Steve Strazza posted a great piece on a bunch of stocks in the Biotech space that are setting up for some nice runs. And he outlined 6-12 month price targets for all of them, should the move materialize. There are some robust gains to be had here:
As long as price is above its 2015 highs near 134, we don’t want to bet against this breakout. Sure, we’d like to see momentum register an overbought reading and finally confirm these new highs, but price is always the final arbiter of truth… and right now, it’s pointing higher.
From an options trader's perspective, unfortunately there isn't a ton of options volume and open interest in many of these names. This is a bummer.
But have no fear, there's still a smart, risk-defined way to play the space.
Every week we publish performance tables for a variety of different asset classes and categories along with commentary on each.
Despite some volatility in the second half, risk assets continued their steady march higher last week. The broadening participation from Equities was again evident as every major US and Global Index was higher with the exception of Dow Utilities $DJU.
We've written extensively about the strongest areas and those first to reclaim their highs. In this post, we'll highlight a handful of Equity ETFs/Indexes which are at or just beneath fresh highs. Whether these areas work through their overhead supply or get rejected at these key levels will provide important information into the strength and durability of the current rally.
Let's dive right in and take a look at our Sector SPDR ETF table.
A few week's ago we profiled the strength in Biotech and highlighted the Genomics space as one of the top-performing industry groups. We said we were looking for some consolidation in these areas in the coming weeks and that if and when prices resolved higher these would be areas we'd look to for long opportunities.
In this post, we'll highlight our top-down approach to look into the Biotech space and offer some trade ideas. Then we'll drill further down into Genomics, provide an update on what we're seeing there, and share some setups in holdings of the ARK Genomic Revolution ETF $ARKG.
We talk a lot about the importance of secular leaders. More often than not these groups have a relationship to Technology, regardless of whether they are classified as a Technology stock or not. Tech is everywhere today.
The last time a sector was so pervasive would have to be Industrials way back in the mid-1900's. One could argue Financials had their time in the sun too, but that was short-lived and we all remember how it ended.
Industrials may not be as important as they once were, but they are still important.
I'm fortunate to have a lot of smart friends who are experts on the stock market. In some cases they're traders, or portfolio managers, analysts, financial advisors and best-selling authors. I get to have incredibly insightful conversations with my friends and colleagues every single day. But I understand that most people don't.
So today I'd like to share a video of a conversation I had yesterday with New York City Trader Kim Sokoloff, and about half way through my buddy Joe Fahmy also joined the chat. We discussed process, we talked about a few trade ideas we liked and just had an overall good time catching up.
These are the conversations I'm having regularly. I hope this gives you some insight as to how much I get to learn from my friends:
In mid-April, we posted a list of 20 key chart levels we were monitoring in some of the most important assets around the world. We've used this as a risk-gauge to measure the internal strength or weakness of the market in the time since.
The list started at 60% bullish, never fell below 50%, and has been stuck at 90% with the same two bearish hold-outs for the past month now. The list has grown consistently more bullish since we began tracking it as more charts continued to break above our levels.
Since the end of May, 18 of the 20 items have been in bullish territory and many have run a good amount from our risk-levels. With the strongest stocks and indexes making new all-time highs and confirming this bullish outlook, prices have spoken and it's time we retire our bull market checklist.
Coming out of the most recent All Star Charts Monthly Conference call, one of the themes that JC stressed was the continued stream of bullish setups in the strongest sectors, and most notably Internet Retail. Makes sense, right? Outside of grocery shopping, not many people are heading to the local mall for any unnecessary "retail therapy."
Additionally, exercise-crazed Americans who've suffered their favorite gyms and yoga studios being shuttered for several months now are exploring options to get their exercise fix at home. Sounds like a perfect setup for an internet company that sells exercise equipment!
Here's JC on the opportunity setting up in Peloton $PTON:
When it comes to "Continuation Patterns", Triangles are one of the more common ones you'll see. In this video we're discussing, more specifically, the Symmetrical Triangle, and how markets tend to consolidate between two converging trendlines. This series of higher lows and lower highs ultimately reaches its apex, which forces a resolution.
Throughout this course, we discuss all kinds of patterns, both continuation and reversals. In Triangle Land, we often see Symmetrical Triangles, Ascending Triangles, Descending Triangles and Wedges that appear like Triangles and have similar implications.
Traditionally, we've approached the market using a top/down approach. In other words, we start by looking at stocks globally, the intermarket relationships between them all, and only then do we come to the U.S. and analyze the Indexes, then the sectors and ultimately we drill down to individual stocks. But all of those opportunities in stocks come within the framework of all the other analysis we've done to guide us into those particular names.
With few exceptions, this is our approach. And it's worked well because this process helps us identify the direction of primary trends, and we err in that direction. This keeps the probabilities of success on our side, and not just the favorable risk vs reward that we always harp on.
The IBD 50 has been a great universe of stocks, but it has an earnings and sales growth component to it, so that limits the list. And quite frankly, I couldn't give a damn how much money a company makes or loses. That isn't my problem.
Last night was our Live Video Conference Call that I host for Premium Members every month. We went over the entire global macro landscape and then drilled down to individual stocks that I think are the best vehicles to profit in the current environment.
One of the areas we continue to like, and continues to pay well, is Internet Retail. The relative strength and positive momentum coming out of these stocks has been off the charts for months.
A nice clean setup in the space is Peloton. I like how prices have been consolidating below their 161.8% extension and ready for their next leg higher:
For those new to the 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?
