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Will Pot Stocks Finally Live Up To The Hype?

February 6, 2021

From the desk of Steve Strazza @sstrazza and Grant Hawkridge @granthawkridge

Marijuana stocks have been smoking hot over the trailing quarter, with the Alternative Harvest Marijuana ETF $MJ more than doubling since the election on November 3rd.

Considering this new leadership role over the near-term, today we're going to do a follow-up on our last deep dive into the space, which we published last fall.

Back then, we were simply looking for a bottom and mean reversion move higher, which we got... Now, with the industry making new highs, we want to see how things are looking on both an absolute and relative basis.

And as always, we'll check in on some of our past trades in the space and highlight today's strongest stocks, along with trade setups skewed in our favor that we want to use to express our bullish thesis.

Before we get into the weeds, let’s start at the industry level with the Alternative Harvest ETF (MJ).

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Is It Finally Commodities Time To Shine?

February 5, 2021

From the desk of Steve Strazza @sstrazza and Louis Sykes @haumicharts

In a post last month JC discussed the recent strength in Commodities and posed the following question...

If the CRB Index is above its 2016 lows and Crude Oil is above all those former lows from the past decade, how can we be bearish commodities?

Over the last few quarters, we've seen more and more intermarket relationships make a significant shift in favor of risk-assets.

Many are showing early signs of a structural reversal and others simply accelerating in the direction of their underlying trend.

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[Options Premium] In For a Potential Squeeze

February 5, 2021

Stocks getting squeezed are all the rage these days, and rightly so. Some of the moves have been epic. The reasons for each squeeze vary from stock to stock, but the price action is hard to ignore.

With that in mind, we've identified some potential short squeezes that also have the benefit of the technicals lining up in our favor. Check out our recent Freshly Squeezed report.

One of the names on the list looks like it's ready to go...

 

[Options] February Positions Review

February 4, 2021

As February gets under way, it’s time to review positions with February options that remain open (haven’t already hit profit targets or been stopped out). This month there isn't much to discuss as most of our February options trades have already been closed out thanks to hitting their profit targets or getting stopped out.

Most trades I put on for All Star Options tend to have a minimum duration of 30 days (short premium plays) and often as long as 6-8 months (for long premium plays). As options approach expiration, greeks like theta and gamma start to become my enemy and whipsaw my P/L. Therefore, as options and spreads get into the expiration month, my best practice is to put each position on notice — it’s time to take action.

At the time of this writing, I've only got 2 remaining positions with Feb options.

In the scoreboard below I denote the date we exited each position:

Elephants On The Move

February 4, 2021

There is a big difference between those who follow the market on a daily basis and those who take a quick glance at it once in a while. One category tracks moves for short term trades and the other looks out for long term investments.

What catches the attention of both these categories simultaneously though?

When the top two gainers of the day in Nifty50 go by the ticker names of SBIN and ITC.

This is not a frequent phenomenon and hence attracts more eyeballs upon occurrence.

Read on to know more.

SBI and ITC are like the elephants of the jungle - they move when they have to but stay under the radar for the most part. These are evergreen names that have the good fortune of being held in high standards in the eyes of the market, regardless of market conditions.

Ask around for long term investment tips, and all analysts big and small manage to throw these two names in the mix pretty often.

But why are we focusing on these names?

Has anything changed? Maybe.

Are we observing something new in the price action? Maybe.

 

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People Are Scared Of Their Own Shadow

February 3, 2021

Investors are so scared. They don't want to get burned. They've missed out on one of the greatest stock market rallies in history. They think it's too late for them to be buying stocks.

Here's the thing. I think we've barely even gotten started. This is the beginning, not the end.

Last week the Volatility Index saw its highest reading ever with the S&P500 within 5% of new all-time highs.

When people buy insurance at a faster rate than ever before, does that normally happen just before everyone is thankful they had that insurance? Or does that traditionally occur just after the disaster when it's not necessary anymore?

How funny is it that Saturday Night Live mentioned that the stock market is not working on 3 separate skits in the same episode last weekend?

Hilarious.

[Options] Super Cyclin'

February 3, 2021

JC and I conducted a great options webinar last night, attended by well over 500 people. It was a fun opportunity me to lay out some of the core options strategies I employ on a regular basis to make trades in a variety of trading environments. And the questions we received from the audience showed that they were engaged and enthusiastic, which makes it great for everyone.

Options volumes on US exchanges have been exploding in recent years as investors and traders are waking up to the power and flexibility that trading options provides. And our event last night was a reflection on that.

Anyway, at the conclusion of our call, JC teased a trade out of me I had not yet put on but was considering entering.

Mystery Chart (02-03-2021)

February 3, 2021

From the desk of Steve Strazza @sstrazza and Louis Sykes @haumicharts

New Mystery Chart!

For those new to this exercise, we take a chart of interest and remove the x/y-axes and any other labels that would help identify it. The chart can be any security in any asset class on any timeframe on an absolute or relative basis. Maybe it’s a custom index or inverted, who knows!

We do all this to put aside the biases we have associated with this specific security/the market and come to a conclusion based solely on price.

You can guess what it is if you must, but the real value comes from sharing what you would do right now. Buy, Sell, or Do Nothing?

Currently Stuck In A Currency Rut

February 3, 2021

Stocks and commodities have been the best place to be in. We've been saying this for a long time now. The other thing we've been saying is that Currency has been a downer in the last few months. Anyone who's been trading in currency would be better off investing in a different asset class!

Does the same view hold true going forward? Let's find out.

What Intermarket Signals Suggest For Interest Rates

February 3, 2021

From the desk of Steve Strazza @sstrazza and Grant Hawkridge @granthawkridge

They say the Bond Market is where the smart money is. Maybe it is. I have no idea.

What I do know is that it's where a lot of the smart information is.

Due to the diversity among credit instruments, there is a swath of unique data that we can use not just for Bond prices and Interest Rates but also to glean insight into other asset classes.

I'm talking about things like TIPS for inflation expectations and Emerging Market or High Yield Bonds to analyze risk-appetite for other assets such as the stock market.

Alpha has been in Equities and risk-assets for a while now. As such, we haven't needed to discuss bonds from a portfolio perspective... but that doesn't mean we aren't paying close attention to these assets.

The Bond Market is overflowing with information. We'd be foolish to neglect it.