As Strazza mentioned in our Telegram live chat this morning: "Not too many charts look as good as this one right now."
It feels hard to comprehend that we're finding leadership in Chinese tech, internet, and auto stocks, but it's happening. Politicians lie. Prices don't.
And one name we've got an eye on has been coiling in an extremely bullish high flag pattern.
I’ve written in the past about how I had been invited to join a local Improv Comedy group here in Colorado for a one-off show back in May.
While this may sound random, I do actually have some professional improv training. I took a year of classes at Chicago’s famous Second City Theater and then a couple more sessions at Improv Olympic (also in Chicago) back in 2006. It was just for fun. I had no illusions of ever becoming an actor of any kind.
Well, the show I was invited to participate in back in May went off without a hitch. We played in front of a sold-out room (it only seats 110 people) and by all accounts, it was a fantastic success. For me personally, I was just happy I didn’t suck! LOL!
We were eventually invited to come back again and I was once again asked to participate.
We've seen some bullish thrusts in sectors with ties to the medical and healthcare spaces, and if the broader market has designs on moving higher deeper into the summer, we think leaders will continue to emerge from this area.
Today's trade is a bet on one of those next leaders.
On both an absolute and a relative basis, healthcare names continue to perform. I guess the need for quality healthcare is a stronger driver of stock prices than interest rates and global macro? At least for now, that appears to be the case.
One name we've been watching, Cigna $CI, is knocking on the door of a major base breakout.
The title of this post is a takeoff from one of my favorite ongoing SouthPark bits involving our friendly Canadian neighbors :)
There seem to be better bearish setups on my radar than bullish ones. This makes sense as I prefer to trade with trends and the overall stock market trend in 2022 has been down. Ballsier traders than me like to step in and "buy the dip." But I'd rather let the market prove itself to me first.
One of the most beaten-down sectors has been tech stocks. Steve Strazza summed up this sector with one word: "Awful." Yeah.
The stock in my crosshairs today comes from this area.
For this week's trade, we're selling an $XLE August 65/85 Short Strangle for an approximately $2.75 credit. This means we’ll be naked short equal amounts of the 65 puts and 85 calls.
Get the full details, risk management procedures and targets for this trade here:
Internally, we were talking yesterday about the energy space and the recent pullback in prices. While still the strongest sector in the market in 2022, this move off the highs has been notable.
Is the trend over? Or was that just the "hot money" taking profits?
I'm not sure we have a definitive answer to that question yet. It looks to me that the market is still sorting that out. And this condition of indecision, coupled with high implied volatility priced into options is combining into a nice opportunity to collect some options premium while energy figures itself out.
So we're going to wade into the energy pool with a delta-neutral short-premium options trade.
I'll cut right to the chase: JC put out a piece this morning highlighting the relative outperformance of the Healthcare space.
The XLV sector ETF for the space has more or less been consolidating sideways as the broader markets sold off, and one of the bellwethers here is already making new all-time highs. Feels like we'll start to see more candidates here begin to participate as well.
The stock market has breathed a much-needed sigh of relief this week.
Are we out of the woods? I wish I knew.
But in case we're not, I'm hedging a little bit by taking this bounce opportunity to get into a bearish position in an Electric power generation stock that appears to be dead-cat bouncing.
There is probably a certain segment of the investing population that would look askance at me if I mentioned we're seeing "strength in China." They wouldn't believe that is possible. According to the news media they consume, China is "a mess." Perhaps that is true? But we only follow price here at our shop, and price is beginning to tell a different story.
Today's trade idea comes from TWO seemingly unlikely places: China and Internet! (what??????)
And when you see this chart of the Chinese Internet ETF $KWEB, you'll see why:
Taking losses is never fun. But it's the most important thing we do.
I wish it were different. I wish smart risk management was an exciting endeavor that made us happy. The kind of thing that makes us want to high-five our friends and adoring fans.
Unfortunately, it's more like that menial task that you have to do over and over again, hating every minute of it, but knowing it just has to be done (like the doing the dishes or laundry).
To quote our Head Technical Analyst at All Star Charts, Steve Strazza: "Bullish setups are hard to come by these days."
Yeah.
But, for those willing to venture into the choppy waters, recent market action has provided us with some nearby risk management levels that give us the opportunity to act quickly if we're wrong, limiting our losses while giving us multiples of potential profit (as measured against the risk).
And today's idea comes from the only sector to show YTD gains this year.
