May Strat Stock Selection: Eyeing signs of a Further Meltup in Specific Stocks before the Ultimate Meltdown
Strategy Note: Stock-Selection To Trade The Upside Remaining In this Market
Note: I am confident that in this upcoming Recession, we are going to have our best year ever. Use every day to continue advancing the skills of Trading & Investing, and these skills will pay you handsomely in the months to come.
Members,
Welcome to all the new members inside our Community who are joining us during this pivotal market moment.
The debate on whether there will be a Recession is becoming more and more intense as we progress through earnings season.
However, in my opinion, it doesn’t really matter whether we enter a recession or not. This is because I will find opportunities to target Upside and brief moments to target Downside.
As we enter a more uncertain environment, I am going to start honing on a theme inside our Community to help the folks: not only will I provide Research, I will look to provide Actionable Strat for our good people.
Folks know that I am proactive and not reactive.
As the economy gets tougher, I hope to have my Strategy help people nurture and carve out a secondary source of income. Slowly and steadily.
In a latest tactical note to members, I again defended American Express and State Street at key levels shown below. American Express saw a nice bounce from 155 into 161 and State Street saw a nice recovery from 69 into 72.
We made no attempt to discuss FRC which continued to make headlines to lure retail investors to attempt to “invest” in this name.
We also defended China at the swing lows with BABA 82, BIDU 118, and KWEB 27.
Now for me personally, I transact in the same ideas discussed, and small wins add up nicely over time.
As the market becomes more volatile and less stable as recession narratives hit the tape, I am eager to share my observations on names/themes that can make upside or downside moves.
Here’s a real example of targeting Downside on markets (and not overstaying the welcome):
We all know that SPY ETF has ripped higher and that anyone who has overstayed a short position has been greatly challenged by this rising tide.
In mid-April, I saw an opportunity to short-sell Calls against SPY as I discussed with members that many of the signals I follow suggested a pullback BEFORE MSFT/META/GOOG earnings.
When we finally got the rare 2 day selloff from this week to 4050 on the SPX, I immediately closed the position.
Had I even waited one day too late, the SPX rally caused by MSFT/META/GOOG would have taken this position out.
The lesson here is that Traders & Investors need to prioritize certainty over size of gains in this market. When markets are directionless, it’s better to secure wins rather than hold out for the “big one.”
The mindset that has greatly helped me during this environment is the following:
Stay flexible
Size appropriately
Be open minded
Accept that things can change without much warning
Like I often say, smart Bears and Bulls can find opportunities in any market.
The “big one” will happen for Investors in a trending market.
But does this Chart below look like a trending market to you to take large directional positions? For me, I don’t think so. At least not yet.
For now, this is a trading battleground.
Before we get into my commentary, I want to refresh an expectation on who my Investment Community is now designed for:
Traders who take multi-day/week positions (sometimes known as Swing Trading)
Example: Banking stocks mentioned above for tactical wins.
Intermediate-Term Investors who take multi-month positions up to 6 months
Example: Our opinion on Dollar Tree, Walmart, and Dollar General in early 2023.
Long-Term investors who have a preference to Buy and Hold
Example: Our opinion on Trip.com from Fall 2022 before China reopening. It traded 23 at the time.
My posting frequency (on average now once per week - or more if mkt conditions are extremely volatile) should be a clear indication of the types of investors I serve.
In this note, I plan to discuss several things in the following order:
A Selected Holistic Overview of Earnings Season via Management Commentary
Stocks/Themes that I am looking to trade the Long side to target Upside
Stocks/Themes that I am now watching to potentially target Downside
So, is there a further Meltup coming before the big Meltdown? How do we trade and invest in this outcome?