This Week in Episodic Pivots: April 2, 2023

What a finish to the end of the quarter. Last week the S&P 500 decisively broke out of the trading range it was in to the upside. This helped all our open positions close higher on the week.

But as we can see, the S&P 500 just went from one resistance level to the next.

Even when the market does break out of a range, traders need to act quickly. The market is trading very technically…. And heads straight to resistance and support levels.

All-in-all it was a great quarter. The S&P finished up 7.5% on the quarter. And the Nasdaq surged 17% higher. Great start to the year.

And we saw some big moves higher on Friday in some familiar sectors. The biggest moves happening in artificial intelligence (AI) stocks. Several were up over 20% on the session.

But these are ones I would avoid for at least a couple weeks. We want to make sure that Friday’s move higher wasn’t just for window dressing by large funds. That’s the practice of funds buying the big winners for the past quarter into the market close on the last day of trading. And then dump the following day.

Beware of any stock that moved big on Friday without any corresponding news. It could be a bull trap.

In good news though, tonight there are rumors of the WWE’s sales to Endeavor Group – owner of UFC. This is a perfect pairing. Both companies put on entertainment spectacles. With the UFC being “real” MMA fighting. And WWE scripted.

But the deal is rumored to be for an enterprise value (EV) of $9.3 billion. That implies a $102 share price… But it’s essentially an all-stock deal. Meaning the final price will be decided by the market at the time of the close. So the futures are down to $87 this morning. We’ll watch the price action a bit. But we’ll likely exit this position in the first hour of trading today. Let’s take a small gain as the catalyst for the episodic pivot has played out.

You can try to hang on for a few more months and do a little merger arbitrage, but that’s not what we do here.

And we are still holding the remainder of our positions as we haven’t been stopped out of any.

Our gameplan is to sit tight and keep holding these episodic pivot stocks as long as the uptrend is intact.

So let’s get onto this week’s picks.

 FREYR Battery ( FREY 0.00%↑ )

This is a Norwegian company that designs and manufactures lithium-ion batteries. These batteries go in electric mobility, stationary energy storage, marine, and aviation applications.

Las Wednesday they announced a potential coalition with Glencore, Caterpillar, Siemens and Nidec. These are monstrous companies that want to pattern with FREY. This all but guarantees FREY’s batteries will get the inputs they need. And they will have several large customers to help pick up adoption of their batteries.

Investors liked the new partnerships and bought up the stock in mass last week.

We’ll use $8 as a hard stop for now. That level has acted as support before this recent pullback in prices.

IonQ Inc ( IONQ 0.00%↑ )

IonQ is at the leading edge of quantum computing. And their products are recognized as such by the market. Revenue in Q4 doubled… Albeit from a small number, rising from $1.6 million to $3.8 million this prior quarter.

It shows adoption. And IonQ expects that to continue as they forecasted revenue of $18.6 million this year. With bookings (committed orders which may not be recognized as revenue yet) growing to around $40 million.

The company is on a clear path towards commercialization. And if they accomplish that, this will be a big player in the quantum computing space.

And we saw a nice surge after its earnings last week.

We have to take a little bit more risk in this position as it’s a bit more volatile. But we’ll use the 50-day MA, which sits near $5, as our stop.

Until next week, happy investing!