Yes, it's tricky both tactically and mentally to get long in the stock market right now. One look at the broader indexes would give any rookie market technician pause.
That said, there are still pockets of strength that are working and growing stronger --- both on a relative and an absolute basis. Which, by the way, is not uncommon. Even in the most vicious bear markets, there are often certain sectors that see gains. And so a bear market may force us to be more selective when searching for bullish bets, but the opportunities are there for those willing to do the work.
With that in mind, today's trade is one of those names that is thriving in this current market environment.
From the desk of Steven Strazza @Sstrazza and Ian Culley @IanCulley
The turmoil in equity markets has stolen all the attention since last year. But stocks aren't the only asset class that's a mess. We're getting the same kind of mixed signals and sloppy price action from forex markets.
While stocks remain under pressure, currencies have been throwing head fakes and dishing out whipsaws all year long. The AUD/USD broke to fresh nine-month highs just last week only to reverse 200 pips by Friday’s close.
We're seeing this type of action from currencies all over the world. It’s hard to trust a breakout these days. As frustrating as these failed moves may be, there are some clean chart patterns and favorable setups shaping up right now.
One area where the trend is very clear is the Japanese yen. Just about anything priced in Yen has been rallying recently as the currency continues to collapse.
Today, we’re going to highlight the massive base in the USD/JPY.
We’ve had some great trades come out of this small-cap-focused column since we launched it back in 2020 and started rotating it with our flagship bottom-up scan, Under the Hood.
For the first year or so, we focused only on Russell 2000 stocks with a market cap between $1 and $2B.
That was fun, but we wanted to branch out a bit and allow some new stocks to find their way onto our list.
The way we did this is simple…
To make the cut for our revised Minor Leaguers list, a company must have a market cap between $1B and $4B.
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.
We held our April Monthly Strategy Session last week. Premium Members can click here to review the recording and download the chartbook.
Non-members can get a quick recap of the call simply by reading this post each month.
By focusing on long-term, monthly charts, the idea is to take a step back and put things into the context of their structural trends.
This is easily one of our most valuable exercises, as it forces us to put aside the day-to-day noise and simply examine markets from a “big picture” point of view.
With that as our backdrop, let’s dive right in and discuss three of the most important charts and/or themes from this month’s call.
I was just in Boston for a couple of days for a family function.
It had been about a decade since I was last there.
I gotta tell you, I really like Boston a lot. I used to go quite often right after college because I had a lot of buddies who moved there.
Nothing but fond memories.
Anyway, I stayed in Beacon Hill this weekend, which as it turns out is a beautiful part of the city. A ton of bars, restaurants and shops. Right next to the park. Right by the water.
I highly encourage you to take the family and check it out.
So in the afternoon I met a lot of people who I had never met before. Everyone was super nice.
We got into talking about how things were early in my career. I had gone to Catholic school from the age of 4 until I was 22, when I graduated from Fairfield University.
Then came Wall Street. Like 90% Jewish, from what I could tell. I had only known a couple Jewish folks my entire life, until that moment.
What Happens on Expiration Day when I'm holding long options?
I’ve gotten some questions recently about what happens to an open options position if we’re still in it when the contracts expire.
Caveat: I will rarely hold an options contract in ASO trades into expiration unless it’s a winning position and it's going my way. Profit targets or stop loss exits will usually get me out far in advance of expiration day.
I promise this isn’t a “Go-Have-a-Baby” post that talks about how the greatest thing a human can do is procreate.
I’ve recently come to somewhat believe that. But I won’t be that guy here.
My friend Michael Nauss (@michaelnaussCMT on Twitter) just welcomed his first child into the world – a beautiful baby boy – and I couldn’t be happier for him.
And it got me thinking about all the ways my perspectives on things have changed since becoming a father myself nearly 8 years ago.
The biggest change for me is that I’m only now beginning to fully appreciate the hard work and sacrifice my mother had to go through to raise me and my two younger siblings.
My father left our house and the divorce process began when I was about 7 years old. At that time, my mom was a stay-at-home mom with no source of income. And my dad, while well-intentioned, was pretty much a deadbeat when it came to finances. So she was basically left to fend for herself with no money and no family around to help out.
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, which you can check out here.
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.
