From the desk of Steven Strazza @Sstrazza and Ian Culley @IanCulley
In last week’s Currency Report, we highlighted the NZD/USD cross as a means to express our bearish US dollar thesis.
The setup was too good to resist taking a swing at following the recently failed breakdown. And so far, we’ve been rewarded for it. That’s information.
But it’s not the only cross that continues to trend well against the US Dollar. We see it all over, and it’s only reinforcing our bearish thesis.
As such, we want to look for more opportunities to take advantage of this developing theme.
In this week’s post, we’re going to do just that.
Let’s drill into our forex universe now and identify some of our favorite risk/reward setups we want to bet on to capture profits from a weakening US dollar.
As the third quarter winds to a close, the bulls just took the lead for the first time since early in the 1st half.
Everything is clicking for them and they're in control of the game right now. While it's been a nice comeback, it's still just 52 to 48, so they have plenty of work to do.
I'm not talking about basketball. Not the Chicago bulls. I'm referring to stock market bulls and the current score on our risk checklist.
It's currently at its highest reading since we started publishing it back in June, so we'd be remiss not to write about it.
It's been a great roadmap for us in recent months so let's have a quick look at what it's saying now as well as some of the more recent developments that have taken place.
From the desk of Steve Strazza @sstrazza and Ian Culley @ianculley
In last week’s Commodity Report we highlighted the Uranium ETF $URA and promised to dig up some trade ideas within this outperforming group of stocks.
While everyone was enjoying the Labor Day weekend, barbecuing, and watching football - we were pouring over our Uranium universe to uncover the best risk/reward opportunities in the strongest names.
But hey, this is what we love to do!
So let’s dive right in and see what we found.
First of all, why do we like Uranium so much right now?
Both the Uranium ETF and the underlying commodity are showing leadership and breaking out of 6-year bases. That's more than good enough for us.
Welcome back to our latest "Under The Hood" column where we'll cover all the action for the week ended September 3, 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.
We questioned whether it was a rounding top reversal pattern – in which case we’d be looking for a breakdown.
Or, if it was actually a failed breakdown - and we all know what tends to follow those patterns…
The responses we received were mixed. But there were plenty of bulls who wanted to be long against the former lows and bet on a swift reaction higher.
That’s pretty much the camp we were in too. We recently wrote about all of the whipsaw action we’ve been witnessing.
We said the next critical piece of information we’d be looking for was whether or not these patterns would see some real follow-through and confirmation.
Fast forward a week or so, and we definitely have our answer.
So let’s talk about it, and more importantly, what it means for risk assets.
From the desk of Steve Strazza @Sstrazza and Ian Culley @Ianculley
In today’s Commodity Report, we zoomed out to our monthly charts to reconnect with the primary trend. This exercise really allows us to tune out the noise on the weekly and daily charts.
As we were reviewing our charts, there was one recurring theme that kept popping up...
Pullbacks and retests.
The CRB Index retested its breakout zone near the 2018 highs ~206.
Crude oil broke back below a 13-year downtrend line only to reclaim it in recent sessions.
Iron ore fell right back to check in on its 2013 highs.
And even palladium, the one bright spot in the precious metals space, pulled back to a six-year trendline.
But guess what? Just like we’ve recently seen in many of the weakest areas in other asset classes, buyers dug in at these key levels.
Of all these retests, one that stood out most was Uranium.
Once again this month, I’m going to share info on positions that were closed in the month of August. As a reminder, our exit plans are always laid out ahead of time in each trade idea we publish. In every case, the exits mentioned below were all in accordance with the plans as laid out.
As we head towards September expiration, we have three open positions remaining with expiring September options that need our attention. Most of our delta-neutral premium-selling plays worked out in August, which makes sense considering the slow markets we just endured. Let's dive in.
Positions with September options that need monitoring:
From the desk of Steve Strazza @Sstrazza and Ian Culley @Ianculley
Mixed signals have been the rule rather than the exception since the market peaked in early February.
The major stock indexes have continued to print record highs while breadth has deteriorated beneath the surface, creating several bearish divergences.
Some stocks have gone up and some stocks have gone down. But the reality is that most stocks have gone nowhere.
The same is true for commodities.
We’ve noticed pockets of strength in base metals, livestock, and softs. But the majority of commodities have remained range-bound since the beginning of May.
These are the registration details for our Live Monthly Candlestick Strategy Session for Premium Members of All Star Charts.
This month’s Video Conference Call will be held on Tuesday September 7th @ 6PM ET. As always, if you cannot make the call live, the video and slides will be archived and published here along with every other live call since 2015.
