Top Gainers Today @ 11am
What to watch for the week of 5/2/22.
Are you prepared to take on the markets this week? Here’s a watchlist that I created of some potential catalysts I’ll be keeping an eye on and looking to trade for the week beginning May 2nd. Feel free to save it for reference, share it in your trade groups and repost it on your social media page. Also be sure to follow me. Let me know what you’ll be watching in the comments.
The Coming Week in Earnings
Woooo boy, this week will be fun for my portfolio.
- $BIGC^ (On my Sell Watchlist)
- $EXPI^ (On my Buy Watchlist)
- $FSLY^ (On my Sell Watchlist)
Anything with a ^ indicates I read the 8-K and 10-Q/10-K and track their financials along with KPIs on a spreadsheet I have.
So basically, this will be me next week...
The Dark Side of the Market: The Short Sell
Everyone is very familiar with buying a stock but many are missing a huge opportunity within the market by not being educated on the short sell.
First off, what is a short sell? Short selling a stock is when you borrow the shares at a set price with the hopes of buying them back in the future for lower. Just as you want to buy low and sell high, you want to short high, and re-buy back in low.
What are the pros to short selling? You can explode the returns of your portfolio if you believe a company is extremely overvalued. For example $ZM $FVRR $PTON are all exceptional examples of overvalued companies last year that could have generated over 80% returns in 2 years.
What are the risks of short selling? Unlimited downside potential, hard to borrow shares with some brokers, unable to borrow shares in retirement accounts, and at times higher fees.
How do I utilize short selling? I primarily short a stock as it is transitioning from a stage 3 top into a stage 4 downtrend. If you are unfamiliar with this, it is called stage analysis and it shows the higher time frame trend of a stock.
Given The Feds major change in stance this year with higher interest rates, potential end of QE, war with Ukraine - Russia, and other macro headwinds - I saw a huge opportunity for stocks to decouple this year. At first, we saw small caps roll over which gave a foreshadowing of what is to come in the mid/large cap world. While some might use short selling as a way to make money from an overvalued company, I utilize short selling when macro headwinds are ahead and TA is confirming major breakdowns. A few examples of these have included $U $UPST $MDB $APPS $DKNG $NIO $BABA and many more.
There are major risks to short selling as I only utilize them as trades, but they have been a huge part of my portfolio this year instead of sitting in cash or staying long in many downtrending stocks.
No matter how much you believe in your stock over the next 5-10 years - understanding how to actively invest can lead to explosive returns if you can capture both the upside and the downside.
I have not taken 1 long in over 6 months as an will wait patiently for my watchlist stocks to base after decoupling. For example, I am bullish on $TWLO long term, but I have shorted it this year to increase my portfolio value to buy more shares when it transitions from stage 4 into stage 1.
It’s important to learn to play both sides of the market because only playing the long side misses out on so much money when the market is rolling over.
Trade the trend. Use the profits to buy more shares of your favorite long term names. Rinse and repeat.
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Great overview of shorting— what brokerage do you use to short / where do you actually borrow the shares from?
Russia-Ukraine Continues to Drive Markets: Daily Contrarian, Feb. 18
Good morning contrarians! Yesterday saw a pretty significant sell-off as fears over Russia-Ukraine took center stage. The Nasdaq gave up almost 3% and Dow Industrials had their worst day of the year so far. Cryptos dropped and bonds rallied. But oil and gas curiously did not. More on that in the bottom line.
The latest developments here are that Secretary of State Antony Blinken proposed a meeting with his Russian counterpart next week. President Biden has a call with other NATO leaders this afternoon and Vice President Kamala Harris and House Speaker Nancy Pelosi are in Munich for a security conference. Figure they could have maybe chosen a better city for that? Well, whatever…
State of Play
Stock futures have bounced off the lows and are heading higher this morning. Presumably the Blinken news overnight was the cause for the shift. As of 0635, the Nasdaq is up 0.7%, with Dow Industrials up 0.5% and S&P 500 0.3%.
Bonds have stopped their advance in keeping with this risk-on theme, with the yield o the 2-year up a bit to 1.49% and the 10-year at 1.98%.
Commodities are selling off pretty precipitously, with WTI crude down 2.5% to below $90/barrel and natural gas off 1.2% to $4.40. But industrial metals are continuing to advance: Zinc, nickel, and aluminium all up 1% or more. Copper is up a little less.
Gold and silver are dropping a bit, with gold about 0.6% lower to drop below $1900/oz. Cryptos are being sold more significantly, with bitcoin down 6% to around $40,400.
Earnings seasons is winding down but there are a few big companies still left to report. DraftKings ($DKNG) is up this morning at 0700. Deere ($DE) and Campbell Soup ($CPB) are also expected.
Existing home sales are out at 1000. These are expected to have decrease by 1% month-over-month in January, to 6.1 million from 6.8 million. Building permits and housing starts (which are more of a leading indicator than existing home sales) were mixed yesterday, with permits beating expectations and housing starts falling short.
We also have a bunch of Fed speakers again today: Chicago Fed President Charles Evans, New York Fed President John Williams, and Fed Governors Lael Brainard and Christopher Waller.
The Bottom Line
It’s all still about Russia-Ukraine. As pointed out yesterday, the movement in asset prices is not entirely consistent here. For example, if fears of an invasion were really pronounced, you could expect oil and especially natural gas (seeing how it’s Russia) to spike. But they actually dropped yesterday and are continuing their descent this morning. Also Russian indexes and ADRs still remain above their lows from a couple of weeks ago.
So either investors aren’t taking the invasion threat entirely seriously, or they’re just using the excuse to dump certain stocks (cough, tech). Doesn’t mean they’re right on either count of course.
For contrarians who still believe in a growing economy, this has created an opportunity to put money to work. Through one does have to be concerned about the levels where certain tech stocks are trading: most are well into correction territory if not an outright bear market.
Either way, do your own research. Make your own decisions. And have a nice weekend.
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Upcoming Earnings Calendar (Feb 14th - 18th)
Hey guys! Here's the upcoming earnings calendar! Three of my holdings report next week.
- $ABNB - The stock has held up pretty well during the market sell-off. The valuation is still high, but with re-openings the company could see a big boost this year.
- $TTD - They've said Apple IDFA is a non-issue, so their growth should be great. A key indicator of ad spend.
- $ROKU - The stock is down almost 64% from ATH, but the fundamentals keep improving. I expect great results from the company, with ARPU growing and margins expanding.
If you'd like an easier way to track earnings dates, you can automatically sync your portfolio's earning dates to your personal calendar with just a couple of clicks here.
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