Today’s most significant insider transaction report is another Form 4 filing by Warren Buffett’s Berkshire Hathaway $BRK.A.
Buffet continues to increase his position in Occidental Petroleum $OXY, as he just reported an additional purchase, this one worth roughly $390 million.
Today we have a stock from the Service sector making its way to the Trade of the Week post. It is definitely a crowd favourite, and I'm sure you'd like to note down the levels for this one! Let's check it out!
We retired our "Five Bull Market Barometers" in 2020 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.
Welcome to Under the Hood, where we'll cover all the action for the week ended August 5, 2022. This report is published bi-weekly and rotated with our Minor Leaguers scan.
What we do here 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.
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.
We also weed out hedging activity and ensure there are no offsetting trades that either neutralize or cap the risk on these unusual options trades.
What remains is a list of stocks that large financial institutions are putting big money behind.
And they’re doing so for one reason only: because they think the stock is about to move in their direction and make them a pretty penny.
Noisy price swings can obscure underlying downtrends.
Bulls holding serve on rally but hardly pressing an advantage.
The price moves in this environment have been impressive in both directions. One-quarter of the stocks in the NASDAQ are more than 50% above their 52-week lows, but more than 40% are still 50% or more below their 52-week highs.
Last week, for the first time since early April, more stocks on the NASDAQ made new highs than new lows. That ended the consecutive streak of days with new lows > new highs at 83. This was more than two weeks longer than the previous record stretch (which ended in December 2008 - prior to financial crisis lows). Like many of the stocks that make up the index, the NASDAQ Composite is well off its lows. But it is still more than 12% below where it was the last time new highs exceeded new lows.
In this weekly note, we highlight 10 of the most important charts or themes we're currently seeing in asset classes around the world.
The New Leaders
Biotech continues to be among the top-performing industry groups over shorter timeframes. They were among the first groups of stocks to bottom back in May. They were also first in line to complete a reversal pattern back in June.
This is illustrated by the double bottom in the S&P SPDR Biotech ETF (XBI) above. After digesting gains in a tight range for most of July, Biotech stocks are now resolving higher once again. We think the bullish resolution from this high and tight flag is a good roadmap for what other growth stocks and indexes are likely to do in the coming weeks and months.
Check out this week's Momentum Report, our weekly summation of all the major indexes at a Macro, International, Sector, and Industry Group level.
By analyzing the short-term data in these reports, we get a more tactical view of the current state of markets. This information then helps us put near-term developments into the big picture context and provides insights regarding the structural trends at play.
Let's jump right into it with some of the major takeaways from this week's report:
* ASC Plus Members can access the Momentum Report by clicking the link at the bottom of this post.
The real answer is because a lot of charting software packages the past few decades have set it as a default.
But you also hear guys like Paul Tudor Jones talk about how below a 200 day moving average, you get out. In other words, bad things happen below the 200 day.
For me, I have reasons for doing everything. And while I understand that there are more like 252 trading days in a year, not 200, I still believe that if a stock is below its 200 day simple moving average, it's probably not in an uptrend.
This is specifically for my personal definition of an intermediate-term timeframe. I like to look out weeks and months, not years, and certainly not hours or days.
200 days is a good number for me. And while it's not perfect (hint: nothing is) looking at the percentage of stocks above their 200 day has historically given us some great washout signals.
It's a big wide world out there. Luckily for us investors in the U.S., we aren't just limited to trading domestic companies. Often via ADRs, we are able to participate in opportunities in the very best foreign companies and conglomerates.
And right now, there are good opportunities shaping up in if we look overseas at some banking stocks.
While we have seen an expansion in new highs, the majority of coins find themselves right below overhead supply. The same can be said for the major averages, which have bounced nicely into tactical levels of resistance.
The primary trend is still down, and repairs after bear markets like these often take months and quarters, not weeks.
Having said that, we can never be dogmatic in our approach. If we don't account for new data as it comes in, we're no longer doing our job as technical analysts.
We often like to make Monday's letter a little more lengthy and detailed, but this week we're taking the opposite approach.
That is, we're outlining four simple developments that'd make us flip more on the bullish side.
