As many of our longs continue to work in this current leg higher in the stock market, I like putting on bearish bets as portfolio hedges to cushion the blow if/when the turn comes.

And the best way I know how to do it is to position bearishly in stocks that are already falling. If they are performing poorly now, I have to believe there is a lot more downside should a downdraft hit the broader market.

My analysts published their latest Short Report, and one of the names caught my attention.

Perhaps the title of this post is a bit dramatic. But it got your attention, yeah?

While the indexes continue to plow higher and higher, proving markets can stay irrational longer than bears can stay solvent, there continues to be signs piling up that a turn may be near at hand.

We're not saying that the long bull market is coming to an inglorious and permanent end. We're more of the belief that a well-deserved pause and/or pullback feels like a perfectly natural thing to happen somewhere around here.

So we're going to add another bearish bet to the board in a stock that is already showing signs of topping in a sector that might be ready to roll over.

Analyzing Unusual Options Activity | The Flow Show https://t.co/XsSONHUcYV

— Sean McLaughlin, NLD 📈 ( formerly @chicagosean) (@OptionsSean) February 5, 2024

Today on The Flow Show, me and Steve Strazza chatted about the current $VIX environment, the potential for sideways, volatile trading action, and our internally diverging views on the overall market (JC is getting more bearish, Strazza is still flying the Bull Flag, and I'm closer to Switzerland).

As we dug into it, Strazza floated a couple ideas in the Healthcare space that made sense to me once we fleshed it out.

We’re gonna keep this quick cuz I’m on the road doing errands.

I just got off the phone with JC, who called me in the car. His “spidey senses” are tingling and he thinks there might be a low-risk/high-reward opportunity to short the broader indexes here.

He likes it both as a standalone bearish bet and as a portfolio hedge against a bunch of longs that are working for us right now.

Today's trade is a "keep it stupid simple" kinda trade that might take a little intestinal fortitude if you do not enjoy buying stocks at all-time highs.

But in my experience, these are the types of stocks that continue to defy odds.

So let's get after it.

This is a bonus, second trade idea for today that came out of our internal conference call this morning and dovetails nicely with this note that JC just published.

We're getting short Lululemon, $LULU due to what appears to be a failed breakout:

It doesn't happen very often that a bearish setup presents an opportunity for us to position with a simple long puts purchase. Usually, when we want to buy puts, the whole world is on to the idea and the premiums in the options market reflect that.

But today, we've got a situation where a stock is flirting with breaking a key support level, and the options market is pricing in a smaller move than our research suggests is possible.

We got stopped out of a Wells Fargo trade a couple of weeks ago, and it looks like that was the whipsaw it needed to shake weak hands out. And since I was shaken out, I consider myself among the weak hands squad. I'm ok with that.

But given what we've seen since we were stopped out, we're getting back in for another try. This time, with tighter risk management and a longer runway.

Today's trade is in a $79B company that provides software, hardware, services, and reusable integrated circuit design blocks.

Here is a chart of Cadence Design Systems $CDNS:

Today is Day Two for the All Star Charts team hosting our Portfolio Accelerator event in New York City.

During our group conversations today, Strazza and I put our heads together and put on this trade in Snowflake $SNOW.

Hey folks...

The entire All Star Charts team is presently in NYC hosting our Portfolio Accelerator event. So I will skip the preamble and get right to the point for today's trade in $TSM...

The housing sector continues to perform well, and it makes sense that companies in the mortgage business should come along for the ride.

One of those names had a big push into the end of the year, and then had a monster pull back to start 2024. We think this reversal may be a bit overdone and the stock is now at a level where we can take an advantageous position with minimal downside from here.