Updated: Jan 16
Before US Stocks open on Tuesday, traders must understand the macro environment in order to position themselves for profit. While crypto has been running and risk is turned [on] for the time being, we must pay close attention to global markets, earnings reports and most importantly, futures, to set the tone moving forward this week.
Fear & Greed Index
(Yesterday vs Today)
(7 Point Swing)
Swinging this gap between Fear & Greed could offer a lucrative entry / exit strategy for a wide eyed trader, but get caught in a bull-trap, and forever hold your peace.
These "gap and go" opportunities reiterate the need for cash on hand or "dry-powder", as well as the ability to be quick on the trigger in this "John Wayne Market". Everything is more connected now than it ever been. China stocks are merely range bound at this point and unless housing, PPI, bank and airline numbers print, hopes of a follow the leader rally dissipate. I'm no "Perma-Bear" but this new bull market euphoria can be replaced by recession fears on a dime. Now is usually when Jamie Dimon says something from left field and it shakes the entire market so just be cautious.
Earnings season is back and banks will be kicking it off, here's the most anticipated earnings release for the week beginning January 16, 2023
Source : Earnings Whispers
When it comes to bank earnings, I've got my money on the roads less traveled by this time around. My top 3 winners in financials are Wells Fargo ($WFC) , Citizens ($CZBS) and CF Bankshares ($CFBK) (with the Dragonfly Doji). Also have $SOFI earnings on the 30th so eyeing these $5.50 or ideally the $5.00 OTM calls if we can pull back enough. I've played gaps on $SOFI earnings in the past and frequent their options chain enough so I'd know a good deal on contracts if I saw one. Make sure you're following my Twitter for the alert. https://twitter.com/TheBullishShark
We'll also have some airlines reporting this week. I don't typically fly with airline stocks but if I did, I'd have my money on American Airlines ($AAL). They just hiked their revenue outlook last week and call premium shot up to $8.5m, while total put premium for the day couldn't break $4.5m so the flow is 66% bullish. If the numbers start coming in strong then the bullish sentiment will subsequently hold. We also have some housing numbers coming out this week as well as PPI data.
Here is another scenario based off volatility, which is currently down to lows of 18. Every time the VIX Index ($VIX) went down to 18 over the past 12 months- there was a peak in the S&P 500 and markets subsequently reversed. That's why if earnings season gets off to a rocky start and/or China stocks begin to lose footing (200-day SMA), the market could flip along with it on a dime.
$SPX / $VIX Source : Market Radar / Bloomberg
Regardless of what history is saying here, you must position yourself for profit to the upside as well as profit to the downside. Although the Bullish Shark trades the VIX , this strategy is not recommended for beginners and timing these sort've trades is virtually impossible but I've started a position in 2X Long Vix Futures ($UVIX). While $UVIX is the instrument of choice, that's not to say I'm adverse to $VXX & $UVXY. All charts worth taking a look at more than ever this week.
Aside from VIX plays but in the same ballpark, I'm scaling back into $SQQQ (ProShares UltraPro Short QQQ)- A rather aggressive play on large-cap tech as it attempts to run inverse (at -3x exposure) to the NASDAQ-100. So while $NDX is -24.12% on the 1Y, $SQQQ is +27.60% on the 1Y. Without going too in depth on beta slippage, know that even if the Nasdaq turns bearish, there's no guarantee $SQQQ will print. Picture $SQQQ as a loner vehicle with a high ticket price that was manufactured to depreciate over time and it costs a lot to maintain. But, this vehicle performs considerably well when rubber hits the road, and in any sort've black swan event- it has 3x the horsepower you'd anticipated. Timing is everything, if the $NDX goes +3.67% again this week then $SQQQ can go another -10.30% just as fast.
Gold has been on a rampage since the beginning of November, that coupled with the New Year Pump- is too much too soon. Using the SPDR Gold Trust ($GLD) chart as an example. If price action was sustainable this month like it was in December, you could expect the trend to continue. Instead, the first two weeks of 2023 look like early October's pump & dump or November's dip & rip. In each of these instances, prices got carried away and short interest was tipped off on a noise complaint.
$GLD Short Interest
Because of this, I'd wanna see some sort've consolidation before putting my money on gold right now. I like $GLD and VanEck Gold Miners $GDX as longs in the retirement portfolio but I'm unapologetically an equities guy at heart. I need short term volatility and midterm dividends, therefore, my precious metal pride and joy plays for 2023 are still : Yamana Gold ($AUY) & Wheaton Precious Metals ($WPM).
I've also noticed whales coming from out of the woodwork EOD on Friday loading the boat on $LYFT, which gave the stock a nice face lyft on the chart. I'm now eyeing the rideshare king for follow through this week to the upside, weather permitting.
If broader markets hold and IV stays down then the $15 strike calls are added to my to-do list. My lifetime P/L on $LYFT is resume worthy and I'm not about to jeopardize that on some some juiced up calls. The stock is already pushing +30% this month so strategizing an entry becomes that much more difficult and the daily setup is all you have to work with. Like the $AAL play, I'll look before I touch.
Following up on technicals, I'll be watching :
Vicarious Surgical ($RBOT)
Berkshire Grey ($BGRY)
and Better World Acquisition Corp ($BWAC)
Moving on, the meme stock of choice is Blue Apron ($APRN). Bullish engulfing and setting up perfectly for a major cup and handle breakout. Call volume is over 1m too so buyers are betting on a squeeze. I'll make a move if it goes under $1 on the $1 strike calls but otherwise I'm sitting on my hands here.
Another meme play worth watching is PLBY Group Inc ($PLBY), the stock that's been been left behind. Hefner's legacy only crunched +1.83% last week while it's peers like $AMC docked +30% and $BBBY put up +130%- so the upside potential is there. Also, take a look at the double bottom off it's recent 52 week low at $2.46, now it's running support lines at the psychological $2.50 and setting up for an inverse head and shoulders.
Final meme play is Beyond Meat ($BYND). It held +11.5% last week even before Bill Gates came out on Friday with his bullish bets on plant based products. While Gates has his money on BYND rival, Impossible Foods- they're still yet to IPO so BYND is likely to be the good news beneficiary. Between that and more meme stock euphoria, this could break out of it's current range and run back towards $30+ a share or +100% gain.
As far as China trade ideas...
Ehang Holdings ($EH) is officially breaking out, back from the dead with bullish piercing patterns for 2 weeks straight and their debt to equity ratio is currently sitting at .02
I also like the reversal on Canaan Inc ($CAN) / considering the OTM $3 Strike Calls.
It's worth noting Sabre Corp ($SABR) as the bullish tech play of choice. This came across my desk on technicals before learning it was an American Airlines spin off company at one point in time. Anyway, hoping the affiliation, coupled with an $AAL beat on revenue- can assist on the follow through back to 52 week highs and 2x territory from where the stock currently sits.
Finally, I have VF Corp ($VFC) as the recession play (EST. 1899). VF Corp owns North Face, Vans, Timberland, Dickies etc. and wall street is calling this one "recession resilient", referencing The Great Depression- where retailers saw earnings evaporate but VF Corp only gave up -9% on their earnings per share. Currently trading at a 10 yr low PE of 15 and a 10 yr high dividend yield of 6.9%.
Honorable mention buys include:
National Instruments Corp ($NATI)
Southwestern Energy Company ($SWN)
CECO Environmental Corp ($CECO)
Wynn Resorts ($WYNN)
**Not Financial Advice. Entertainment Purposes Only. All Rights Reserved. Shine Share LLC / The Bullish Shark Company & The House Enterprise**