It's all about knowing what environment we're in and adjusting our tools and strategies accordingly. In environments like these, buying into breakouts is a dangerous game.
I'm away for a few days enjoying Wisconsin’s Door County Peninsula. It's been great to camp and explore in what is widely known as “the Cape Cod of the Midwest.”
I'll be back Thursday for our regularly scheduled Town Hall but in the mean time, here's a quick look at our latest Bull Market Re-Birth Checklist.
We retired our "Five Bull Market Barometers" in 2020 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.
Welcome back to our latest Under the Hood report, where we'll cover all the action for the week ended July 8, 2022. This report is published bi-weekly and rotated our Minor Leaguers report.
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...