This week we're looking at a long idea in the Pharma space.

We retired our "Five Bull Market Barometers" in mid-July to make room for a new weekly post that's focused on the three most important charts for the week ahead.

This is that post, so let's jump into this week's edition.

From the desk of Steve Strazza @Sstrazza.

Welcome to our "Under The Hood" column for the week ended September 25, 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.

Here is this week's list of the most popular stocks. Now, let's see what's...

I got a last minute invite to pop on BNN Bloomberg yesterday to chat about the ongoing uptrend in the stock market. While we've seen some stocks and sectors correcting this month, others have held up very well. We want to focus on the ones that did NOT correct, or barely corrected, and are already pressing up against new highs.

With most Indexes in more of a messy range, our focus is on the individual equities.

Here's my interview in full:

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Emerging Market stocks have their place in a lot of portfolios, but for the last decade they've been underperforming especially relative to US stocks.

As we head into a new quarter, we thought it'd be worthwhile to highlight two charts worth monitoring to track these stocks' progress.

Something we've been working on internally this year is using various bottoms-up tools and scans to complement our top-down approach. One way we’re doing this is by identifying 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 and into mid-cap status (over $2B) then they enter our radar.

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. Some of the best-performers in recent decades – from the likes of Priceline, Amazon, Netflix, and Salesforce, to a myriad of others… they all would have been on this list at some point.

When you look at the stocks in our table you will notice we are only focused on technology and growth industry groups such as Software, Semiconductors, Online Retail, Solar, and more.

Then as any good technician, we are filtering the list by those names that are closest to 52-week highs. This allows the cream of these strongest groups to rise to the top and makes our job easy to identify technical breakouts...

From the desk of Tom Bruni @BruniCharting

About a month ago, I discussed the historic rally in Lumber during episode four of "What The FICC?"

One of the primary focuses was the historic rate of change since the March lows and the historical data that suggested forward returns are worse than average following these types of readings.

I'm pretty charged up about another opportunity from the Under The Hood report that is setting up today.

If the markets stabilize soon, this feels like one of the names due for a pop. And thanks to the "Robinhood" options trading speculators, there is plenty of juice in out-of-the-money calls for us to take advantage of to leverage into a good trade.

From the desk of Tom Bruni @BruniCharting

In June we outlined that the "Reflation Trade" indicators we track had picked up significantly after reaching levels of long-term support in March.

Since then that thesis has played out and we've been taking advantage of it in Metals, cyclical stock market sectors like Materials and Industrials, and even Agricultural Commodities which managed to break out.

But...after a nice run many of these assets and intermarket relationships have pulled back over the last month or so...begging the question "is the reflation thesis over?"

Luckily for us, we only need one chart to discuss what's happening and how we're approaching it.

The way I learned it is that, "Sector Rotation Is The Lifeblood Of A Bull Market".

But what does that mean exactly? Why does it matter? Why should we care?

All great questions, so I invited my friend Todd Sohn from Strategas and our very own Steve Strazza to discuss this important topic.

What sort of rotation are we seeing today?

Here is Part 1 of our discussion:

We're seeing a lot of follow thru in names that have been highlighted in previous Under the Hood reports. After a brief shakeout, many of these names are back above our levels of interest and are beginning to work (Pinterest $PINS is one brightly shining example!).

The latest one that has the most appealing setup to me is Datadog $DDOG from the SaaS space.

I was chatting backchannel with our analyst Steve Strazza today and he brought this chart to my attention:

Look at those two failed breakdowns below support! And now, it's looking like it is getting pretty serious about breaking the magic one-hundred-dollar line and following through significantly higher.

Steve and I both agree that $120/share looks like a reasonable price target if the "momo crowd" gets a hold of this dog.

While options premiums are relatively...

From the desk of Steve Strazza @Sstrazza

New Mystery Chart!

For those new to the 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?