Disney is another stock that has been on our watch list for a short trade, but has stubbornly held on... until today. We had been waiting for $DIS to close below $113 and on Wednesday our criteria was finally met.
Could the broader markets be due for an oversold bounce here? Sure. But we think Disney's price action (better late than never) was an ugly omen for the start of a pretty bearish movie coming in this name over the next several weeks.
This past weekend I was down in San Diego for the annual Trade Ideas Summit. I gave a presentation earlier in the day, which you can watch here, and then sat on panel later in the afternoon with some really smart guys. So I thought it would add value to share this conversation with everyone.
When the stock market is not going up, the blame game gets played. It's a combination of shareholders losing money and media types needing something to say. It's always someone or something's fault and rarely described as a normal occurrence. The truth, however, is that yes, stocks falling in price is part of the regular cycles that we've always seen. In fact, stock markets that don't have periods of falling prices are incredibly abnormal. 2017 for U.S. Stocks was the exception that proves the rule.
The reason I mention this is because we have not been in an environment where we want to be selling strength since early 2016. Many of you have been following my work for many years and remember my gloom & doom days of 2015 and even as far back as 2008. You guys already know that I'll be bullish stocks when appropriate and bearish when necessary as well.
When the weight of the evidence is pointing in one direction as it has been for most of the last two years, it makes sense to be aggressive and take advantage of the clear trends while they're intact. However, when conditions change and the evidence becomes more mixed, a more neutral approach is appropriate. But what does that look like from a practical sense?
When the weight of the evidence is pointing in one direction as it has been from early 2016 through mid-2018, it makes sense to be aggressive and take advantage of the clear trends while they're intact. However, when conditions change and the evidence becomes mixed, a more neutral approach is appropriate. So what does that look like from a practical sense?
The new 52-week high list has been pretty scarce as of late, but Verizon's earnings announcement propelled its stock above an important level of resistance to 17-year highs, signaling further upside may be be ahead.
We don't do a lot of "earnings" plays here at All Star Options. We don't scare away from entering smart trades with defined risk ahead of earnings reports, but only if we feel there's a larger play in the cards.
However, when all the stars align, we'll consider specific opportunities.
The thing about the market is that there is no holy grail. No matter how hard you try, you're not going to find it. The holy grail does not exist. We have to weigh the evidence knowing full well that we're working with incomplete information. The idea is to accumulate all of the data and make a conclusion based on all of it, not just some of it.
Today, I want to go over a few of the divergences that have put the bulls in a precarious situation. There is a large crowd of permabull "passive" investors that are taught just to buy stocks and hope for the best. They are shown all of these sexy equity curves and told again and again how much they would have made had they invested in the S&P500 in 1950 or 1982 or whatever cherry-picked date is forced upon them.
This weekend we updated our chartbooks for Premium Members of Allstarcharts India, so I wanted to do a quick post outlining the changes to our universe of stocks since the end of the first quarter.
This weekend I was down in beautiful San Diego for the 3rd annual Trade Ideas Conference. For me, it's not just about the presentation that I give or the panel that I sit on, but the people that I get to meet or see again. That's the great part about our community: everyone's ability to share and learn and recognize that we're all in this together. As we approach the market with our own individual goals and objectives in mind, along the way we pick things up from others that help us adjust and fine tune our strategies regularly over time. My friends at Trade Ideas put on a good show, but it was the engaged audience and interactions with my fellow speakers that really made the weekend great.
Here is the video of my presentation. Shoot us an email to info@allstarcharts.com if you're interested in receiving the slides:
So far, this new corrective phase in U.S. stocks is playing out according to script: Deep down moves, interrupted by gravity-defying bounces that suddenly get saddled with lead weights which drag stocks back down with the fishes. Sorry for the horrible Godfather-inspired mixed metaphor.
In this type of environment, we want to be patient with our risk-defined positions when they go against us, yet aggressive when they go our way. This one simple mindshift will be what separates the winners in a bear market from the pretenders.
We laid out our first list of stocks we want to be short in a correction back on October 12. So far, this list is treating us well. The next name that we're ready to tackle is Cisco $CSCO.
