I discussed in recent videos how we could see a pullback towards the end of the quarter because the week after Options Expiration tends to trend to the downside, and the end of the quarter (when we’re in an uptrend) tends to see profit taking and portfolio re-balancing. Beneath the surface, Wednesday’s decline wasn’t as bad as it appeared because it wasn’t a distribution day (yes, the day sucked but the volume wasn’t higher than Tuesday’s volume) and because most of the leaders acted very well. From here, your actions should depend on whether you’re a trader or investor. For investors, I would remain bullish for all the reasons I’ve discussed recently, especially because all the major indexes are still in uptrends. For traders, hopefully you had some cash coming into today. If so, you could take positions/add to some of the leaders if they pull back to support levels (21-day EMA or 50-day MA). You can also add to stocks that held up well (using short-term relative strength) and the ones that pulled back on light volume. Most of the stocks that fit that description on Wednesday were in the software sector.
I’m sure you’re wondering whether the selloff is over. Of course, no one knows, but I’m not overly concerned because I’ve said several times that we will see shakeouts and pullbacks along the way up. Also, next week is a holiday shortened week and that tends to trend to the upside. Jim Cramer discussed it in the video below. Of course, I am not complacent. I simply didn’t think Wednesday was that horrible of a day and I increased my investment levels from approximately 50% to 75%. If we see any sustained follow through selling on heavy volume I will reduce exposure, but for now, I am doing my best to stick with the trend and with the leaders.
Link to Jim Cramer video: https://twitter.com/MadMoneyOnCNBC/status/1275854581143044107
Unusual Option Activity:
6/24/20 Z-Scaler (ZS) with 400 November $95 puts sold to open $10
6/24/20 Tesla (TSLA) buyers of 1870 January 2022 $1800 calls today near $123 for around $23M today into weakness
6/24/20 Twilio (TWLO) with 500 January 2022 $200 puts sold to open for $44.75, stock replacement and similar to trades in other high-growth names lately
6/24/20 Amazon (AMZN) with 900 February $4000 calls bought to open today for around $2.5M
6/23/20 CrowdStrike (CRWD) into day lows with size buy 1000 March $105 calls for $20.35 to open in a stock replacement
6/22/20 Alteryx (AYX) with a large trade as 1000 January 2022 $220 calls opening for $26.30
6/22/20 Zillow (Z) the July $60 calls being bought 2,000X this afternoon from $3.80 to $4.30
Topics covered:
1) 0:00 Announcements
2) 0:20 Market Commentary
3) 7:20 Index Review – Nasdaq Composite and S&P500
4) 10:00 Stock Review – Mega Cap Focus List: AMZN, MSFT, NFLX, ADBE
5) 12:50 Stock Review – Software Focus List: COUP, AYX, VEEV, OKTA, DDOG, CRWD, FSLY, TWLO, NOW, ZS, ZM
6) 18:10 Stock Review – Artificial Intelligence Focus List: SDGR, BTAI, ICAD, DT
7) 20:00 Stock Review – Biotech/Medical Products: SGEN, VRTX, DXCM, STAA, ADVM
8) 23:30 Stock Review – Others: NVDA, Z, CHGG, TSLA, SHOP, BYND
9) 25:50 Current Setups – ACMR, OKTA
10) 27:05 Conclusion/Summary