Welcome back to Under the Hood, where we'll cover all the action for the two weeks ended December 6, 2024. This report is published bi-weekly, in rotation with The Minor Leaguers.
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.
As part of an educational effort, I've unlocked this previous paywalled post so anyone can access.
I've flipped my short-term bias (that looks out weeks) to bearish as the three largest tokens in the asset class test critical resistance levels. Ethereum has been the exception in the group over the last few weeks, but even now it looks set up to consolidate its gains.
If Ethereum, the one token that has helped support market breadth over the last two weeks, begins to pause, it could set the asset class up for a few weeks of indiscriminate selling. What would prove me wrong is seeing all three of these assets complete successful breakouts.
Regardless of whether sellers step in here, I think this is a good area to pay ourselves and take some profits off the table. It is prudent trading/investing to scale out of positions as the market works higher.
I think if we see any meaningful weakness here in the coming weeks, it will present itself as a great buying opportunity.
But in the interim, I think the best approach is to be patient.
Speculative technology stocks have been mooning in recent weeks. Many of these stocks have rallied over 100% in the last month alone.
Today, we're outlining a technology stock that rallied 700% in half a year after pivoting from blockchain infrastructure to high-performance computing. In other words, they pivoted from crypto to AI.
After consolidating for over a year, the stock put the finishing touches on a textbook basing pattern last week and is beginning a fresh leg higher.
But it's not just the chart that has us excited... the short sellers have gotten way too greedy, and we're going to exploit their weakness.
According to the National Retail Federation, 197 million Americans shopped over the 5 days from Thanksgiving weekend through Cyber Monday. There are only216 million Americans over 15 years old in the country. Even allowing for double-counting, that’s a good turn-out for a fake holiday with unexceptional discounts.
Who won?
Well according to our Retail and Consumer expert Jeff Macke,
"Abercrombie won the mall. Walmart won Discount. William Sonoma and Dick’s Sporting Goods have won Home and Sports so hard they’re running out of chains to compete with. Amazon is winning the world and barely seems to care about (or profit from) retail at all."
The S&P500, Nasdaq100 and Global100 Index each made new all-time highs yesterday.
This is among many other stocks, sectors and indexes around the world that are also making new cycle highs.
We've been buying stocks very aggressively, of course, because historically it pays much better to own stocks during bull markets vs doing the alternative.
We've gone back and done the work. It's just math.
Those investors with too much cash, or too few stocks in their portfolios, have been paying the consequences.
The pushback I get, and have been getting over the past couple of years, tends to revolve around valuation and how stocks are "too expensive".
I find that to be a hilarious reason to avoid buying stocks during a bull market.
Common excuses for fighting this powerful trend include, but are not limited to:
Seven of the ten biggest-ever options volume days have been in 2024, with the other three in 2023, according to this report in Traders Magazine.
It goes on to say: "...numbers that would be considered spikes ten or even five years ago are more like a current-day new normal."
I wouldn't have it any other way.
The growing popularity of options trading makes sense to me. No other product offers so much dynamic flexibility for traders to craft unique ways to express market opinions.
No other product gives us the ability to define our risks absolutely, while positioning ourselves with leverage to participate in theoretically unlimited gains.
We've seen some fast moving breakouts during the recent stage of this bull market cycle.
I'm not calling for the bull market to end. In fact, I think it continues for a while longer. But its highly likely the pace of prices increases slows.
With this in mind, today's trade is the perfect kind of play for such an environment
I was wondering myself. So I asked Retail and Consumer expert Jeff Macke to shoot over some results.
His answer?
"Abercrombie won the mall. Walmart won Discount. William Sonoma and Dick’s Sporting Goods have won Home and Sports so hard they’re running out of chains to compete with. Amazon is winning the world and barely seems to care about (or profit from) retail at all."
Man is he good.
Look at this chart of Abercrombie breaking out of this multi-decade base to new all-time highs:
Our International Hall of Famers list is composed of the 100 largest US-listed international stocks, or ADRs.
We've also sprinkled in some of the largest ADRs from countries that did not make the market cap cut.
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 largest names each week and then apply technical filters in a way that the strongest stocks with the most momentum rise to the top.
Based on the market environment, we can also flip the scan on its head and filter for weakness.
Let's dive in and take a look at some of the most important stocks from around the world.
