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Is there a bullish case after yesterday’s rollover?

Aug 23, 2022

Good morning!

‍Right on cue … a revenge rally.

Here’s what I wrote in yesterday’s One Bar Ahead™ client update …

“The markets are trying to put in a bottom as I type which tells me the computers may have overdone it to the downside … the MMI™ - Master Market Indicator – suggests a short-term upside move may be in the cards.”

Here’s my playbook.

Bears’ revenge or a one & done?

Depends on your perspective. If you’re a short-term trader, the odds of a higher close tomorrow (or any given day for that matter) are roughly 53.25%. The markets have a defined upside bias over time which is why it’s not 50/50 in case you’re wondering. Move that horizon out 3-5 years and the probabilities jump to 82% give or take. Look out a decade and you’re at 92.3%.

Wall Street wants you unsettled. That’s how they make their money … by separating you from yours when the going gets tough, so they engineer it to be as “tough” as possible using every means at their disposal … BS clickbait stories, analyst reports that somehow consistently miss the mark, high-speed trading, and dark pools.

It is in Wall Street’s interest for you to make bad decisions. Case in point, data from Refinitiv show that investors pulled more than $44.1 billion out of stock funds this past June and July during one of the biggest rallies of the year. And, not surprisingly, $11 billion of that converted to FOMO to come rushing back in last week right … before Wall Street yanked the rug (again).

Zoom, boom & doom

The so-called “at home” trade is melting faster than an ice cube on a hot summer day in Texas. The company pared back its annual forecast as revenue growth slows to single digits. (Read)

Buzzword Bingo. Management is blaming a strong dollar on the hit but that doesn’t cut it. The company’s C-suite didn’t hedge currency risk properly. Zoom’s financial chief said the company implemented “new initiatives that have shown early promise … but were not enough to overcome the macro dynamics in the quarter.”

Try this in plain English … Zoom’s salespeople didn’t have the relationships they thought they did with the customers that matter.

Short or avoid.

Memes are great, as long as they last

Prove it or lose it. Meme stocks like AMC, GME and BBBY have a serious problem on their hands. They’ve got to prove they’re stocks worth owning. Or else.

Instant karma. Load of people “loved” AMC but the chain may never recover from pandemic-related changes in behavior despite massive hits like Top Gun: Maverick. Especially with Disney, Apple, Netflix, Amazon and more entering the streaming game.

An important reminder. Expect to pay the piper sooner or later if you’re buying “nice to have companies” without serious business models and the results to back ‘em up. I wouldn’t be surprised to see all three wiped out entirely.

Buy the best, ignore the rest. There are loads of people clinging to so-called social meme stocks but, amazingly, it’s the same tired old stocks, a point noted recently by none other than Jaime Rogozinski who founded the WallStreetBets forum which has played a substantial role in fueling meme-stock mania.

A trade idea. AMC and BBBY are probably roadkill at this point but GME is hanging in at $34 a share as I type. Buying long term puts isn’t for the faint of heart but probably the game at hand … pun absolutely intended.

EVs: if this doesn’t get your attention, nothing will

Successful investing is as much about knowing which way the wind is blowing as it is about picking stocks.

Pay attention. Saudi Arabia is determined to achieve energy independence which is why the Kingdom is making a big move into all things EV battery related.

Why you should care. The Saudis have dominated global oil markets for 100 years and now they’re going to make a move to dominate EV markets by controlling energy once again. This time through batteries. And unfortunately, the West is not only a) clueless but b) enabling the transition. (Read)

The investment. Energy is a continuum which means savvy investors should play this with choices that run the gamut from old-fashioned dinosaur juice to nuclear fusion with everything from algae and EVs in between.

My choice. Hands down, Tesla. CEO Elon Musk has understood this from the very beginning and still does. So do two key Chinese car markers with global aspirations I recommended recently. (Learn more).

The last Master Class starts today at 5pm EST

We took a brief hiatus from our regular publishing schedule to hold a series of four investing Master Classes this month.

Session #1 covered stock selection, thematic investing and more. Session #2 highlighted how to beat Wall Street at its own game. Session #3 covered risk management and hedging for reasons that should be abundantly apparent after days like yesterday.

Session #4 starts today at 5pm EST and will be a comprehensive review with extensive Q&A. Every OBA Member will receive a link to today’s session later this morning.

If you’re not getting the results you want and would like to attend. There’s still time to sign up. (You can do that here)

Bottom Line

Mind your own trading & investing.

Or somebody will mind it for you.

That’s the way markets work.




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