversation here. Specifically, the Commodity supercycle has been one narration that you've been reading here since the end of last year. Of course, the trend hasn't been a simple upward motion. It's been anything but that, to be honest!
But time and again, we get some signals that reach out to us and say, 'we are alive'. It's like waiting for your spacecraft to send you a signal saying it's A-ok. The past week was just that in terms of the base metals move that we saw. Did you see it too?
Earlier this week we shared the metals index making new highs and displaying the strength that we're seeing in this segment. Here is our very own custom index that's basically doing the same thing. You can see how strong the trend has been in the base metals space whereby we witness minor pauses in trend, followed by resumption.
