From the desk of Steve Strazza @sstrazza

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.

From the desk of Steve Strazza @Sstrazza

Welcome to our latest “Minor Leaguers” report.

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.

We recently decided to expand our universe to include some mid-caps…

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.

The way we did this is simple…

From the desk of Steve Strazza @Sstrazza

Our Top 10 Charts Report was just published.

In this weekly note, we highlight 10 of the most important charts or themes we're currently seeing in asset classes around the world.

Testing Former Resistance

We've been pounding the table on the importance of defending the 2018 highs for a long time. These levels represent when risk assets peaked four years ago. The chart below shows the Value Line Geometric Index pulling back to its 2018 highs. This index measures the median stock performance and is an excellent way to view how the overall market is doing. Right now, it’s telling us that the average stock has endured significant damage and has erased almost all of the progress from recent years. Bulls really want to see these 2018 highs hold. If they do, the bias is still higher and the structural trend is intact. But if this level is breached, it will be a major bearish development for the broader market and risk assets in general.

For a while now PSU Banks have been performing better than their counterparts-Private Banks. We have another name popping up from this sector.

Let's take a look at the trade for this week!

It's much better living for stock market bulls if we're above those October lows.

Otherwise, I think you're just living on a prayer.

And why the October lows?

That's the last line of defense for the world's most important Indexes.

We have observed significant drawdowns across the market in the last two weeks.
Nifty 50 faced resistance at its October 2021 high which coincides with a critical Fibonacci extension. This time the index marked a lower high.

According to Dow Theory, the Primary trend is intact. Why is that? Because a lower highs and lower low would mark a negative trend. As long as Nifty50 sustains above 16,500, we could just as well see a market that consolidates.

From the desk of Steven Strazza @Sstrazza and Ian Culley @Ianculley

If you’re searching for strength, look no further than commodities!

With risk assets coming under increasing pressure, the strength from commodities and commodity-related stocks stands out that much more. Except for rates, it’s the only thing the bulls have left.

When we look beneath the surface, so far, the story centers around energy – whether we’re talking about crude oil printing fresh seven-year highs or Chevron Corp. $CVX breaking out of a multi-year base to new all-time highs.

Energy is -- and has been --  re-asserting itself as the next dominant leadership group. 

But unlike the stock market -- where energy is the only group working -- we’re seeing broad participation within the commodities market.

In fact, there are still plenty of pockets of strength we want to be buying.

Today, we’re going to highlight one of those areas by outlining a trade setup in soybean oil.

Let’s dive in!

From the desk of Steve Strazza @Sstrazza

Our Hall of Famers list is composed of the 150 largest US-based stocks.

These stocks range from the mega-cap growth behemoths like Apple and Microsoft – with market caps in excess of $2T – to some of the new-age large-cap disruptors such as Moderna, Square, and Snap.

It has all the big names and more.

It doesn’t include ADRs or any stock not domiciled in the US. But don’t worry; we developed a separate universe for that which you can check out here.

The Hall of Famers is simple.

We take our list of 150 names and then apply our technical filters so the strongest stocks with the most momentum rise to the top.

Let’s dive right in and check out what these big boys are up to.

Here’s this week’s list:

We debuted a new scan recently- The Outperformers.

The Outperformers is our newest scan that pinpoints the very best stocks in the market. It’s the fastest, easiest way to find quality names that are primed for major moves.

The goal is that as the market rally progresses, the sector rotation within the market will reflect in this scan. So while our Top/Down Analysis helps us with the broader view of the market, this Bottom/Up scan makes sure that we catch the slightest change in sentiment.

Buying stocks below overhead supply has always been a bad idea for me.

I don't know about you, but it's usually been nothing but frustration in my experiences.

You see, that's when stocks go down in price. When they're being overwhelmed by selling pressure.

So as I've grown older I've gotten much better at avoiding situations where I own things below resistance.

Trust me, you go through it enough and you eventually stop.

The bottom line is this: If the Nasdaq100 is below 350, there's nothing to talk about from the long side.

From the desk of Steve Strazza @Sstrazza

When investing in the stock market, we always want to approach it as a market of stocks.

Regardless of the environment, there are always stocks showing leadership and trending higher.

We may have to look harder to identify them depending on current market conditions… but there are always stocks that are going up.

The same can be said for weak stocks. Regardless of the environment, there are always stocks that are going down, too. 

We already have multiple scans focusing on stocks making all-time highs, such as Hall of Famers, Minor Leaguers, and the 2 to 100 Club. We filter these universes for stocks that are exhibiting the best momentum and relative strength characteristics. 

Clearly, we spend a lot of time identifying and writing about leading stocks every week, via multiple reports. Now, we’re also highlighting lagging stocks on a recurring basis.

Welcome to the Short Report.

To some investors, they might look at the market and say, "Hey on Monday the market was up a little, and today is was down a little. NBD".

And they won't be wrong.

In fact, Charlie Dow always preached that closing prices were the most important prices. And that was 130+ years ago.

But for those of us who understand the current circumstances. For those of us who do watch the market internals and intraday action, we wouldn't come to that sort of simple conclusion that easily.

In fact, we'd probably disagree with the, Up a little Monday and Down a little Tuesday idea.

There's much more to it than that.