While I was away, volatility had a moment. And it's still hanging at pretty high levels, especially in tech stocks.

In the Technology sector ETF $XLK, we're seeing the highest implied volatility that we've experienced all year:

And with the chart of $XLK forming a range...

...this feels like a good opportunity to play for volatility mean reversion.

Here's the Play:

In today's episode of The Flow Show, me and Steve Strazza talk about the uniquely interesting market we currently find ourselves in, and we delve into a sector that appears to be making a long overdue turn higher, and a stock within the sector that is positioned for a potentially monster breakout.

Here's the big picture setup of Viking Therapeutics $VKTX:

When Michael Nauss first sat down at a trading desk, his computer had a keyboard and a screen. But no mouse.

And his screen displayed an order book. But no charts.

Thus began his career as a scalper working the order book, who paid no attention at all to trends or technical analysis. He was simply trying to find spots to buy ahead of large buyers and flip the position out for a quick couple of ticks. Do this a couple hundred times per trading session and perhaps he’d have a successful day.

This was all part of Michael’s journey of learning to walk before he could run. And it is a mantra that sticks with him to this day as he himself continues to learn and helps many others learn the craft of trading.

Michael says: “Learning is often about “UN” learning.“ 

People are frequently drawn to trading by a social media personality or a brokerage advertisement, and they are like moths to the flame of fast riches and early retirement. Then they lose.

The All Star Charts analyst team continues to believe that the industrial sector will be one of the leading areas to lift the market higher as sector rotation works its magic to keep this bull market going.

And the chart of Caterpillar $CAT looks like a potential failed top in the making:

If we're right, $CAT could quickly recapture all-time highs north of $382 per share and then the sky's the limit from there.

The bull market is on, baby!

But if we expect it to continue, then we're going to need to see some rotation into some new sectors to bring fresh cash into the market and keep the wave going.

One sector that my Analysts feel has the potential to pick up the slack is Precious Metals. And the name that Steve Strazza and I discussed on today's Flow Show has the potential to ride the sector wave as well as play catch up to its big brother Gold.

Here's a chart of Wheaton Metals Corp $WPM:

File this post in your "Trading Is Hard" file folder.

Back on May 29th, I published a bearish trade idea in Nike $NKE.

Here’s what I said about it:

[$NKE] appears to be hanging on the precipice of a potentially large fall. The company will be announcing earnings [in late June] and I think that might be the final nail in the coffin to send this stock lower (if not sooner).

In today's Flow Show, Steve Strazza served up the opportunity that is revealing itself in the financials space.

So we looked for some vehicles to express our bullish thesis, while being mindful of upcoming earnings releases that will be kicking of earnings season in less than two weeks.

This is no time to enter trades with undefined risk. But if we can minimize the volatility, it would be best to consider those options.

We think we have just the right idea in Morgan Stanley.

Here's a one-year chart of $MS:

New issue? check

Near all-time highs? check

High Short Interest? check

Today's trade has all the ingredients for a monster breakout. This of course is no guarantee of a win, but if we're right, the payoff will be incredibly worth the risk.

It's a bull market. No question. But that doesn't change the fact that I'd still like to add some downside diversification to my portfolio in the weakest names the stock market has to offer, just in case.

Today's short trade candidate appears to be hanging on the precipice of a potentially swift and brutal fall. This is as good an opportunity as I can see to help protect my portfolio in the event we see a market pullback.

Born with an entrepreneurial spirit and temperament, Michael grew up in a working-class community full of blue-collar, salt-of-the-earth people who worked honest days for an honest wage. And it rubbed off on him. How could it not? 

In order not to be a financial burden on his family, he knew he needed to get out there and hustle. He shoveled snow, mowed lawns, caddied, and worked as a server and waiter. He worked 15 hours a week while in college so that he could earn a degree from Columbia University.

While his peers were coasting through school with trust fund cash bankrolling their adventures, the only free time Michael had was spent in the library, reading books, writing papers, and repeating.

His blue-collar work ethic paid off to this point. But making the transition into the “white-collar” world of finance wasn’t easy.

We’re taking what the market is giving us.

Recently, some of the best opportunities have been in the mega-cap space. Look at recent gains in Amazon, Google, Microsoft, and Apple.

People like to complain that “all” the gains are being concentrated in fewer and fewer names at the top of the pyramid. Why is that a bad thing? We can trade those names, can’t we? And why wouldn’t we?

In the past week, I’ve added more exposure in my portfolio to this area.

Related to the tail (big caps) that wags the dog (the market), isn’t this true of our own history of trades?

Don’t our small handful of large winners account for the lion’s share of our total gains? And don’t 80% (or more) of the rest just result in a net wash?

Kind of like the S&P 500, no?

Don’t hate. Participate.

We discuss all this and more in this week’s Jam Session: