From the desk of Steve Strazza @Sstrazza and Louis Sykes @haumicharts
At the beginning of each week, we publish performance tables for a variety of different asset classes and categories along with commentary on each.
Looking at the past helps put the future into context. In this post, we review the relative strength trends at play and preview some of the things we’re watching in order to profit in the weeks and months ahead.
Last week, we outlined how the market is in a very healthy state of order.
Nothing has changed from that message. We continue to see strong demand for risk assets and healthy rotation down the market-cap scale.
Additionally, market internals and breadth continue to improve beneath the surface, supporting the recent leg higher for stocks, both domestically and abroad.
As December gets under way, it’s time to review positions with December options that remain open (haven’t already hit profit targets or been stopped out).
Most trades I put on for All Star Options tend to have a minimum duration of 30 days (short premium plays) and often as long as 6-8 months (for long premium plays). As options approach expiration, greeks like theta and gamma start to become my enemy and whipsaw my P/L. Therefore, as options and spreads get into the expiration month, my best practice is to put each position on notice — it’s time to take action.
As it turns out, we only did five trades in total with December options. Currently, we only have two open positions with December options remaining on the books, and only one of them requires any action. The rest have already hit our profit targets or stop loss levels. In the scoreboard below I denote the date we exited each position.
Welcome to our "Under The Hood" column for the week ending November 27, 2020.
What we do 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.
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.
It's nothing new for us who keep track of this stuff regularly. We're seeing a lot of new highs. In fact, we saw more new highs in November on both the New York Stock Exchange and the Nasdaq than we've seen since early 2018.
We're not seeing deterioration in breadth, like we saw in January/February 2020. We're seeing expansion of breadth. We're seeing more participation, not less. More countries are breaking out to new highs, not fewer. These are all characteristics of bull markets and uptrends, not bear markets and downtrends.
They keep telling me that Tech and Discretionary and Communications are no longer participating. But then when you look at the small and mid-cap indexes of those sectors, they've been breaking out to new highs. But now, just to really piss off the permabears, the large-cap indexes are breaking out as well:
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 December 1st @ 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.
I'm back with a brand new edition of the Louis' Look column to share some lessons I'm learning as an intern. You can find my last post here, where I share a handful of obscure charts most people have never seen.
Let's crack straight into it.
My first year of University is now officially over! Woop Woop!
While celebrations would normally be in order, it's a bitter-sweet ending to my freshman year.
This whole virus situation meant that I only spent a few weeks of the year on campus and in the 'University scene' - a time where you're supposed to leave home, grow out, and meet new and interesting people.
We've been keeping tabs on a stock that we traded successfully earlier this fall. The stock hit our price objective, our spread hit our profit target, and we moved on.
Lo and behold, the stock consolidated around that last price target as we expected, and now after about a month of working through the weak hands, it appears Snap Inc $SNAP is ready to make another run.
For those new to this exercise, we take a chart of interest and remove the x/y-axes and any other labels that would help identify it. The chart can be any security in any asset class on any timeframe on an absolute or relative basis. Maybe it’s a custom index or inverted, who knows!
We do all this to put aside the biases we have associated with this specific security/the market and come to a conclusion based solely on price.
You can guess what it is if you must, but the real value comes from sharing what you would do right now. Buy, Sell, or Do Nothing?
From the desk of Steve Strazza @Sstrazza and Louis Sykes @haumicharts
At the beginning of each week, we publish performance tables for a variety of different asset classes and categories along with commentary on each.
Looking at the past helps put the future into context. In this post, we review the relative strength trends at play and preview some of the things we’re watching in order to profit in the weeks and months ahead.
Last week, we mentioned we were no longer in a split market, but rather in an environment supported by strong internals and an aggressive appetite for risk assets.
This week, we're preaching much of the same.
We continue to see rotation down the market-cap scale, into Micro-Caps and SMIDS, confirming the strong underlying market internals.
If Semi's are leading, how bad could things be for the stock market?
As you can see in this chart below, not only are Semiconductors outperforming the broader markets, but they are also breaking out relative to Technology stocks as a group.
