Trading Rotation and Churning

Here are the market observations for today.

1. Traders should trade price action and not their beliefs about the market.
2. SPY over the last 10 days has been inching upwards. Focus on the price action
3. Lots of times, negative market commentary can stop you from seeing the obvious. How can the market rally when valuations are expensive and there are so many economic headwinds from inflation to supply chain problems to labor shortages?
4. Bulls can argue but look at the earnings. That’s why what the market does matters more than what you think it should do.
5. One approach to investing is to identify a theme like Solar, Hydrogen economy, Cybersecurity, etc., and then look for the best names within those groups of stocks, or play with an ETF.
6. Today Solar stocks are rallying and we have exposure to the theme via ETF TAN. But individual names making strong moves like RUN, SPWR, and SolarEdge SEDG
7. Hydrogen Economy has been another theme the market has been bullish on. One can look to add FCEL today on declines if one does not have PLUG or Bloom Energy. I am not adding it to the trade sheet because we have both names.
8. The market breadth continues to be poor and select stocks are driving the market higher. See Apple. AMD is now 117
9. Large Cap fundamentally strong companies eventually rally. Take Salesforce CRM as an example
10. I like a stock that makes a big move and then does not collapse. ME is holding the gap and that makes me bullish on the stock
11. Lots of times, the market is inclined to go higher but the rally is not broad-based and there is a lot more rotation/churning happens which confuses traders on what to hold and what to liquidate. We are in that kind of market now.
12. Silvergate Capital is down 13% post-earnings. It is a company that links traditional finance to the cryptocurrency market. If you bought between 100-120, then nothing to worry but expect short-term pain ahead. Gap down selling is never a good thing.
13. I am starting a new trading sheet: Speculative Growth stock. This is for individuals who can do high-risk trading. I am adding IO. The company is witnessing business momentum. The company sells 3D imaging data to offshore oil companies.
14. Breakout to New High seems to be holding CIDM. Here’s How
15. A wise trader knows that winning periods never last… but so too do losing periods.

 

Trade Sheet:

Disclaimer – The state of the market notes is Deepak’s perspective on the market. The column is purely for educational purposes. Nothing contained herein is a solicitation to trade or a recommendation of a specific trade. By reading this publication you agree to make no trade relying in whole or in part on the comments of the writers