3/11 Best Idea For The Week Ahead
$400B defensive giant sits at very oversold levels. How to play it.
Lots to discuss in this weekend update.
The Market finally broke down, now what
My best idea which is a $400b defensive giant that is very oversold.
Let’s start with the big one, the overall market. I got that recap out friday morning premarket because I hated thursday’s close. I hope you all got that early enough because the first 30 minutes or so friday, we were green, it was a great opportunity to de-risk your portfolios if the multiple other warnings I gave last week weren’t enough.
The followthrough that we saw was just simply technical selling, the fact it coincided with the SIVB collapse was not a coincidence. We trended higher and higher but when the damn broke, the flood commenced.
Here is what I’m seeing and thinking now. The breakdown was clear as day thursday afternoon at the cose, the move friday took us back into the downtrend we were in for all of 2022. That is it, the “bull market is back” crowd is done. We had a nice uptrend, it lasted 6 months, now we’re back in a move lower.
My target is around 3600 which is the bottom of the JPM collar. We recently tested the top of it. This move was where I took off all my leverage and now have moved into shorter term put sales on higher quality names. I will go over all those positions monday in my recap, many of the names I was in before, but with shorter timeframes and using cash secured puts now. The reason being is now the market is going to get nasty, but I can dabble in quality names, take assignment and sell covered calls. There is no 1 set strategy to deal with a dynamic market, and what worked for the last 6 months won’t work now. Levering up into a downtrend is how you blow up your account, so don’t do that, there will be a time to do that again, and we will catch it.
I expect a drift lower for some time, too many questions with the regional banks destroyed, I do think there’s lots of opportunity in the bigger banks because they’re going to be the big winners of this as people question why they bank with smaller banks. The market hates uncertainty and now we have so many questions left to be answered. Was SVB a one off? Are there others? Who will bail them out? Will there be contagion next week? All valid questions and from the put buying we saw this week the answer is I don’t know, but my guess is yes there will be more, never has a fed hiking cycle gone this quickly and the idea it would go smoothly was nuts.
My Best Idea
As I scanned through my database, I couldn’t find any bullish engulfing candles this week so I can’t even share some charts of interest, everything broke down, you had 1200+ names hitting new lows! That’s how quick this selloff has been. I did manage to find 1 great name that is very oversold and one of the best companies in our markets. Rare to see such quality beatdown like this.
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