Welcome to this week's edition of "Under The Hood." You can read more about the column here.
What we do is analyze the most popular Robinhood stocks over the trailing week and find opportunities to either join in and ride these momentum names higher, or fade the crowd and bet against them.
This was another interesting week as the market continues to grind higher with zero regard for whatever bad news is thrown at it. With the S&P 500 knocking on the door of new all-time highs, let's take a look at what Robinhood investors were buying this week.
One thing I've learned very quickly through writing this column each week is that contrary to popular opinion, these Robinhood investors are more often than not on the right side of the trend.
Apple $AAPL has consistently been towards the top of our list since we started tracking it. This week it was #1 with almost 80,000 net new accounts. Not only is this a quality company and not some "hot stock," but it's also up ~20% in the trailing two weeks on the heels of it's most recent earnings release.
With the company closing in on a $2T market capitalization, Robinhooders have been and continue to make money in Apple.
We covered the stock in our Under The Hood column on July 17th. After consolidating for a few weeks price recently gapped above our prior objective around 400.
Apple continues to exhibit incredible relative strength, but it's not actionable at current levels.
We also had a number of high profile IPOs this week which made the list. Rocket Companies $RKT which is basically the Detroit-based mortgage provider, QuickenLoans, came in at #2 as the stock rallied as much as 50% from its opening price in the two days since coming public.
BigCommerce $BIGC, which provides a SaaS e-commerce platform similar to that of Shopify's came in at #13. The stock rallied above 100 after opening at 68, and then sold off on Friday to close the week at 79.
Lastly, Rackspace Technology $RXT, another Software/Cloud company that also came public on Wednesday, came in at #49. Unlike the first two, RXT has flopped lower since its debut.
For newly public companies, the temptation is there to analyze or trade them but we have to wait until we have more data to work with. Day and swing traders working with a shorter timeframe can have at it. But for us, we have to be patient since we're looking to hold positions several weeks, months, or even longer than that.
Speaking of IPOs, here's one that came public just about 2.5 years ago. This is the popular security provider ADT Inc. $ADT.
ADT might need some time to digest its recent gains, and can certainly fill its gap lower towards 9.00-9.25, in which case we can buy the stock against that level. Although, the ideal setup here would be if price could power back above its all-time highs near 12.70. We'd be buying this strength with a 1-3 month target just above 18. We'll keep this one on our radar for now.
Here's another popular household name, Sony Corp $SNE. You should know how we feel about these massive multi-decade bases by now.
We think prices eventually head back towards their all-time highs of 150 which would be nearly a double from their current level, but that will take time. With Sony trading smack in the middle of our risk level and next objective, there is nothing to do here over the short-term. For those with a longer-term outlook, we want to buy any weakness back towards 60 if we get it.
Here's a long-term outperformer that made it onto our list for the first time this week. This is the education technology company, Chegg Inc $CHGG. People not being in school isn't slowing this one down at all.
New all-time highs on both absolute and relative terms this week. This is a very strong uptrend, but it's not actionable at current levels. We can buy weakness back towards recent highs and the 261.8% extension near 76 if we get it.
Here's an update on Jumia $JMIA. Despite price being at 15 when we wrote about it in last week's column, we said the name had a lot of momentum behind it and that we wanted to be buyers above ~19.
We thought the move could happen fast and it did. We closed above that level this week, so want to be long over the next 1-3 months with a primary target above 29. We think the stock eventually heads back to its all-time highs around 46.75.
Now here's a fun one. Overstock.Com $OSTK has been a controversial name, to say the least. You often hear the phrase, "stocks take the staircase up and elevator down.” In Overstock's case, it's been the opposite.
The stock looked priced for bankruptcy back in March when it traded as low as 2.50. Fast forward about five months, and it's now up almost 4,000% as it closed above 100 and at fresh all-time highs this week.
Don't count anything out in this market. While new highs are never bearish, especially in the context of a 15-year base breakout, this one's come a bit too far too fast for our liking, so we'd prefer to stay on the sidelines and see how prices digest these gains for now. Some consolidation above those prior highs would be healthy, in which case we'd eventually be looking for another leg up. Not yet though.
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