This week we’re looking at a long setup in the Infrastructure sector. Nifty Infra continues to display strength across different time frames. One of the stocks that stands out from this sector has been featured here.
From the desk of Steve Strazza @Sstrazza and Grant Hawkridge @granthawkridge
Bond yields are breaking higher across the board. So, it’s essential to understand that some stocks do better amid rising rates, while others prosper in markets with low growth and low yields.
For instance, cyclical and value stocks should outperform in a rising rate environment.
Meanwhile, growth, tech stocks, and any long-duration assets (bonds) typically lag. They become less attractive during periods where more economically sensitive areas offer more appealing opportunities.
And we’re already seeing this rotation into the rising rate beneficiaries, while growth stocks have come under pressure in recent weeks.
In today’s post, we’ll look at market internals of these groups to see what they suggest about recent price action.
We can compare growth to cyclicals by analyzing the ratio of Large-Cap Tech $XLK to Energy $XLE.
And we can further illustrate this growth-versus-value relationship through a variety of derivatives. They all tell similar stories.
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.
As many of you know, something we've been working on internally is using various bottom-up tools and scans to complement our top-down approach. It's really been working for us!
One way we're doing 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.
You know me, I'm skeptical of everything and everyone.
You have to earn my trust.
And if there's one indicator in this market that has earned my trust and attention over the years, it's the relationship between Consumer Staples and the rest of the market. More specifically, Staples relative to Consumer Discretionary stocks.
You see, when portfolio managers believe stocks are going higher, they are going to overweight Consumer Discretionary stocks. These are things like Retailers, Automobiles and Housing stocks. Areas where "Consumers" spend their "Discretionary" Income.
Consumer Staples, on the other hand, are things "Consumers" are going to spend money on regardless of economic conditions, therefore being "Staples". Think Toothpaste, Laundry Detergent, Beer, Soda and Cigarettes.
In the week gone by, the Realty sector performed exceedingly well. We added the index to our Three Charts for the Week Ahead post as well. The reason for that was that the index constituents are trading at crucial levels.
With the stocks jumping up above their resistances, we thought a post should be dedicated to the Realty sector.
So let's take a look at some interesting ideas.
Realty has been moving sideways for a while after breaching its 2018 highs. In the week gone by, we witnessed a strong move in the index. While the index is trading close to its overhead resistance, the strong momentum could take the price higher.
But about relative strength? Do you reckon there's something there?
We’ve already had some great trades come out of this small-cap-focused column since we launched it late last year and started rotating it with our flagship bottoms-up scan, “Under The Hood.”
We recently decided to expand our universe to include some mid-caps….
For about a year now, we’ve focused only on Russell 2000 stocks with a market cap between $1 and $2B. That was fun, but we think it’s time we branch out a bit and allow some new stocks to find their way onto our list.
The way we’re doing this is simple…
To make the cut for our new Minor Leaguers list, a company must have a market cap between $1 and $4B. And it doesn’t have to be a Russell component–it can be any US-listed equity. With participation expanding around the globe, we want all those ADRs in our universe.
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 Realty sector. Nifty Realty broke out of an 11-year base and has picked up momentum. At this time we're looking for an interesting idea in this space.
We retired our "Five Bull Market Barometers" in mid-July last year 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.
Our Hall of Famers list is composed of the 100 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’s got all the big names and more.
It doesn’t include ADRs or any stock not domiciled in the US. But don’t worry; we’re developing a separate universe for that, and we’ll be sharing it with you soon.
So, The Hall of Famers is easy.
We simply take our list of 100 names and then apply our technical filters in a way that 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.
