APOLOGIES FOR THE LONG POST – If you’re here just for the picks, scroll down and skip my scattered musings on the state of the markets for the week
What a week for the stock market we just had! JPOW, earnings/guidance all over the place (I’m looking at you, $SQ, $ETSY), new tariffs on China. Unless we get significant news about a positive trade deal development we should expect the new week to be a great one for the bears – markets should lose (quite) a few points across the board, with the potential for a significant drop (we’re talking SPY below 280 very quickly, if 285-287ish resistance doesn’t hold) depending on the news that come ahead.
Even if the main indicators and most stonks come down, however, we know that some will trend up. There are promising potential venues for traders to make a profit across the aisle, and if you’ve followed my posts/watchlists for some time you know that I advocate for investing in individual stocks, and I think both bears and bulls can make a profit in these markets. With the trade war, we know that not all sectors will be affected equally, and if we learned anything from the previous round of tariffs in early May, we know that some sectors and some stocks are actually quite strong in times of trade war turmoil. Cybersecurity, software, health insurance, genetics, (some) medical devices, etc. proved pretty strong in the last round of cuts. And I personally expect cybersecurity, software, and much in the health care sector to climb up/correct in the weeks ahead.
With all this said, make sure you identify those strong stocks that are oversold and shouldn’t be (so) affected by the new tariffs, and keep a close eye on those. If you think a strong company’s stock has been unfairly hit by trade war news and no other significant news (ehem… CRWD, OKTA, ZS, NOW, MDB), then there’s no reason why you should stop investing on that stock, especially if you’re in for the long term.
If you’re feeling overly bearish on the main indicators, keep in mind that a lot of the damage from the news we know (that the US will impose new tariffs on China, that the Chinese govt. is considering retaliation, etc.) will be priced in. By the time the markets open (expect a sharp drop in all main indicators then), we should see the gains of over two months totally wiped out… (in just a few days since FOMC+Tariff tweet, mind you). So if you’re considering going all in on SPY puts (like a couple of you messaged me about!), reconsider. The optimal time to have done this was right after the tariff tweets or even holding puts over the weekend. Monday at market open might not be such a good idea – it’ll all be contingent on what we hear from Trump/China on trade developments, and whatever way the news media spins that. Expect the coming week(s) to be all about China (just like early May was)… Though y’all already knew that.
Also keep in mind that we have (yet another) big round of earnings ahead of us (i.e. $DIS, $ROKU, $TTD, $LYFT/UBER, etc.), Xi’s (hopefully lack of) retaliation, Trump’s whimsical (to say the least) trade policy decisions/responses in the next week, and plenty of significant developments in the global economy to keep an eye out for (i.e. watch out for developments on Brexit and Boris Johnson [my heart goes to my fellow Brits for such a joke of a PM]; developments with Iran and in the Middle East as a whole; unrest in HK; currency wars, etc.). Plenty of news/potentials to turn the markets around. Also keep in mind that Buffett’s Berkshire is holding more cash than ever(would love to hear your thoughts about this/its implications below!)
Here’s a list of stocks to keep a watch on for bulls and bears, along with a very brief explanation on each:
- $CRM is quite oversold, and the markets haven’t really priced in the positive news with the $BABA partnership. There’s an encouraging amount of buying in the 8/23 $150C, and we ($CRM traders/investors) know the company’s tremendous potential and solid fundamentals. If feeling bullish at all this week, this is one to consider.
- $CRWD and $OKTA. These have come down sharply on no good reason, they are in an essential sector that grew in the last round of tariffs. Both are incredibly strong companies ($CRWD well ahead of $OKTA imo, and with much more potential to soar in the short term). $CRWD dropped on Friday on no volume. Monster growth company with VERY few stocks available for trading in a sector well positioned to grow during the trade wars. If bullish, $CRWD should be HIGH on your watchlist, $OKTA closely following. $ZS is also a strong entry, especially if going long (and willing to cash in on strong upcoming earnings!)
- Software/cloud and other tech companies such as $NOW, $MDB, $SPLK, $TWLO (all alarmingly oversold), $ADBE (strongish close above 290, very oversold), $TEAM (Oppenheimer Tech Conference 8/6-8/7) and even popular tech companies like $FB and $PINS. None of these should be terribly hurt by new tariffs, have much potential from a technical standpoint, and are much smarter investments than companies in other sectors such as retail, construction, finances, etc. These stand to lose the least (and win the most, if any!) in the middle of the trade frenzy.
- Do not underestimate the positive Barron’s mentions that $LULU and $NKE received, and consider that the stocks have gotten significant analyst upgrades in the last month or two. Good to keep high on your watchlists if you’re a bull or considering entry on a strong retail stock
- Most things, really… I wouldn’t consider starting positions on retail right now. For those of you who trade options and are bearish, a lot of the cheddar is to be made here. Shorting stocks like $DLTR and $BBY should print tendies, and I do think there’s lots of potential for your $WM and $COST to keep dropping quite a bit.
- Bearish on $CAT, $DE, $MMM
- Bearish on oil companies/oil across the board for next week
- SPY will come down hard if no good news (from China, especially) on the horizon
EARNINGS PLAYS (I will post an explanation for these in my personal wall to declutter this post):
- BULLISH: $DIS (holding some calls, will be picking up a few more right before earnings**) , $TTD, $STMP, $CRON**
- BEARISH: $MELI, $ROKU, $WYNN (considering buying puts right before earnings)
LETS GET THE CHEDDAR, MIS AMIGOS.
Have a bountiful trading week
***Note: I changed the format of this week’s post a little and tried to include a little more information on why those are high on my watchlist. This is not investment advise, as you know. For the negative posters – The main purpose for this post, as in the past, is to start a conversation about individual stocks and to encourage sharing ideas about strong stocks/stocks with more easily discernable patterns. I know that many have benefited in the past, and I will continue to work on these in spite of the shade. Again, these picks are for you to research and to know well, before jumping in.
Disclaimer: Consult your financial professional before making any investment decision.