TIMELY CALL ON THAT BIOTECH ROTATION

Two weeks ago, I had been plotting a rotation into biotech stocks. To sum up my words that week, participants came into all time highs playing defense, and this was a critical step to signal offense.

The $IBB has been trending against the indices all day long. Any time that action occurs in a market like this, it confirms the landscape, which is that we’re trending higher…in case you haven’t noticed.

I pleaded with those selling positions yesterday to quickly buy back in. Moves like this are a positive signal to the overall health, and uptick in risk appetite of the overall market.

Carry on.

OA

It’s no secret, I’ve held some $TWTR stock from Dick (Costello) prices. I knew once we traded @Dick for @Jack, I’d need to endure some pain for awhile. Thus I did. Never felt the time was right to average down, until last night.

I bought shares of $TWTR AH last night to bring down my basis. That report and the reaction kind of felt like a capitulation of sorts, and after watching this stock trade through months of discouragement, and start to slowly climb a wall of worry…this feels like aversion.

OA

I’m a market history guy, and this is quite a good story to tell. If you can recall back into 2013, you’ll remember $AAPL trading in a similar range YTD. It was a $400 stock, but the price range, under performance, and sentiment were all the same.

Here’s a look at the two charts:

I spent a lot of time covering the sentiment in $AAPL. There was a great dialogue about it back then, as well as an earnings trade that quarter when the stock broke out and never looked back.

I highlighted the weekly bar above in the 2013 chart, which serves as a good analog to current price action.

Here’s a weekly chart of $AAPL in its current set-up.

The best tell from all this was the options. In both scenarios, this was the cheapest the options have been heading into earnings. Implied volatility hasn’t been this low for $AAPL since that 2013 earnings release.

To recall how bad sentiment was, it was a hot topic here at iBC. It was hated on the same way it has been now. Bearish opinions outweighed at least 5:1.

Should be a runner at the open when people realize they don’t own enough. I loaded up with some calls yesterday a few hours after the downgrade.

OA

Now or never here. Added to my August calls at a nicer price.

Godspeed,

OA

I’m guilty of recency bias here, so understand that ahead of this idea. A couple months ago, I started talking a lot about the $BPTRAN, which is the bullish percent indicator for transportation stocks. Couple this with the work I did last year about what I felt would be a false Dow Theory sell signal and I’ve been pretty upbeat about this group, especially considering that most of these stocks were hit hard in the last year.

Here’s a longer dated snapshot of this indicator from the DW site. It’s pretty rare for transports to get this low, but this has been a fantastic buy indicator as all my P&F chartists would agree.

Some of the top weightings in the index include $KSU, $UNP, $NSC, $LSTR, $CHRW, $JBHT, $R, $KEX, etc. I’ve been watching the long term charts of these and they look amazing. The last year or more, they’ve all been trading in bullish flag/wedge patterns back to support. The response down there was hard to ignore.

$CHRW reports tonight. I’m tempted to add this to my list of ER plays.

A few weeks ago, I wrote this post about betting against Gold. It hit an oversold signal that stopped the rally in its tracks, and has since pulled back by a good amount.

Well, today crude oil printed an oversold signal of the same caliber.

Oil is seeing a sharp upside reversal here this morning. From here, I’d be looking for entry points on the long side. $OIH, $XOP, $ERX all interesting here at support as well.

OA