1/27 Best Idea For The Week Ahead

We closed yesterday at another new weekly high close. This has become a recurring theme recently and there isn’t much to say other than until we close a week below that blue line, the market is not a short . This week is going to be big in possibly changing that narrative with Powell speaking and the mega caps reporting but until we see something in this chart that confirms a trend change, caution is warranted because we’re at max overbought levels, but things can stay at those levels for a long time.

Historically speaking if you zoom out on a weekly chart of the SPY, below, every major dump we’ve had in recent years came with the rsi being as elevated as it is now. I know this time is different, soft landing, whatever but that is why I’m saying things are ok now over the 8 week, but if that uptrend we’re in breaks then we have to change our narrative and reduce exposure, so keep an open mind.

This week’s best idea is one of the largest companies in the energy space. I’ve seen some bullish trades recently, oil seems to be breaking out, and yesterday’s attack by the Houthis on a ship didn’t help calm tensions down. If oil continues its breakout and sustains over the 200 day as it did yesterday, it seems like short term at least, energy names are the space you want to be in. Again, this doesn’t mean forever, very few names are forever, but there’s always a new sector gaining momentum in the market and it seems to be energy momentarily. We’re going to look at what the analysts are saying, the options flow, some charts, and 2 potential trades 5 month trades on it that could return 22% or 43% depending on how aggressive you want to be even if the stock drops 10% from today.