This Week in Episodic Pivots: Jan 9, 2023

Very volatile start to the year. Every trading day so far has seen a move greater than 1%. It’s clear investors are trying to figure out what 2023 will bring us and repositioning to take advantage of any opportunities.

One thing that has become abundantly clear in the past couple weeks is that the economy remains strong. Very strong. The unemployment rate went down to a near record 3.5%, while labor force participation went up.

Credit borrowing is increasing at a rapid pace. And the restaurants and bars, at least by me, are packed full of people.

This makes me believe we’ll have a good earnings report coming up, which may push the market higher. But this also makes it likely the Fed will increase their Fed Funds rate at the beginning of February. We’ll have to see how the sentiment around that changes as the month goes on.

But this strength means we’ll likely see inflation numbers remain elevated. So that’s another factor to take into consideration.

Takeaways From Week 1 of Trading

We can learn a lot from how investors position themselves in the beginning of the year. These are the positions that funds didn’t want to show on their year end books. But these are the ones they want to ride higher for the year.

This is why we didn’t take any new positions in the past couple of weeks. We wanted to see how the week would play out.

A couple of trends from last week are that value stocks and those that benefit from a weakening dollar got a lot of attention from investors.

These are some of the beaten down, but profitable stocks. As well as stocks from foreign countries. And then stocks that do well in a high interest rate environment are moving higher. These are financials like banks and insurance companies. These sectors looked poised to have a good run in the coming months.

While I haven’t seen many of these companies making episodic pivots, these are still sectors to watch. And maybe incorporate into your personal trading/investing plans.

I personally hold a decent chunk of my long-term portfolio in insurance companies. These companies tend to outperform the market over the long run. And that’s the goal of the barbell part of the portfolio – to have long-term, low-volatility outperformance over the market. Then we supplement that with high octane investing and trading strategies on the edges of our portfolio. This is how we make strong portfolios that withstand all market environments.

With that said, let’s get onto a few recent episodic pivots.

World Wrestling Entertainment (WWE)

This shot higher last week on huge volume as founder Vince McMahon said he was going to get back on the Board of Directors. This is the man who built the WWE into what it is today. So it’s not surprising that investors loved to hear that he was coming back.

This is a bit risky of a position because it’s shot so high… But if anyone can turn around this company, it’s McMahon.

To trade this, we’ll use $80 as our initial stop loss. This was the previous high before the stock broke out last week. And will likely provide some support in case of a pullback.

We’ll likely adjust to a moving average soon, but let’s see how the position moves first.

This should be an exciting story to watch unfold.

Virgin Orbit Holdings (VORB)

This stock rocketed (pun intended) higher last week as the company announced it would launch the first orbital rocket from UK soil.

The launch should happen shortly after writing this. And if the launch is successful, we can expect many more launches in the future.

That makes VORB an interesting public company. And compared to the SpaceX’s recent valuation of over $100 billion, this VORB is miniscule. It’s less than 1% of the size with a $700 million valuation.

If this stock catches the eyes of investors, we could see it surge higher.

This is still in a downtrend, which concerns me a little. So we’ll keep a tight leash on this one. If it closes below the 10-day MA, we’ll bail on the position on look for another reentry.

Casa Systems (CASA)

The telecommunications company had a rough end of 2022… And got beaten down after a poor earnings result. But now it looks like things are turning around for 2023.

Last Friday, the stock soared on no news. This tells me investors are quietly positioning for big news coming forward.

It’s likely a stock that’s gone form bad to less bad. And we could see a sustainable move higher.

We’ll use the 10-day MA here as our stop to limit our losses. This isn’t a true episodic pivot as there was no episode to move it higher. But at the beginning of the year, we should take notice of these kind of moves.

Paysafe (PSFE)

This is another company that going from bad to less bad. And we’re seeing massive accumulation over the past couple of weeks. This is huge volume.

That volume makes me believe something is going on… And we’ll see some big news soon. And we want to get in ahead of it.

But this also is in a downtrend… So we’ll keep a tight stop loss on this and we’ll use the 50-day MA for the time being.

Portfolio Update

For those following the instructions, we only have 3 positions remaining. Those are Weibo (WB), Johnson Outdoors (JOUT), and Didi Global (DIDIY).

WB and DIDIY are big winners and Chinese stocks have caught fire the past month. These are screaming higher. And Johnson Outdoors is hanging onto its support. We’ll see if it can break out of its consolidation and move higher.

Continue to hang onto these positions and watch the markets. That’s all for this week.

Good luck.

For any questions during the week please tag me in a post on Twitter @BarbellAlpha