The Auto sector has been the flavor of the season. And by the looks of it, the season isn't over yet! We're here today to discuss another popular stock from this sector.
We retired our "Five Bull Market Barometers" in 2020 to make room for a new weekly post that's focused on the three most important charts for the week ahead.
This is that post, so let's jump into this week's edition.
This is one of our favorite bottom-up scans: Follow the Flow. In this note, we simply create a universe of stocks that experienced the most unusual options activity — either bullish or bearish, but not both.
We utilize options experts, both internally and through our partnership with The TradeXchange. Then, we dig through the level 2 details and do all the work upfront for our clients.
Our goal is to isolate only those options market splashes that represent levered and high-conviction, directional bets.
We also weed out hedging activity and ensure there are no offsetting trades that either neutralize or cap the risk on these unusual options trades.
We’ve had some great trades come out of this small-cap-focused column since we launched it back in 2020 and started rotating it with our flagship bottom-up scan, Under the Hood.
For the first year or so, we focused only on Russell 2000 stocks with a market cap between $1 and $2B.
That was fun, but we wanted to branch out a bit and allow some new stocks to find their way onto our list.
We expanded our universe to include some mid-caps.
To make the cut for our Minor Leaguers list, a company must have a market cap between $1 and $4B.
In bull markets you'll see a lot more stocks making new highs than new lows.
In the current market environment we're used to seeing the opposite.
Here's an update on how that's going. For those of you keeping track at home, we're now going on 34 consecutive weeks of more stocks making new lows than new highs:
If you've been following along over the years, you've heard me mention plenty of times that breadth thrusts tend to cluster together early on in market uptrends.
Well, a funny thing happened yesterday - we had our first 9-to-1 up volume day on the NYSE since May.
To quote Willie, "Stringing 2 of these together without an intervening 9-to-1 down day would be a very positive development".