This is the video recording of our June 3, 2021 Monthly Charts Live Strategy Session
Hopping onto the Energy Express
Over the past few days, we’ve seen the market resolve higher. With the new all-time high in place, we’re seeing one sector witness growing strength.
Energy has been a part of the sectors that have been showing strength for some time now. However, there are a few stocks that are now joining the bandwagon of the ‘breakout express’ and this seems like a good time to jump aboard!
The All Star Momentum Scan
We debuted a new scan recently which goes by the name- All Star Momentum.
All Star Momentum is a brand new scan that pinpoints the very best stocks in the market. This time around, we have incorporated our stock universe of Nifty 500 as the base. Among the 500 stocks that we follow, this scan will pump out names that are most likely to generate great returns.
Market Rise Amid Low Participation
We put out a post recently about the breadth indicators picking up bullish signals. This was when Nifty 50 was attempting to move past its earlier high of 15,431.
Well, what do we have now? In addition to keeping track of the participation in the general market scenario, it is increasingly important to track the same indicators when new highs are claimed.
Nifty 50 managed to move past its resistance, but what do the breadth indicators say? [Read more…]
Under The Hood (06-01-2021)
From the desk of Steve Strazza @Sstrazza.
Welcome back to our latest “Under The Hood” column for the week ended May 28, 2021. This report is published bi-weekly and rotated on-and-off 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.
Watch this video for a “behind the scenes” look at our process.
Whether we’re measuring increasing interest based on large institutional purchases, unusual options activity, or simply our proprietary lists of trending tickers… there is a lot of overlap.
The bottom line is there are a million ways to skin this cat. Relying on our entire arsenal of data makes us confident that we’re producing the best list each week and gives us more optionality in terms of finding the most favorable trade setups for our clients. [Read more…]
[PLUS] Weekly Momentum Report & Takeaways
From the desk of Steve Strazza @Sstrazza
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 context of the big picture 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.
“Follow The Flow”
From the desk of Steve Strazza @sstrazza
This is one of our favorite bottoms-up scans: Follow The Flow. In this note, what we do is simply create a universe of stocks that experienced the most unusual options activity – either bullish or bearish… but NOT both.
What we mean by this is that we have options experts, both internally and through our partnerships with TheTradeXchange, whereby we do all the digging through the level 2 details and do all the work upfront for our clients, in order to isolate only those options market splashes that represent levered and high-conviction, directional bets.
We weed out all the noise for you in terms of hedging activity and ensure there are no offsetting trades that either neutralize or cap the risk on these unusual options trades. What this leaves us with 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.
From there our job is easy. We merely flip through our list of stocks that saw unusual options activity, and using many of the same technical filters we do for our other bottoms-up scans, we simply pick the best of these setups and follow the money flow to fatten our own pockets along with some of the smartest financial institutions. It’s a simple concept, really.
Whether the transaction was executed on the bid or the offer matters as well. Which counterparty was the aggressor definitely matters otherwise we wouldn’t know whether the trade was a bullish or bearish bet.
For example, a massive amount of put contracts executed at the ask is a bearish bet (all else equal). But, did you know that a bunch of these very same puts executed on the bid is actually bullish? In this scenario, the seller is the aggressor and they are shorting the puts, which is similar to buying calls on the ask and betting on higher prices.
But you don’t have to worry about any of that. We’re doing this part for you!
All you need to know is that we’ve designed a list of stocks that some of the largest financial institutions on wall street are either very bullish or very bearish on… and we’re going to follow them into these trades. BUT only if they meet our own criteria.
Due to the nature of the catalysts applied to create these universes of stocks, most of these trades will tend to be on the shorter-term end of the spectrum… we’ll typically be looking to take profits a few months out at most.
At the same time, there will be splashes in the options market whereby participants put on “leaps” – or other long-term strategies, which would warrant a longer timeframe setup.
Either way, after running this scan internally for years now, we’re confident that we’ll find some great trade ideas from these lists – and better yet, they’ll come from both the long and short sides.
Just remember, the main idea behind this note is simple, and no different from the other really. We’re merely creating a watchlist of stocks that have potential tailwinds, or headwinds at their backs, increasing the likelihood that they will either start to, or continue trending. After all, we need trends to make money… right?
Then, as with any other scan, we apply a series of technical filters in order to focus on the strongest names with bullish options flow as well as the weakest ones that experienced bearish unusual activity in the options market each week.
At the end of the day, the idea for this universe based on unusual options activity is to follow the smart money into some of their largest-conviction trades in hopes to ride these names higher or lower right along with them.
And of course, as with any stock we’re in… we’ll also have the primary trend at our back.
Gold Keeps Winning
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