7/2 Daily Plan: Many Stocks Have Been Completely Discarded in favor of Big Tech
Hey Folks -
Tomorrow is a half day at the NYSE and Nasdaq with stock exchanges closing at 1pm eastern standard time. The market also closes on July 4th for the holiday.
That means yesterday, today, and this upcoming Friday are the only full trading sessions of this week.
Doesn’t mean that there is lack of opportunity for action though!
Yesterday, I was eyeing craters on tech which were Intraday-Buyable. This morning I shared with Members the following context:
To watch Euro Stoxx 50 and the DAX for clues on U.S. market price action
Eye Euro indexes paring losses before U.S. opening bell, which would result in ES and NQ erasing pre-market losses due to their current high correlation
Eye 930am and 10am EST as times for pivot points in intraday direction.
When the Euro indexes had stopped falling and made Low of Day in the pre-market, NQ (Nasdaq-100) had begun to form a Higher-Low structure around 8am.
Exhibit 1: Euro Stoxx Stops Falling
Exhibit 2: NQ Stops Falling. Starts Rising.
That was my cue to get some long NQ exposure as my view is that the higher-time frame setup is still Up while intraday action could see some mild softness.
As we approached the opening bell, Europe had pared about half their losses. The U.S. setup began to strengthen into the opening bell.
And then off we went for a nice +100 point sequence on NQ!
This note will be start brainstorming together another list of ideas I’m eyeing / awaiting as setups form.
Most companies in the S&P 500 have absolutely terrible technical structures and look like they’re all getting sold to buy Big Tech.
This suggests that looking for opportunities outside of Big Tech/Semiconductors will require us to have strong patience for the best possible level for entry and a degree of nimbleness to exit the position at modest profits.
The equal weight S&P 500 ETF represents the average stock in the index and a good proxy for “breadth” in the market.
If market breadth can improve, we will have a next leg higher in the S&P.
Stocks that still have some semblance of margin of safety (in my opinion) discussed below.
Now that we’re in 2H 2024, I’ve dug into some opportunities that I’m looking at which I will lay out here.
I will have more emails that send out new ideas as they come out.
Big Picture Thinking:
Excluding the top 10 stocks in SPY and QQQ, Many stocks in the S&P 500 have very weak technical structures (in my opinion) that look like they’re on the cusp of rolling over. If this turns out to be a failed breakdown in RSP, then we could see a relief rally in breadth.
My belief is that China is tactically oversold, and I will hunt aggressively for opportunity there. China is still a Trade, so any 2-5% return on a individual stock bounce should be immediately managed (lift Stop/set a Trailing/Set a Limit).
The best sector to buy on intraday craters is tech QQQ ETF (NQ) as of this post.
Below, I’m going to share a list of stocks where I’m interested at key levels. Big Tech reports earnings in 2 weeks. I’ll have a separate update on FAAMG and Semis later.
If one wants tech exposure, go for QQQ ETF. I would love to guide on high flying tech names if/when appropriate.
U.S. Names:
Visa (DCF Conclusion Study Link here): We previously caught the sequence from 270 to 280. Now back at 265, it could again get back to 269-270. This can be a Market Order.
Mastercard (MA): We previously caught the sequence from 442 to 460. Now back at 440, it can get back to 447-448. This can be a Market Order.
XOP ETF Oil: Long-term XOP is going higher. This one is simple. Just buy and hold it.
Micron (DCF Conclusion Study Link here): Micron is now at fair value 130-135. If SOXX ETF can get another leg up, I think MU can get to 137-140. It’s now 132.
United Health (DCF Conclusion Study Link here): One can go Direct here at 496 and target 505-510 or wait for a Limit order at 480 and then go for a 480→495 sequence.
Any other name from the previous list, I still like. If there’s a name I’ve soured on, I’ll make it clear in a note. Retail stocks still continue going down, but I’m not selling.
China:
KWEB China ETF: KWEB now at 27 should be able to see 3-4% back to 28.3-28.5 once a bid in Hang Seng comes back in. Gains in China are not as sticky as they are in the U.S. so take them when they come.
BABA (DCF Conclusion Study Link): You’re rolling your eyes on any mention of BABA at this point unless you’re a sniper trader. Hey, it did get to 77-79 when it woke up last time. This time, from 73, it can get to 75-77 If you see 75-77, lift Stops/consider ways to protect the position.
Li: China EV stocks have been disrespected, destroyed, and discarded. But the sector isn’t going to 0. Sell Puts on Li at Strike 15 with Jan 2025 expiry as that represents all-time lows. Owning 100 shares at 15 is likely to result in at least 8-10% ROI for a trade.
TCOM: Let’s say you’ve made profits from TCOM in the past. I now view TCOM as a reload area between 43 and 47 (43 being most ideal). Revisiting the 50 area is something I view as high probability given a few months. Chinese consumers still love to travel, recession or not.
PDD (DCF Conclusion Study Link): Still Like PDD. No reason to abandon it. We’ve caught numerous bullish sequences on it, namely the big one from 110 to 165. Now that it’s retraced back to 130ish, I continue to hold PDD. Willing to buy more if it gets to 120 and 110. Why? Because it’ll see 150 again in the future (my opinion). Timing is uncertain with China now that Trump is gaining momentum. But Pinduoduo is best in class for China names.
Overall, I’d really like to see a broad market dip to reset the risk/reward.
The setups today are scarcer and forcing me to be more conservative with name-selection.
There will be an abundance of ideas once prices come down. We do need to err on the side of conservatism with name-selection, theme, and targets because chasing at the highs is never going to result in strong sustainable alpha.
-Larry
Important Links (Organized DCF Conclusion Studies By Indices)
Semiconductor SOXX ETF Top Stocks DCF Conclusion Studies (Newly Added - will add the other SOXX names in here shortly): https://larrycheung.substack.com/t/soxx-etf-top-10-dcfs
DOW Top Stocks DCF Conclusion Studies:
https://larrycheung.substack.com/t/dow-etf-top-10-dcfs
QQQ ETF Top Stocks DCF Conclusion Studies: https://larrycheung.substack.com/t/qqq-etf-top-10-dcfs
SPY ETF Top Stocks DCF Conclusion Studies: https://larrycheung.substack.com/t/spy-etf-top-10-dcfs
Conclusion Table on Dow and QQQ ETF Stocks
Link to DCF Full Archive: https://larrycheung.substack.com/t/dcf-modeling-fundamental-analysis
Link to Educational Guides: https://larrycheung.substack.com/t/educational-guides
Q&A: Why I focus on NQ as a primary market.
My focus: I now focus about 95% of my attention on price action when it comes to the indices. I would strongly encourage spending lots of “screen time” for folks who want to navigate the market.
Note: I publish Monday-Thursday. These are my opinions based on my own research and my model may or may not aligned to the market’s thinking. I have to repeat this in all my notes as there is an element of the unknown in today’s strange macro environment.
Disclaimer: My investment community is not investment, financial, or trading advice, but for educational informational purposes only. I am happy to share my personal opinions which I provide as my personal journal. Trading of any kind of securities involves a lot of risk. No guarantee of any profit whatsoever is made. Investors may lose everything they have. Practice extreme caution. No profit is guaranteed whatsoever, You assume the entire cost and risk of any trading or investing activities you choose to undertake. You are solely responsible for making your own investment decisions. Owners/authors of this publication are NOT registered as securities broker-dealers or investment advisors either with the U.S. SEC, CFTC or with any other securities/regulatory authority. Make sure to consult with a registered investment advisor, broker-dealer, and/or financial advisor.