Treasury yield pauses, bulls trap shorts and the indices make an impressive comeback!

Happy Saturday and welcome to our Weekly Digest column! What a week we had in the markets. We continued the downtrend on Monday and Tuesday as the energy crisis intensified. On Wednesday a pattern changed. In the previous weeks in the last hour of trading we had a sell program. Wednesday night, indices managed to keep close off lows showing signs of life. This was our buy signal as we went long tech which had reached oversold territory again. Despite a stronger than expected CPI reading, tech continued to act well and led the 2 day rally in the overall market. Friday, the cherry on top was $AMZN’s awakening, as the e-commerce giant posted one of its 100+ points day. Earnings are in full swing. The banks were first to report. Great earnings and outlook intensified the buying pressure. Those caught short mid-week had no chance to exit as we had a rapid snap-back rally. The treasury yield eased off below 1.55% which helped tech and growth names to act better. Small caps and crypto rallied which showed that investors are once again bullish on the market. We had a great week for our portfolio as we returned almost 10% in just 5 trading days. In such cases, timing is crucial. Positioning long Wednesday and continuing to buy dips on Thursday offered our portfolio one of the best weekly performances of the year. There are several worth mentioning winners this week: $TSLA, $CRM, $MSFT, $AMZN. Apart from these ones, we had great trades in $AMD, $F, $BTCUSD, $JPM (reversal play with options). It is nice when most trades work out and it is difficult to choose the best ones. Make sure to book profits as such moves do not happen every week. We have been in a horrible market for the past 6 weeks and we need to keep things in perspective.

$TSLA chart

When $TSLA acts well it is hard not to get involved. It had an impressive rally above the moving averages in the past weeks. We continued to have exposure throughout the week through options and common stock. It easily surpassed 807 and 821 to close the week above 840. What more can you ask from it?:) We have currently exited all our call spreads and common stock as the EV maker announces earnings results on Wednesday. We put on a lotto call spread 870/920 for which we paid $700. In case $TSLA does make a new all time high next week, we are looking for another 6x profit.

$CRM chart

Salesforce has been a big winner for our portfolio and we still expect greater things from this company. We put on a call spread 280/300 last week which had impressive results this week as $CRM made a new all time high. $CRM has been a strong stock amid the market’s sideways action and therefore we were confident that when the market conditions would improve, it would grind higher. We have trimmed 1/3 but are still involved as it is digesting nicely this huge move.

$MSFT chart

When the market is looking better always go back to the strongest stocks out there. This was exactly our approach this week as we engaged $MSFT on Wednesday for an impressive rally past $300. We still hold call spreads for earnings later this month. We exited our stock for great wins as booking profits along the way is always a winning strategy. Do not let FOMO dictate your trading strategy.

$AMZN chart

$AMZN has been the weakest link in the tech sector for a long time. It has been a laggard. When the market showed signs of life on Wednesday night we put on a call spread for earnings later this month. On Friday, $AMZN offered an impressive igniting candle above all moving averages as the retail sales numbers were better than expected. We got long the stock around 3320 for a 80+ move. Having the calls from Wednesday and buying the stock early on Friday were a nice boost to our overall portfolio performance. We trimmed some stock at the close but are still long for next week as it might offer some continuation. We are hoping to maximize our 3350/3500 call spreads for a $10.000+ profit.

We hope you managed to shift gears quickly on Wednesday and profited from the impressive end of the week rally. It was not the easiest thing to do as we had many fake moves in the past. We are cautious going into next week as the indices will need to digest this huge move. Earnings season is in full swing and tech needs to deliver impressive results in order for this rally to continue. Make sure not to let your highs get too high or your lows too low. This is a good advice which most of us forget in times of euphoria or frustration. Several headwinds such as labor shortages, chip shortages and ramping inflation will continue to play a role. For now at least, with the indices above all moving averages, the bulls are finally in control after a long period. Cheers to that! Have a great weekend!

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