This Week in Episodic Pivots February 19, 2024
Two New Setups Today
It may be a holiday-shortened week, but this week will be an important one… Especially on Wednesday. We will see some movement in the markets at 2 pm Wednesday as the Fed’s FOMC meeting notes get released. This will tell us what the members think about rate cuts this year.
If the rate cuts even sound like they’re getting pushed out past June the markets will likely turn lower on the day. We also have speeches from Fed members Bostic and Bowman that day too…
But the real fireworks will happen after the market closes on Wednesday. That’s when Nvidia ( NVDA 0.00%↑ ) reports earnings. NVDA is the leader in the stock market right now. The company is the face of AI revolution. And if NVDA sees lower than expected growth, investors will likely take that to mean the rest of the industry is facing slowing growth. That would send the market lower.
Conversely, if NVDA beats, and beats soundly, the stock will surge. And that will also tell us that the market rally is likely to continue.
So it’s an important week. And we may make adjustments on Thursday if things turn lower. But I don’t think that’ll happen…
Lately the market has shown increasing breadth. And we’ve seen an uptick in small cap stocks. The Russell 2000 index outperformed its large-cap counterparts last week by a couple percentage points.
Small caps have lagged for quite a while. But when they get going, they move. And these are also the kind of stocks we tend to purchase here at Barbell Alpha.
A New Setup
This week I’m going to introduce a new setup to our letter. For the past 15 months, I’ve focused exclusively on episodic pivots. We’ve bought stocks that are surging after a big news event. But lately, I’ve found a lot of great setups in stocks that hadn’t surged yet. They were starting to move slightly higher, on large volume, before the move happened.
I’ve been involved in Intuitive Machines ( LUNR 0.00%↑ ), Rigetti Computing ( RGTI 0.00%↑ ), and Tenaya Therapeutics ( TNYA 0.00%↑ ). All these have had big moves, but they happened on no news. So they are not episodic pivots. But I don’t want you all to miss out on potential explosive moves before the news happens.
So we’re going to start adding some breakout plays to the portfolio.
Before we get to the first one, we should close it out for about a 12% gain unless Synaptics opens higher this week.
And now onto the first pick this week.
Gossamer Bio ( GOSS 0.00%↑ )
This biopharma company focuses discoving and developing immunology and inflammation therapeutics. And right now they have a promising drug called seralutinib in Phase 3 trials. This is a therapy for pulmonary arterial hypertension, which is fairly common.
And Wall Street analysts love this company. I don’t care much about analyst ratings of a stock. But their target prices tell us to which level we’ll likely see Wall Street participation in the stock.
Right now GOSS trades at $1.08. But one firm, HC Wainwright just raised its price target from $5 to $10. They see promise in the company and will encourage their clients to pile in the stock as momentum grows. The average price target among the nine firms that cover GOSS is $7.60.
If GOSS starts advancing their pipeline, this stock will surge higher.
And we may see someone taking a position in the company now. We’re seeing GOSS break out of a three-month wedge pattern on large volume. And it’s doing this with no news. I’m guessing someone who knows something is trying to accumulate shares ahead of an announcement. Let’s follow him into the stock.
We’ll buy shares this morning and use $0.90 as a stop.
Naas Technology ( NAAS 0.00%↑ )
We have two kind of risky plays today. GOSS is a low priced biotech stock and NAAS here is a Chinese-based EV charging station company. And I always get a little nervous investing in a Chinese company because of the number of frauds over there….
But funds run by Invesco and Envestnet have both recently added NAAS to some of their funds. And Jefferies has coverage on the company. This gives me comfort it’s an actual business.
And NAAS is growing fast last year they had about RMB 100 million in revenue, this year it will be 300 million. And for the first time in January they achieved a gross profit. The company is doing well scaling their charging network.
I have dreams of owning one of those low float Chinese-based stocks that go from $1 to $40 in a couple days. Maybe NAAS will be that one – it has better fundamentals than a lot of those highfliers…
And it looks like big money is flowing in. Look at the big green bars during the recent rally. Any declines in price we’ve seen lately come with low volume (as designated by the red bars). Investors are establishing a position and likely holding for a big move.
We’ll buy shares this morning and use $1.50 as our stop.
And that’s all for this week.
Happy Investing!