Welcome back to our latest Under the Hood column where we'll cover all the action for the week ended April 29, 2022. This report is published bi-weekly and rotated with our Minor Leaguers column.
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.
Price action has been chopping in the high 30,000s, and there's little to update.
We're closely monitoring the tight trading correlations to traditional finance. Despite strong spot flows, this remains the most pressing driver of price action to date.
With few actionable opportunities, we're sitting back and weighing the probabilities of a number of scenarios.
The largest insider transaction on today’s list is a Form 4 filing by George Simeon, director of Nkarta Inc $NKTX, who reported a $10 million purchase.
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.
In this weekly note, we highlight 10 of the most important charts or themes we're currently seeing in asset classes around the world.
Indexes Hit New Lows
We’re seeing more and more stocks and indexes resolve lower from distribution patterns and violate critical support levels. Many more are on the brink, challenging pivot lows and threatening to follow their path.
The Nasdaq 100 (QQQ) and Russell 2000 (IWM) are excellent examples of this as both are violating their recent lows and resolving to the downside. We’re paying extra special attention to these patterns as their breakdown levels coincide with the AVWAPs from the COVID lows. These levels represent the price the average investor has paid for shares since March 2020, making them logical potential support zones.
Now that these indexes have taken out the confluence of support at their pivot lows, we’re likely to see further downside and increased volatility. Bulls need to come out and repair this damage immediately.
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.
These are the registration details for our Live Monthly Candlestick Strategy Session for Premium Members of All Star Charts.
This month’s Video Conference Call will be held on Tuesday May 3rd @ 6PM ET. As always, if you cannot make the call live, the video and slides will be archived and published here along with every other live call since 2015.
Twitter is on everyone’s mind these days. In light of Elon Musk’s takeover, there are a lot of people with mixed thoughts/feelings about the platform. But I for one am incredibly grateful for what Twitter has brought into my world.
During the depths of the financial crisis, I was trading (poorly) from home. I had left my office at the Chicago Board of Trade a couple years prior and I was having a hard time adjusting to being away from “my people.”
I missed the camaraderie of being around other traders. I missed the serendipitous strategy brainstorms. I was lacking the sounding boards to vent after a bad trading day, or to celebrate after a good one. And there was nobody else on Earth who understood the inside jokes and mannerisms that were second nature to those of us who attempt to pull money from the markets on a daily basis.
We are a different breed of human animal.
In March 2009 as the stock market was nearing the bottom of the Great Financial Crisis, I read an article in Barron’s that mentioned this “new online community called Twitter” and it highlighted people in finance who were using the platform to share trading ideas and network.
From the desk of Steven Strazza @Sstrazza and Ian Culley @Ianculley
The rally in some commodities has been near-vertical this year.
And we’re seeing this strength across the entire complex -- from energy contracts like crude oil to base metals such as tin and even grain markets like wheat.
While these kinds of moves are bullish over longer time frames, when things get too hot (like they have), it’s often not sustainable on a tactical basis.
This is the situation right now for a lot of commodities. We think a period of well-deserved digestion is underway for the broader asset class.
But this doesn’t mean there won’t be fresh up-legs taking place in some individual contracts.
As this new secular bull market matures, pockets of strength will rotate across the space. Our only job is to find the emerging leadership.
