Why CRWD dropped after stellar earnings

Good morning!

‍Investors are betting like the bottom’s in on big tech but I’m not so sure that’s a good idea.

Throwing caution to the wind like many did yesterday can easily backfire.

Profit taking today is likely, especially in the early going and especially when it comes to big tech.

Here’s my playbook.

1 - Stick with winners

The fantastic Liz Claman asked me for my take as we headed into the final hour of yesterday’s session and a sizable rally.

My friend and colleague, Steve “the Sarge” Guilfoyle and I agreed … on names and on the approach needed. (Watch)

Now what: Some profit-taking would be expected at the open with tech and into the weekend with everything else if the algos jump in. Traders could try to “extend” in which case that may get pushed to Monday but I doubt it.

I suggest: Set profit targets, trim around the edges, and buy speculative puts. If you haven’t already.

2 - My thoughts on MSFT’s “warning”

Microsoft cut guidance through the fiscal quarter ending June 30 due to “unfavorable foreign exchange rate movement in the fourth quarter”. (Read)

Not a big deal and not an isolated incident … 41% of the S&P 500’s sales come from overseas. Other companies including P&G, Amazon and probably a few more will get caught in the fracas.

It’s a currency management issue, not a business failure.

Why you should care: Currency is a treasury function, but business is an operational issue. The “warning” means that MSFT’s treasury may not have hedged properly or accounted for conditions.

Sales contracts can be adjusted (and will be).

Lower prices are a gift if you’ve got a 3-5 year horizon or longer.

3 - Even Elon wants to cut jobs

Reuters reported that Elon Musk wants to cut 10% of jobs at Tesla and people are acting like this is a canary in the coal mine when it comes to recession.

Definitely could be but I think it’s more like a Phoenix.

The strongest companies act first, cut deepest and make themselves stronger through the chaos.

Cutting jobs is not a sign of weakness, but of strength.

A possible way to trade this: Volatility is high enough that selling super low and deep puts is appealing.

4 - Enough nuclear waste to power the US for 100 years

People think energy is an on/off switch.

Doesn’t work that way.

Sometimes you have to look backwards to go forward.

There’s reportedly enough energy in the nuclear waste in the US to power the entire country for 100 years.

This could have material implications. (Read)

5 - CRWD: why shares dropped after stellar earnings

It’s the oldest game in the books and one we’ve talked about many times.

Big traders run the best stocks into stellar earnings because they know retail traders will buy when they’re announced. Then yank the rug out.

Retail traders constantly ask me “why?”

Super simple.

What the big money knows: The big money knows retail investors expect prices to rise after great earnings, so they use all that money rushing in as an exit. Price drops, the weak money “stops” out. Then they repeat the exercise as many times as they can.

It’s as predictable as the sun rising.

If you’re tired of getting fleeced: Start thinking like the big money or you will get separated from yours.

Bottom Line

Investing is a mirror of yourself.

Keep your head in the game, your emotions under control and your joy of life alive at all costs.

Make it a great day!

You got this – I promise!

Keith