I’ve been at this for 20 years. I’ve seen a lot of uptrends and bull markets in my day. I’ve studied many more that came before me.
Along the way, do you know what you’ll find a lot of in bull markets?
New 52-week highs. [Read more…]
Expert technical analysis of financial markets by JC Parets
by JC
I’ve been at this for 20 years. I’ve seen a lot of uptrends and bull markets in my day. I’ve studied many more that came before me.
Along the way, do you know what you’ll find a lot of in bull markets?
New 52-week highs. [Read more…]
From the Desk of Steve Strazza @Sstrazza and Alfonso Depablos @AlfCharts
Our Hall of Famers list is composed of the 150 largest US-based stocks.
These stocks range from the mega-cap growth behemoths like Apple and Microsoft – with market caps in excess of $2T – to some of the new-age large-cap disruptors such as Moderna, Square, and Snap.
It has all the big names and more.
It doesn’t include ADRs or any stock not domiciled in the US. But don’t worry; we developed a separate universe for that. You can click here to check it out.
The Hall of Famers is simple.
We take our list of 150 names and then apply our technical filters so the strongest stocks with the most momentum rise to the top.
Let’s dive right in and check out what these big boys are up to.
Selling premium is easy.
Being a premium seller is hard.
This chart perfectly encapsulates why this is true:
This is the one-year performance of our trading account dedicated to delta-neutral premium-selling strategies. We call it our “Paid-to-Play” or “P2P” account.
We’re making new highs, and the long-term trend is in our direction. But as you can see, the ride hasn’t always been smooth.
Selling premium is a winning strategy over the long run precisely because it’s hard. It’s hard because sitting through sudden drawdowns is hard – and many traders don’t have the stomach for it. Or they trade too big, making the PnL swings far too taxing on their emotions. Or worse, the big swings knock them out of the ring.
That big drawdown you see in March was courtesy of the regional banks blowup. Going into it, we were short a naked strangle in $KRE (regional banks) options, as well as some related positions that didn’t fare too well.
It was no fun defending those positions and staring at paper losses that eventually converted to realized losses. But the one thing that kept us in the game and continues to work for us is position sizing.
When trading strategies such as short strangles (naked short puts + naked short calls) which feature undefined risk, the best way to ensure our continued ability to participate in markets is to trade each individual position small. Being conservative is what keeps us in the game.
The reward for being conservative and sticking to our process speaks for itself.
Check out the P2P portfolio’s performance relative to two key benchmarks.
First up, the S&P 500:
While our returns have only slightly outpaced the S&P 500, we achieved this gain with significantly less volatility. Our max drawdown of -6.23% is dwarfed by the S&P’s -16.9% drawdown during the same period.
Amateurs are seduced by total returns. Professionals focus on the risk-adjusted returns and the volatility of the ride.
Compared to the S&P 500 Covered Call ETF, there’s no contest:
It’s important to point out that our P2P Portfolio represents only a portion of our total trading assets. We are not ALL-IN on this strategy. It is only one of many that I and JC each run.
This is not meant to be a strategy to house all of our investable or tradable assets.
The true aim for a strategy like this is to provide portfolio and strategy diversification. This trading account often zigs while other accounts we manage zag. That’s what we want it to do – to provide some ballast to weather the rolling waves of the market while offering a meaningful risk-adjusted total return.
This is how we win.
If you’d like to follow along with our Paid-to-Play portfolio, you can learn more about it here.
Trade ’em Well,
Sean McLaughlin
Chief Options Strategist
All Star Charts, Technical Analysis Research
by Ian Culley
From the Desk of Ian Culley @IanCulley
Tech stocks don’t care about the manufactured debt limit crisis. Nor are they bothered by the increasing probability of a rate hike next month.
Growth stocks seem concerned with only one thing – printing fresh highs.
The Tech sector ETF $XLK posted new 52-week highs yesterday. And the Communications ETF $XLC rallied within reach after taking out its Aug. ‘22 pivot highs.
So where does that leave bonds and other long-duration assets?
If these base breakouts across growth sectors hold, I imagine bonds have some serious catching up to do…
From the Desk of Steve Strazza @Sstrazza
When investing in the stock market, we always want to approach it as “a market of stocks.”
Regardless of the environment, there are always stocks showing leadership and trending higher.
We may have to look harder to identify them depending on current market conditions. But there are always stocks that are going up.
The same can be said for weak stocks. Regardless of the environment, there are always stocks that are going down, too.
We already have multiple scans focusing on stocks making all-time highs, such as Hall of Famers, Minor Leaguers, and the 2 to 100 Club.
We filter these universes for stocks that are exhibiting the best momentum and relative strength characteristics.
Clearly, we spend a lot of time identifying and writing about leading stocks every week, via multiple reports.
Now, we’re also highlighting lagging stocks on a recurring basis.
by JC
Sector Rotation is the life blood of a bull market.
In the back half of last year, almost everything was working – except for some growth stocks and Tech.
Then came 2023. The best performers have been growth stocks and Tech.
That’s what we mean by “sector rotation”.
Last year they were all bitching about the fact that these Tech stocks and the Nasdaq weren’t working, even through practically everything else was.
This year they’re bitching that these Tech stocks are the only ones working (hint: they’re not the only ones).
Large-cap Tech outperforming does not mean that market breadth is weakening. It just means that Large-cap Tech is outperforming.
This is classic sector rotation – a characteristic regularly found throughout bull markets.
So what comes next? [Read more…]
[9/7: stop moved to 260. We’re already #FreeRiding on this one. So whatever we sell the remaining position for is pure profit!]
Today’s trade leans against a significant support level that we believe will hold. But because the stock is at such a delicate level where it could quickly collapse on us if the level doesn’t hold, we’re going to keep the play simple and cleanly define our risks.
A picture is worth a thousand words, so here’s the chart of Caterpillar $CAT that’s got our attention: [Read more…]
by JC
This is the video recording of the May 2023 Mid-month Conference Call.