We packed our latest Under the Hood report with several choice setups displaying strong relative strength, beautiful bases, and even a couple of names making bullish moves at key risk levels. There were a ton of potential long setups with risk skewed to the upside on this week's list.
The only problem with this is that the direction of the underlying market was (and frankly, still is) largely in question.
Today, the broader market followed through with strong gains to the upside, supporting our view that a tradeable low has been made.
With this as our backdrop, we want to share three more setups from our most recent "Under The Hood" list as additional vehicles to express our thesis more aggressively on the long side.
Here's the table from this past week's report.
First up is Rollins Inc. $ROL, which specializes in pest management and sanitation services for the food industry....
Welcome to this week's edition of Louis' Look, where I walk you through what I'm learning every week as an intern at All Star Charts. Last week I discussed how information is most valuable when it remains hidden; you can read the post here. Today, I want to explore how the market continually reinforces the necessity of a game plan.
A sexy name that has been in vogue since the coronavirus pandemic sprang up is showing signs of breaking out again from a high consolidation pattern. And unless you've been hiding under a rock the past 6 months, you've probably used their product.
We retired our "Five Bull Market Barometers" in mid-July 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 to our "Under The Hood" column for the week ended September 25, 2020.
What we do 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.
Whether we're measuring increasing interest based on large institutional purchases, unusual options activity, or simply our proprietary lists of trending tickers... there is a lot of overlap.
The bottom line is there are a million ways to skin this cat. Relying on our entire arsenal of data makes us confident that we're producing the best list each week and gives us more optionality in terms of finding the most favorable trade setups for our clients.
Here is this week's list of the most popular stocks. Now, let's see what's...
I got a last minute invite to pop on BNN Bloomberg yesterday to chat about the ongoing uptrend in the stock market. While we've seen some stocks and sectors correcting this month, others have held up very well. We want to focus on the ones that did NOT correct, or barely corrected, and are already pressing up against new highs.
Something we've been working on internally this year is using various bottoms-up tools and scans to complement our top-down approach. One way we’re doing this is by identifying 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 and into mid-cap status (over $2B) then they enter our radar.
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. Some of the best-performers in recent decades – from the likes of Priceline, Amazon, Netflix, and Salesforce, to a myriad of others… they all would have been on this list at some point.
When you look at the stocks in our table you will notice we are only focused on technology and growth industry groups such as Software, Semiconductors, Online Retail, Solar, and more.
Then as any good technician, we are filtering the list by those names that are closest to 52-week highs. This allows the cream of these strongest groups to rise to the top and makes our job easy to identify technical breakouts...
One of the primary focuses was the historic rate of change since the March lows and the historical data that suggested forward returns are worse than average following these types of readings.
I'm pretty charged up about another opportunity from the Under The Hood report that is setting up today.
If the markets stabilize soon, this feels like one of the names due for a pop. And thanks to the "Robinhood" options trading speculators, there is plenty of juice in out-of-the-money calls for us to take advantage of to leverage into a good trade.
In June we outlined that the "Reflation Trade" indicators we track had picked up significantly after reaching levels of long-term support in March.
Since then that thesis has played out and we've been taking advantage of it in Metals, cyclical stock market sectors like Materials and Industrials, and even Agricultural Commodities which managed to break out.
But...after a nice run many of these assets and intermarket relationships have pulled back over the last month or so...begging the question "is the reflation thesis over?"
Luckily for us, we only need one chart to discuss what's happening and how we're approaching it.