No one is perfectly rational all the time. Sooner or later, our emotions – especially fear and greed – are bound to take over. We're only human, after all.
And human beings tend to move in herds, especially in financial markets. Now, that's something we can measure and use to make better, objective decisions.
On your TradeSmith Finance dashboard, you'll find a Fear & Greed index front and center in the Market Health section.
Here in April, that needle swung from Greed to Fear in less than a week. Now it's come back a bit to Neutral:
Heading over to Markets in the top menu, then S&P Sectors, we can gauge the impact of this turmoil on specific sectors. Immediately we see that a few sectors have held up much better than others – still offering plenty of Green Zone stocks to choose from:
Here are a few stocks that are in the buy zone across TradeSmith's bullish indicators: Ratings by TradeSmith, our Health indicator, Predictive Alpha, Trade Cycles AND Quantum Edge ...whose companies also earn a top-notch Business Quality Score.
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Note: Our Quick Picks are intended as potential ideas to research, not specific recommendations from TradeSmith or our analysts. Always do your own research.*
SPECIAL REPORT: Top 3 Shadow Threats Ready to Crash the Stock Market in 2024
The Middle East and Ukraine are on the brink, while ungoverned A.I. could allow even more bad actors to step forward.
It feels a lot like the weeks just before COVID-19, when we went from a few outbreaks to a global pandemic. A storm is coming... but how do we prepare?
April 24: Added the TSLA 31 May 24 $115 Put for our Infinite Income Loop weekly trade.
April 22: Sold shares of the iShares Semiconductor Index ETF (SOXX) for -1.3% in Constant Cash Flow after the SOXX 19 Apr 24 $201.67 Put expired in the money.
April 22: Added Equifax (EFX) 17 May 24 $190 Put as an alternative trade after Constant Cash Flow provided the same option as it had the day before.
All in all, added seven more short puts for Constant Cash Flow in seven days. Six others expired for full profits this week.
As for covered calls, our Best Opportunities included instant income with buy-writes on DocuSign (DOCU), Core & Main (CNM), Pure Storage (PSTG), American Eagle Outfitters (AEO), and Delta Airlines (DAL).
April 24: Closed Comcast (CMCSA) short puts at 18.5% profit and rolled the Cisco Systems (CSCO) covered call into a new option: the CSCO May 17, 2024, $51 call.
April 23: Closed Mondelez (MDLZ) short puts at 86.5% profit and sold covered calls on Nike (NKE) – the NKE May 3, 2024, $97 call – at $0.45 or more.
April 22: Added Google (GOOG) May 3, 2024, $140 short puts in Ultimate Income for about $0.60.
Acquired shares of CVS Health (CVS) in Ultimate Income when the CVS 26 Apr 24 $70 Put expired in the money. Halliburton (HAL) covered calls expired for full profits.
Mike Burnick's Bottom Line
Some members of the "Magnificent 7" posse have had their reputations tarnished recently.
Both Tesla (TSLA) and, to a lesser extent, Apple (AAPL) have fallen from grace in the past couple of weeks. Netflix (NFLX) last week posted mixed results, and its stock took a hit. Next, Meta Platforms (META) reported earlier this week, and its disappointing guidance cost the stock dearly.
But fear not, stock-market homesteaders: On Thursday, Microsoft (MSFT) and Google (GOOGL) rode to the rescue with better-than-expected results. MSFT opened 3.3% higher Friday morning, and GOOGL stole the show with a nearly 12% surge higher at the open.
So even if the Mag 7 have been reduced to just this "dynamic duo," their results still may be enough to save the day for stocks, perhaps reversing the recent correction. We'll have to wait and see.
In the meantime, it's not just the dynamic duo of MSFT and GOOGL that's holding up reasonably well. Interest-rate-sensitive utilities and consumer staples are largely in an uptrend – trading above their 50-day moving averages – as are energy stocks:
So, rather than across-the-board selling, we're seeing more of a rotation into the classic defensive sectors that are exactly what investors tend to flock into when the stock market heads south. And that's something we can work with in our stock portfolios.
Good investing,
Mike Burnick Senior Analyst, TradeSmith
P.S. We hope this Roundup makes it easier to access the total value of your subscription – and we're always looking for ways to improve. So, please send us your feedback on our Platinum Roundup to emailmikeburnick@tradesmith.com.
*TradeSmith provides this tool for informational purposes only. The results do not represent a recommendation to buy or sell securities. The information is generic and not personalized investment advice. You should not make decisions based solely on information from this tool and should seek the advice of a qualified investment professional before making any investment decisions. You bear complete responsibility for your own investment decisions. TradeSmith does not guarantee the accuracy, adequacy, completeness, timeliness, or availability of information from this tool. Please see our full disclaimer.
TradeSmith is not registered as an investment adviser and operates under the publishers' exemption of the Investment Advisers Act of 1940. The investments and strategies discussed in TradeSmith's content do not constitute personalized investment advice. Any trading or investment decisions you take are in reliance on your own analysis and judgment and not in reliance on TradeSmith. There are risks inherent in investing and past investment performance is not indicative of future results.
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