Welcome back to our latest "Under The Hood" column where we'll cover all the action for the week ended October 29, 2021. This report is published bi-weekly and rotated on-and-off with our "Minor Leaguers" column.
What we do here is analyze the most popular stocks during the week and find opportunities to either join in and ride these momentum names higher, or fade the crowd and bet against them.
We use a variety of sources to generate the list of most popular names. There are so many new data sources available that all we need to do is organize and curate them in a way that shows us exactly what we want: A list of stocks that are seeing an unusual increase in investor interest.
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. What remains is a list of stocks that large financial institutions are putting big money behind… and they’re doing so for one reason only: because they think the stock is about to move in their direction and make them a pretty penny.
This week we’re looking at a long setup in the Infrastructure sector. The market has been quite selective over the past two weeks but we saw strength come through in pockets. Here is one such example.
If you say 20% price appreciation it's probably because you watch too much basic cable.
Are a majority of stocks going higher or are a majority of stocks going lower?
That's how we determine bull and bear markets.
And by the way, individual stocks do NOT have bull and bear markets. The concept of a bull or bear market is a broad market description, not reserved for individual stocks.
If anyone ever tells you that an arbitrary 10% move is a "correction" and 20% is a bull/bear market, then you know they can't be trusted. It's that simple. Move on.
So if you're interested in the way markets actually work, as of earlier this month, when breadth improved, we proclaimed that the bull market was finally back, after the last one came to an end in February.
Our International Hall of Famers list is composed of the 50 largest US-listed international stocks, or ADRs.
These stocks range from some well-known mega-cap multinationals such as Toyota Motor and Royal Dutch Shell to some large-cap global disruptors such as Sea Ltd and Shopify.
It’s got all the big names and more--but only those that are based outside the US. You can find all the largest US stocks on our original Hall of Famers list.
The beauty of these scans is really in their simplicity.
We take the 50 largest names each week and then apply technical filters in a way that the strongest stocks with the most momentum rise to the top.
Let’s dive in and take a look at some of the most important stocks from around the world.
From the desk of Steven Strazza @Sstrazza and Grant Hawkridge @granthawkridge
While breadth has improved in recent weeks and months, the bulls still have their work cut out for them.
When we consider all our breadth indicators in aggregate, the evidence remains mixed. What else is new!? It’s been that way for the majority of this year.
Many of the major indexes made new all-time highs this week. Meanwhile, some advance-decline lines are moving higher, but others are moving lower. Some are at the top of their range, but others are at the bottom of theirs.
The advance-decline line measures stock market breadth based on cumulative net advances. In other words, it takes the number of advancing stocks on a given day and subtracts the number of declining stocks. That number is then added to the previous day’s value, creating a cumulative advance-decline line.
A/D line divergences occur when price is making new highs and the A/D line is NOT.
Today, we are here to discuss the areas of the market where despite today's correction, we saw some strength.
Using relative strength charts for analysis is a great tool to have. But there is another way to look at it. When the market is correcting and certain stocks are going up, that is information. That is relative strength. And vice versa of course.
So let's take a look at the sectors that were displaying strength.
We use a wide variety of bottom-up tools and scans to complement our top-down approach. This makes it near impossible for us to miss out on favorable trading opportunities.
One way we do this is by identifying the strongest growth stocks as they climb the market-cap ladder from small- to mid- to large- and, ultimately, to mega-cap status (over $200B).
Once they graduate from small-cap to mid-cap status (over $2B), they come on our radar. Likewise, when they surpass the roughly $30B mark, they roll off our list.
But the scan doesn’t just end there. We only want to look at the strongest growth industries in the market, as that is typically where these potential 50-baggers come from.
We debuted a new scan recently which goes by the name- All Star Momentum.
All Star Momentum is a brand new scan that pinpoints the very best stocks in the market. This time around, we have incorporated our stock universe of Nifty 500 as the base. Among the 500 stocks that we follow, this scan will pump out names that are most likely to generate great returns.
While we go through our lists of sectors and stocks on a weekly basis, we thought of launching a product that would highlight the names that are the strongest performers in our universe and those that are primed for an explosive move.
Just like The Outperformers scan, this is a list of stocks belonging to the sectors that display relative strength in the market at any given point in time. Since sector rotation is the lifeblood of a bull market, we will be ahead of the curve before the gears keep shifting.
The last couple of weeks have been quite a ride in the market.
If you've been following actively, then you probably saw the selling pressure come through in several sectors. As sectors rotate within the existing bull market, strengths and weaknesses will keep shifting hands.
Today we're here to take a look at the weak areas of the market and the levels they'd have to move past, to get out of that weakness.
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. What remains is a list of stocks that large financial institutions are putting big money behind… and they’re doing so for one reason only: because they think the stock is about to move in their direction and make them a pretty penny.
