This Week in Episodic Pivots: Feb 12, 2023
Markets looking choppy... No new positions this week
We’ll cut right to the chase – there are no new positions this week.
I looked through hundreds of charts of companies that made big moves… But I didn’t like the look of any of them. A lot of charts right now look overextended. And the risk/reward setup of these trades are not favorable.
I feel the same way about the markets in general too. The S&P 500 Index looks like it’s going pull back another 5% or so… And that will take our high-beta names much lower.
So we are going to wait on any new setups to see if there’s a pullback for a better entry point.
We are going into options expiry week too. A lot of the times the market pegs to a certain price with a lot of open options contracts. That can lead to some weird trading action during this week… And if anyone remembers, this was the week before the crash in 2020. The markets were pegged to its current spot.
So let’s be patient the next couple of weeks.
We have no major events in the market. Just the tail end of earnings season.
And one thing I will say, earnings seasons worried me a bit. Companies lowered their earnings estimates for the year… And it’s looking like we’ll see a bit of an “earnings recession” this year. Fourth quarter earnings were down 4.9% year-over-year. If this continues, it’s likely the market is a bit overvalued right now.
Now, sales are still up 4.6% from fourth quarter of 2021…. So this tells us that companies are having difficulty passing on price increases to consumers. If inflation continues, this will become a bigger issue going forward.
I could talk more about other leading indicators, but often it’s best to keep things simple. Find the most important things moving the markets and concentrate on that. Right now, that’s inflation and how it’s impacting companies’ bottom lines.
We should expect this to lead to choppy trading conditions this year. So our plan is to stay nimble, ride the waves higher and then try to bail close to the top.
And we’ll have to find companies that are outperforming the macro environment. Find the little niches, or little companies, outperforming.
So far so good. Artificial Intelligence (AI) companies are still killing it. Even as they pulled back a bit this week, we still have over a double on SoundHound ( SOUN 0.00%↑ ). I think we talked about selling half and letting the rest ride. So do that if you haven’t already.
And Tesla ( TSLA 0.00%↑ ) had a good week for us as electric vehicles (EVs) caught the limelight. And I anticipate we’ll see a little bounce in these stocks after seeing all the Super Bowl ads scheduled for EVs tonight.
That’s my micro analysis for this week. Keep it simple.
Now let’s get onto the portfolio update because we have some action to talk about.
Portfolio Update
Shares of Weibo ( WB 0.00%↑ ) broke below the 10-day MA. And that’s our signal to sell. For those paying attention, that should have been done on Tuesday. The closing price on Tuesday was $27.73 and that leaves us with a 44% gain on the position. A great gain for a 9-week trade.
Paysafe ( PSFE 0.00%↑ ) also broke below the 50-day MA on Friday. Assuming there’s no major surge higher tomorrow, we’ll exit that. That should be around a 22% gain on that trade.
Energy Vault Holding ( NRGV 0.00%↑ ) also closed below its 10-day MA and was exited on Monday at $4.43. That’s a small 4% winner. But a winner is a winner.
We’re still hanging onto SoundHound. Since we sold half, let’s give this a wide stop. We’ll use $2.75 as the stop, which allows it to fill an overnight gap. And once the 50-day MA goes over that level, we’ll use that as our stop.
The rest of the positions are still greenlit for owning. We still have 8 open positions… Which really is quite a lot. It takes a decent amount of time to track all of these trades.
And that’s all for this week. Enjoy the Super Bowl tonight.
For any questions during the week please tag me in a post on Twitter @BarbellAlpha