Happy Saturday and welcome to our Weekly Digest!
We ended last week in extreme overbought territory and we tried to position as best as possible for a possible pullback. This is exactly what happened this week in the overall indices which came back to their mean. It has been an extremely busy week with plenty of drama (Musk’s tweets on selling $TSLA shares), earnings surprises ($RBLX, $PYPL) and IPOs ($RIVN). In addition, we had 2 inflation readings which showed once again that this issue is not yet transitory. This added some selling pressure to the overall market.
In the last edition of our Weekly Digest we recommended looking at the wellness names as possible candidates for a strong week. We hope you followed our advice as $MSOS (wellness ETF), $TLRY and $VFF were big winners for our portfolio. $TSLA shares came back to earth as Mr. Musk sold 5% of his stake in the EV company.
$RIVN’s IPO was a big success as the company is now worth more than General Motors, despite having not sold any cars yet and looking to generate just $1 million in revenues next quarter. The market no longer cares about Price/earnings, sustainability, profits, cashflow. Innovation, disruption, Metaverse and electric vehicles are the metrics that measure the success of stocks in the short term. Do not let these metrics make you chase all stocks involved in the sectors pointed before, as there are some clear winners and losers already emerging. $PYPL’s and $DIS’s earnings were disappointing and showed that the market has no mercy for some of its old friends.
Our portfolio had a decent week despite the overall turmoil in the indices. We managed to take advantage of $RBLX’s earnings and the re-birth of the wellness sector. In addition, going in light in big tech names helped protect capital during the mid-week turbulences. Here are the stocks that worked best for us this week and how we approached them:
This stock has been our best earnings play of the year. We bought some $90 calls before earnings that cost $100. On Wednesday we sold them for an average of $1300 each. This has been a huge boost to our portfolio on a day when the indices took a small dive. In addition, on Thursday, we re-engaged the stock vs the earnings gap around $94 for another impressive run to 107+. We exited on Friday’s close but put on a new call spread for the end of the year in case this Metaverse stock continues higher. We really hope you followed our recommendation for this name! Similar to $ABNB, this could have been a play that defines the entire quarter for your portfolio!
We became bullish on the wellness sector on Friday on news of possible legislation being passed by Republicans in the coming weeks. We bought some $MSOS, $TLRY and $GRWG calls and common stock for an impressive ride throughout the week. We have trimmed into strength and continue to hold calls for $TLRY and $MSOS for the end of the year. This has been the worst performing sector which has finally entered a new active sequence that we believe can continue in the next couple of months.
Staying out of $FB for the first 4 days of the week has been the correct approach. On Friday, as soon as $FB reclaimed its 8&21EMA we re-engaged this stock for a nice cashflow trade of more than 8 points. In addition, we had some leftover $345 calls expiring this week which are once again profitable. With the entire tech sector showing some sings of life, we believe that $FB can continue higher from here into the year’s end.
The action on Friday afternoon in the indices makes us more bullish going into next week. The tech sector managed to post a decent engulfing candle, resolving the recent wedge type chart to the upside for now. Similarly, the $SPY closed on a positive note erasing some of this week’s losses. $FB, $GOOGL and $AAPL showed signs of life and we are once again more bullish on big tech after they have absorbed the inflation scare of the mid week. We continue to be bullish on the developments in the Metaverse as well as the wellness and small cap sectors.
In order to find out how we positioned in our portfolio, I strongly suggest you subscribe to our Morning Game Plan at this link:
Have a great weekend and remember that at Eclubtrading We Grow Together!