During a quick perusal of ETFs today, I noticed some extremely rich volatility being priced into options on the Retailers ETF $XRT - which isn't entirely surprising given the price action over the past week.
While volatility can certainly continue here, my gut tells me the premiums will fade away soon. Implied volatility is driven by fear and greed, but eventually the marketplace adjusts to the "new normal" and the premiums people will pay for volatility they are now used to will subside. This is where it can be advantageous to put on delta neutral credit spreads.
Earlier this week, the All Star Charts research team did a deep dive on China stocks. Say what you will about the political tension between our two countries, we speculators only care about where money can be made. And when it comes to China, using options to define our risks makes so much sense here.
One of the stocks highlighted is in the hot electronic vehicles space that has me interested.
Things are getting crazy out there. But this post isn't going to be about all the deadwood companies whose stocks are getting short squeezed. I'm looking at some of the biggest names showing signs of breaking out and this is something investors should not ignore. We got into Google (Alphabet) recently, and this might be a double-down of sorts, but now we're eyeing another mega cap.
One of our biggest winning trades of 2020 has been consolidating over the past month and is setting up for what looks like another high-intensity workout. While it would be wishful thinking to expect another complementary ride like the last one, I do think there is a way to capture some gains without having to push all out again!
Software names have been leading the charge in this bull market. And if stocks are setting up for another extension of this bull run, I expect a lot of the leading stocks will come from the software space.
Chatting with the team this morning, something that stuck out and we all agreed on is that the Megacaps are starting to show signs of re-asserting their dominance. And that it won't be a one-day event. Just look at NFLX, MSFT, AAPL, and the like and you'll likely see what we're seeing.
And the stock that stands out the most to us right now is Google $GOOG.
While scanning the latest All Star Charts Quarterly Playbook, one stock the team highlighted gave me a buzz of excitement. A household name found on seemingly every corner in America is breaking out and giving us a brief pullback to get in.
Synaptics $SYNA has been on a heck of run over the past several weeks as it recently thrust out of a nearly 5 month consolidation. Now resting just below all time highs, we're thinking there's another run higher in store. And today's trading action is just the kind of pullback I was looking for in order to get involved.
The first section dives deep into the US Stock Market and Market breadth, then we discuss the International Markets and specific Factors around the world. Next we go into U.S. Sectors and the best looking Industry Groups. In the second half of the report, we dive into the FICC space (Fixed Income, Commodities & Currencies) and their Intermarket Relationships. Finally we finish up with Cryptos, Options and overall Market Sentiment.
You can skip right to the trade ideas here if you'd like, or give the full report a read!
While checking out my list of liquid ETFs to get a feel for the markets this morning, it caught my eye that Gold is currently sporting the highest implied volatility (as measured by IVRank). I suppose it is no surprise given the amount of volatility we're seeing in Gold's distant, but currently more popular second cousin, cryptocurrencies.
You'd think Gold would be trading similarly.
However, looking at the daily chart, it appears $GLD is getting stuck in a range bounded by 184 on the upper end and 166 on the lower end.
I'm loving this new Young Aristocrats report the All Star Charts team as recently begun producing. There have been some great ideas here for me in helping my son build a long term investment portfolio of names with both price appreciation potential, but also steady and increasing dividend growth. Sometimes, traders forget this is what stocks are supposed to do!
Of course, while scrolling through the list, one of the names caught my attention for a tactical options trade. You can say I "discovered" this opportunity...
JC and I were chatting this morning about things we're seeing in the markets. The big thing we're observing is the breakout in financials. And a breakout in financials is rarely something one observes in a bear market, or a bull market that is in the process of "topping."
While it might be wise to wait for pullbacks in the financials space before entering any new trades there, we were able to take some risk off in a bullish calls trade in Morgan Stanley $MS we've been in since December 11.
But one stock that has JC's attention has been lulling investors to sleep over the past six months. And this is kind of ironic since one of their main product lines is Trojan -- which promotes anything but sleep ;)
