The Daily Ticker 5-14-24

// The Market

Overview Of Today’s Key Themes.

A great question on yesterday’s game plan in reference to today’s speed of sector rotation. “Is it faster today than it was years ago?”

Absolutely. 100%. The speed of information and the ability to act fast on that information by more than just hedge fund managers created a new era for the markets. Algorithms read headlines, and have one reaction. Then they read the data, and have a second reaction. 

And there’s millions of algos taking these actions at the same time. Some people will cry that it’s an unfair advantage. But what they fail to realize are the lightning quick moves in your favor. The stocks that fly higher so fast that you can’t place your sell orders fast enough because the price moved higher again.

Fast forward to this week.

Seems like everyone and their hairstylist awaits the CPI report on Wednesday morning. The inflation report holds the hope that the number comes in lower than expected. Holds the hope that the Fed decides to lower interest rates. And holds the hope that a new raging bull market begins.

That’s a lot of people, and computers ready to take action. Be prepared to make a decision before it happens. 

Summary Of The Three-Majors Performance:

As the market holds its collective breath for economic data this week, institutional investors are hanging by the water cooler, letting junior traders place small trades to keep them busy.

Volume, as expected, dropped off a cliff again. The #SPY traded barely 50 percent of its daily average. Smart money is on the sidelines. What does that tell you about the kind of risk you should be accepting right now? 

Be smart.

Since earnings season began, the Dow Jones Industrial Average is the strongest of the three-majors. Mostly because of the performance of a few stocks with a heavy weighting in the index. #GS #UNH, and the revival of key stocks like #AAPL and #MMM.

Nice trading by Stefan Maldonado initiating a new trade in Apple last Thursday. Good patience and great timing.

Headline News:

Roaring Kitty is back and so is meme stock mania. #GME, GameStop stock soared, imploded and is soaring again in early trading.

If you’re not familiar with the story here it is:

In January 2021, a black swan event took place involving the struggling video game retailer GameStop (GME). A group of retail investors, primarily coordinating on the Reddit forum r/wallstreetbets, banded together to drive up the price of GameStop shares, forcing hedge funds who had heavily shorted the stock to cover their positions at significant losses. This event became known as the GameStop short squeeze.

How It Started

GameStop had been a popular target for short sellers due to its declining business in the face of digital game downloads. By January 2021, the short interest in GameStop shares exceeded 140% of the company’s public float 5.

However, some retail investors saw an opportunity. They believed that if enough people bought GameStop shares, it could trigger a “short squeeze” – forcing the short sellers to buy back the stock to cover their positions, further driving up the price.

The Squeeze

The plan worked. Spearheaded by the now famous Reddit user “Roaring Kitty” (real name Keith Gill), retail investors began buying up GameStop shares en masse5. The stock price skyrocketed from around $17 at the start of January to an intraday peak of over $500 per share on January 28 (pre-split price) 5.

This caused massive losses for the short sellers. It’s estimated that they lost over $5 billion in January alone13. Prominent short seller Citron Research announced it would stop publishing short reports10.

Earnings Highlights: 

#HD is scheduled to report this morning.

Cisco Systems (#CSCO) is set to report its third-quarter fiscal year 2024 financial results after the market closes on Wednesday, May 15, 2024. As one of the world’s leading technology companies, Cisco’s performance is closely watched by investors and analysts alike.

Analyst Expectations

Wall Street analysts are expecting Cisco to report earnings per share (EPS) of $0.83 for the quarter, representing a year-over-year decrease of 17% compared to the same period last year.

Product orders:
In the previous quarter, Cisco reported a 20% year-over-year decrease in total product orders.  Investors will be keen to see if this trend has continued or if there are signs of improvement.

// Sector Rotation

Having a hard time finding ideas I love today. For the obvious reasons already mentioned.

We need to act like money managers here and not rookies addicted to the action. Always be thinking long-term. Protect capital, and accept risk when reward is likely.

Utilities top the list. Gotta admit, that sounds weird. 

Some solid bullish stacked order flow for the last four weeks. Many of them are sitting in a two day pause.

#VST #CEG #NRG #NEE #PEG are the top examples.

Vistra Corp is a snapback trade setup today. (looking for a lower open to find buyers on the dip and reverse higher)

#CEG two days of profit taking after an earnings surge. Light volume and an inside day setup heading into today’s trading.

Basic materials show a few setup after a long pause. Copper stocks #FCX and #SCCO once again makes the list. 

Southern Copper is beyond an optimal entry that began four days ago. So keep this in your tracking journal and make sure to catch the next pause after this push and breakout.

#AA, Alcoa burst through the breakout too. A big green energy candlestick. If you missed yesterday’s entry, there’s some resistance just below $43, then solid profit potential up to the $55 level.

#DD continues to hold above the earnings gap open price (EGOP), and closed Monday as an inside candlestick. The earnings gap (red arrow on the chart) poked the stock above key resistance and the charts show another ten percent to the next major level.

Consumer cyclical offers a couple of reversal plays showing initial signs of new bullish order flow. Remember: Initial reversal equals initial position size.

#VSCO and #YETI both sparked to life with “fuel” candlesticks (large volume breakouts from a consolidation). YETI Holding traded into an inD breakout too. (inside day breakout)

Victoria Secrets broke out last Friday, reversed lower, and captured buyers again Monday. When buyers return that typically sees continuation.

#HRB sits as an inside day too just in front of all-time highs after an earnings report produced a big, bullish gap. The same can be said for #SG and #BROS.

// Industry Groups

Industry group strength remains scattered as the bulls wait for a reason to pounce. Apparel retail offers two stocks with stacked order flow across multiple stages: #PLCE #VSCO.

Biotechnology looks for #MRNA to recapture the bullish mojo after resting for a week or so. Seems like the buyers drifted over the #NVAX for the day. #DYN makes the list too.

This group has attention.

// Swing Alerts

Managing existing swing trade ahead of economic data. We’ve mentioned I plan to close out positions sitting on the bubble of profit/loss ahead of the expected volatility.

#KKR looked great heading into yesterday before a tsunami of selling dragged the stock lower. The original stop loss of $99.60 remains in place. Unless the stocks shows a massive bullish reversal candle, I’ll be closing this trade today.

#TNDM Moving the stop loss up to $43. If we don’t get stopped, I plan to close the trade if it does trade above $45 before the end of the day. 

I don’t like the reversal after the buy stop was filled. Especially when it was followed by a close near the lows. The stock continues to hold the earnings gap, but the bullish/bearish dance of candles since then isn’t what we were looking for after reporting. This happens sometimes when the earnings gap is such a large move. 

#C, Citigroup broke out and basically sits just above our entry price. No head start here. I’m not looking for a wave buying spree here so I’m closing this trade out for a likely flat this morning. (A flat means getting in and out at basically the same price)

#AIG In the money by a few dollars but kind of sputtered. Five attempts to breakout above $80 and two heavy volume bearish candles. I’m planning to exit this position as well for a flat on the open.

#HAS has not shown any signs of life since the earnings gap. I liked the pullback/entry but the stock has not attracted any new order flow. Planning to exit this for a small loss on the open.

#DAL reversal candle and a close near the lows. We added to this position so obviously we like it. But with all of the uncertainty heading into Wednesday I’m locking in this profit on the open too.