This is one of our favorite bottom-up scans: Follow the Flow. In this note, we simply create a universe of stocks that experienced the most unusual options activity — either bullish or bearish, but not both.
We utilize options experts, both internally and through our partnership with The TradeXchange. Then, we dig through the level 2 details and do all the work upfront for our clients.
Our goal is to isolate only those options market splashes that represent levered and high-conviction, directional bets.
We also weed out hedging activity and ensure there are no offsetting trades that either neutralize or cap the risk on these unusual options trades.
Welcome back to our latest Under the Hood column, where we'll cover all the action for the week ended June 24, 2022. This report is published bi-weekly and rotated with our Minor Leaguers column.
What we do here is analyze the most popular stocks during the week and find opportunities to either join in and ride these momentum names higher, or fade the crowd and bet against them.
We use a variety of sources to generate the list of most popular names.
There are so many new data sources available that all we need to do is organize and curate them in a way that shows us exactly what we want: a list of stocks that are seeing an unusual increase in investor interest.
In this weekly note, we highlight 10 of the most important charts or themes we're currently seeing in asset classes around the world.
Risk Assets Holding on by a Thread
Risk assets have been under consistent selling pressure for some time now. The Russell 2000 and Bitcoin are both excellent examples of the damage that’s already taken place. Both are holding on by a thread at crucial support levels. As you can see in the chart, for Bitcoin, the 2017 highs around $20,000 are the level we're watching. For small-cap stocks, the line in the sand is at the 2018 and 2020 highs around 171.
If the Russell 2000 and Bitcoin continue to hold these key levels, things are likely improving for stocks and cryptos more broadly. However, if they violate their respective support levels, we have to anticipate increased volatility and another leg lower for risk assets.
Check out this week's Momentum Report, our weekly summation of all the major indexes at a Macro, International, Sector, and Industry Group level.
By analyzing the short-term data in these reports, we get a more tactical view of the current state of markets. This information then helps us put near-term developments into the big picture context and provides insights regarding the structural trends at play.
Let's jump right into it with some of the major takeaways from this week's report:
* ASC Plus Members can access the Momentum Report by clicking the link at the bottom of this post.
The largest insider transaction on today’s list is a Form 4 filing by Nimish P. Shah, who reported a purchase of roughly $5.1 million of Tricida $TCDA.
Thomas Meth, the president of Enviva $EVA, reported a purchase of 8,600 shares, equivalent to $505,508 worth of stock.
When one of the most important procyclical assets breaks to fresh 52-week lows, it takes center stage. It also has major implications across a variety of markets.
But what about energy? What about grains and softs and the rest of the commodity space?
Well, most of those contracts have already been in correction mode.
And, based on the recent selloff in energy and other commodity-related stocks, a much deeper correction could be in store for these raw materials.
It’s definitely something we’re monitoring. And that’s where copper and today’s chart in focus come into play.
Let’s take a look.
Here’s an overlay chart of copper futures and the five-year breakeven inflation rate:
Our International Hall of Famers list is composed of the 100 largest US-listed international stocks, or ADRs. We’ve also sprinkled in some of the largest ADRs from countries that did not make the market-cap cut.
These stocks range from some well-known mega-cap multinationals such as Toyota Motor and Royal Dutch Shell to some large-cap global disruptors such as Sea Ltd and Shopify.
It’s got all the big names and more--but only those that are based outside the US. You can find all the largest US stocks on our original Hall of Famers list.
The beauty of these scans is really in their simplicity.
We take the largest names each week and then apply technical filters in a way that the strongest stocks with the most momentum rise to the top.
Based on the market environment, we can also flip the scan on its head and filter for weakness.
Let’s dive in and take a look at some of the most important stocks from around the world.
The largest insider buy on today’s list is a Form 4 filing by Turtle Creek Asset Management, which revealed a 496,000-share purchase of JELD-WEN Holding $JELD.
In his latest Form 4, the chairman and CEO of Enviva $EVA revealed a purchase of approximately $1 million in the lumber and wood company.
From the desk of Steven Strazza @Sstrazza and Ian Culley @Ianculley
Bonds are off to their worst start in the past 40 years, possibly ever!
It’s not even close.
As we near the end of Q2, the US Treasury Bond ETF $TLT is down almost 22% year to date. And that’s after its recent bounce higher.
There's been nowhere to hide, as these traditional safe-haven assets have been an absolute dumpster fire along with stocks.
But we’re starting to see some of those flames extinguished.
Some of the worst-performing stocks tipped the bond market’s hand ahead of the recent lows. That’s right: Those Big Tech names and Chinese internet stocks stopped going down months ago and now bonds are following higher.
Believe it or not, bonds and high-duration equities have a lot in common. The Growth $IWF versus Value $IWD ratio really tells the story.
Let’s take a look.
Here’s an overlay chart of the TLT and the IWF/IWD ratio:
Monday night we held our June Monthly Conference Call, which Premium Members can access and rewatch here.
In this post, we’ll do our best to summarize it by highlighting five of the most important charts and/or themes we covered, along with commentary on each.
As many of you know, something we've been working on internally is using various bottom-up tools and scans to complement our top-down approach. It's really been working for us!
One way we're doing this is by identifying the strongest growth stocks as they climb the market-cap ladder from small- to mid- to large- and, ultimately, to mega-cap status (over $200B).
Once they graduate from small-cap to mid-cap status (over $2B), they come on our radar. Likewise, when they surpass the roughly $30B mark, they roll off our list.
But the scan doesn't just end there.
We only want to look at the strongest growth industries in the market, as that is typically where these potential 50-baggers come from.
