Every morning I get to wake up and do what I want to do, not what I have to do. Life doesn't always work out that way, so I promise not a day goes by that I'm not incredibly thankful for the opportunities that I have. With a tremendous amount of luck and some hard work, I get to play in the biggest game in town, in every town. Throughout my career, most of my interactions with traders and investors came from living in New York for 15 years. Over the past 18 months, however, I've been traveling throughout Asia learning from investors who come from completely different cultures and bring brand new perspectives to my process.
It's difficult for me to write about these experiences because I truly don't even know where to begin. When I write blog posts and research about technical analysis, I can just tell you what I'm thinking. That's easy and enjoyable for me. But when it comes to really digging down into what the hell I just experienced on the other side of the planet, it's not that simple.
It happens far too often: a game-changing company comes on the scene, has a massive run in its share price, makes a ton of people a ton of money, and becomes a media darling with constant, breathless stories about this exciting new widget maker.
But then the sideliners who sat with their hands in their pockets begin to grumble about how "the stock is overbought", "it's going to crash," "the founder is a fraud," "this company is a scam," etc. No skin in the game, just bitter about not participating. It seems in recent years, Tesla (and it's founder Elon Musk) has been the poster child for this phenomenon.
The broader market has resolved its range to the upside led by several groups, among them Consumer Discretionary, which is hitting all-time highs on an absolute basis and also relative to the Consumer Staples sector. Within that group, the Restaurant industry continues to deliver strong returns. An example is Texas Roadhouse up 20% YTD on top of an already massive ~ 1300% gain from its 2008 lows.
Click on chart to enlarge view.
To show how broad-based this rally's been, I want to highlight two stocks on the opposite ends of the spectrum, Denny's, the breakfast chain, and RCI Hospitality Holdings, the owner/operator of nightclubs.
This week I had the pleasure of being interviewed by Anthony Crudele, host of the Futures Radio Show. In this episode he asked me about my process, how I first got into the market, how I approach the market place today and in what ways we help our clients who are financial advisors, hedge funds, family offices, traders and individual investors. I really enjoyed this conversation and wanted to share it on the stream.
I don't think many people are prepared for a 60% rip in shares of Tesla. I see the headlines coming through written by people who have never traded a stock in their lives. I see the pessimism and skepticism. Most importantly, I also see that a third of the float is short the stock. So forget what people are saying, look at what people are doing!
Those of you who know me or have been reading the blog for a while understand the power of the failed move, or the "whipsaw" as we like to call it. The old saying is that from failed moves, come fast moves in the opposite direction. I believe this scenario is precisely what we have on our hands today in shares of Tesla. In my opinion, the risk here is much higher and the higher probability outcome is that these shorts get squeezed very hard.
Today's mystery chart reveal post highlighted the potential opportunity in the Homebuilder ETF ($XHB) as it sits at an important inflection point within a longer-term uptrend. In the post I highlighted that although there is mixed performance among the components, the reward/risk is still skewed in favor of the bulls at current levels. As a follow-on to that, this post will be highlighting some of the best and worst stocks in the sector along with our risk management levels and targets for each.
Last week I posted the mystery chartpicturedbelow to see what people were thinking once they removed the biases of knowing the security name, timeframe, or etc. and had only price to rely on.
Well, the *rough* results are in and
50% said do nothing because of the opportunity cost;
The Technology sector ETF $XLK in recent months has overtaken its previous highs set in the year 2000. For anyone that was trading during that time, you know that breaking these levels is a big deal. Do you think 18 years of reclaiming former highs is going to stall right here? I don't.
But maybe you think this week's stretch break higher is a little much and while you're bullish too, perhaps you're more cautiously so in the near term? I don't entirely disagree. Thankfully we've got some well defined levels to trade against while seeking to earn some income.
I'm back in the United States and I must say, it was truly a pleasure attending this year's Traders Carnival in Mumbai. The interest in Techncial Analysis was off the charts! (see what I did there?) The people were amazing and the food was outstanding. The entire experience was really enjoyable for me and my younger sister, who tagged along with me to Mumbai this time.
Many of you have been asking about the slide deck I used during my first presentation to kick off the event. You can download the entire PDF here:
This week's chart of the week is highlighting the 4+ year highs that Copper made today, however, the rest of the base metal space should not be overlooked as it continues to show relative strength versus the rest of the commodity complex. With that being said, this post is a quick update on our risk management levels and price targets for the rest of the space.
