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Good evening, and welcome to this week’s edition of Stealth Trades!

After an ugly 4 days last week, stocks ripped higher to close the week out strong.

Wednesday was especially significant.  

The CPI report showed no drop in inflation – leading to an initial selloff in the market.

But just before lunch, the big boys started buying. What followed was an epic reversal all the way to the close.

The five-minute chart of the S&P 500 above shows the action in detail.

One of the things I look for is anomalous days in the market when stocks rally on bad or mediocre news as this is a strong sign that prices are likely to go higher. Wednesday was just such a day.

We saw similar price action in May…

And again in August…

If history repeats itself, this is what we could see leading up to the election:

A lot of investors are focused on the upcoming election. Odds of a Trump victory, which appeared to a foregone conclusion following the assassination attempt, are now around 50/50.

In this week’s presidential debate, Trump was less impressive than in years past and Harris was more prepared than most expected.

Regardless of your personal views on the event, the stock market gave the win to Harris. Stocks that would have benefited from a second Trump term like Trump Media (DJT) and Geo Group (GEO) – a private prison company, fell the next morning.

Solar stocks like ARRY and FSLR, on the other hand, which would likely benefit from a Harris victory, saw big gains.

The price action of these names following the debate is laid out below.

The “Harris trade” that is beginning to form is in the clean energy space.

Solar stocks have been eviscerated over the last few years, so this is a sector we will continue to monitor for a potential reversal.

Gold and real estate – two of the areas I have been highlighting for several months – continue to show strength and will likely play out regardless of who wins in November.

Below you can see the decade-long base in gold.

We are seeing a similar pattern on the daily chart:

This “base on base” action is extremely bullish, and I believe gold will reach $4,000-$5,000 per ounce over the next few years.

Mortgage rates are also coming down thanks to expectations of aggressive rate cuts in the coming months.

This is likely to fuel a housing boom as 3% mortgage holders may finally come out and play.

If all plays out as expected, we should see 5% mortgage rates by the end of 2025.

As of Friday morning, at the time of this writing, the S&P 500 is less than 1% from making new all-time highs. It is up 17.9% year-to-date.

Until I see evidence to the contrary, I remain bullish.

Best wishes for your trading,

It was not a fun week for investors.

The S&P 500 fell 4.0% and the Nasdaq was down a full 5.5% in the shortened trading week.

This morning, the long-awaited Employment Situation report of non-farm payrolls was released. Although it showed 142k jobs had been added, this was below the 160k consensus estimate.

After last month’s revision lower (fancy way of saying the government lied and overstated the jobs numbers last year), stocks sold off further in response.

Market leadership took the biggest hits this week. Nvidia, which has been the clear front-runner of the 2023-2024 bull market, is down 21% since reporting earnings last week.

I held several webinars last month warning investors to get out of NVDA after seeing massive selling by company insiders.

The picture was crystal clear.

Hopefully you took our advice and side-stepped the collapse.

Right now, the S&P 500 is at a critical juncture.

By adding a volume profile indicator to a daily chart of the index, we can see where most of the trading has occurred over the last few months.

Looking at the profile along the right side of the screen, we notice several high and low volume areas on the SPY.

The 545 and 530 levels, for example, show prominent high-volume nodes. These are areas where buyers and sellers tend to meet. They act like price magnets.

The 538 area, on the other hand, has seen almost no trading activity. I have highlighted this area with a white box on the chart below:

Historically, low-volume nodes like this tend to be either rejected or blown through quickly.

In other words, if the market does not bounce here at the beginning of next week, expect to see the selloff continue.

The only silver lining to this recent selling is the effect it is having on interest rates. Powell was clear in his speech from Jackson Hole last month that the Federal Reserve is reversing course on monetary policy. He all but confirmed a rate cut at the next Fed meeting.

But some traders are now forecasting a potential 50 bps cut.

10-year bond yields are falling. In fact, interest rates made new 52-week lows today.

The sector likely to benefit most from lower borrowing rates is construction.

Potential buyers who have been reluctant to move from fear of trading their 3% mortgage for an 8% one can now borrow at around 6%. If the Fed aggressively cuts in 2025, we could see that number fall to 5% which, in my opinion, would spur a huge housing boom.

So, it is no surprise that homebuilders – along with related groups like banking, real estate, insurance and building products – are performing best right now.

Real estate has been out of favor for three and a half years, but it could be the trade of the year in 2025.

Best wishes for your trading,

Good evening, and welcome to this week’s edition of Stealth Trades!

Our market health model has officially flipped back to green – a signal that a healthy bull market is in full effect.

We built this model a little over a year ago. It analyzes both technical and fundamental data to signal when market conditions are healthy or poor.

It’s not perfect. Nothing is. But it keeps us in when times are good and out when conditions are less than ideal.

The market rallied today following Fed Chairman Jerome Powell’s comments at the annual economic conference in Jackson Hole, Wyoming.

“The time has come for policy to adjust,” Powell remarked. “The direction of travel is clear, and the timing and pace of rate cuts will depend on incoming data.”

In other words… It’s time to start cutting.

“We will do everything we can,” Powell said, “to support a strong labor market as we make further progress toward price stability.” By cutting rates, he said, “there is good reason to think that the economy will get back to 2% inflation while maintaining a strong labor market.”

This is what the market has been waiting for – solid confirmation from the head of the Federal Reserve that interest rates are heading down. Powell fell short of hinting at a 50-basis point cut at the next meeting (something I was hopeful for), but the news was bullish for stocks nonetheless.

It was a spectacular day for construction stocks. This is an area of the market I have been talking about for most of 2024. The rally that began in the beginning of the year lost steam after the 6 rate cuts we were promised failed to materialize.

Interest rates are hugely important for homebuilders. A few percentage points in either direction is often the difference between American families being able to afford a mortgage or not.

Here is a quick screenshot from my Construction watchlist on TradingView today:

There are several clean setups in this space – primarily in the big homebuilder and building materials names.

Builders FirstSource (BLDR) pictured below is breaking out from a clean shallowing base.

The nasty dip at the beginning of August was the Japanese Yen fiasco that temporarily rocked international markets. It was a Black Swan type event, so we can ignore it as it pertains to the trade setup.

Generac (GNRC), which manufactures and sells whole-home generator systems, also looks good.

The chart could be cleaner. And without the July 31 Japan shock, it probably would be. This is why it is important to know what is taking place in the markets when evaluating charts.

KB Home (KBH) is a west coast home builder whose stock is also benefiting from the assumption of lower rates going forward.

Notice the strong move through the pivot today.

Mohawk Industries (MHK), pictured below, is breaking out from a textbook flag pattern.

This is one of the most powerful chart patterns in the market, and I will be discussing it in more detail in tomorrow morning’s LIVE presentation. All the details are at the link below.

CLICK HERE TO REGISTER

Nothing is guaranteed. But right now, both the technical and fundamental picture point to one thing – higher stock prices over the rest of the year.

There will be lots of opportunities in several areas. But construction-related stocks are, in my opinion, the low-hanging fruit here.

Get ready for a new housing boom.

Best wishes for your trading,

Good evening, and welcome to this week’s edition of Stealth Trades!

Ever heard of the put/call ratio?

It is a powerful signal – one you can use to buy dips in the market during periods of short-term panic.

Simply put, it measures whether traders are making more bullish or bearish bets.

The easiest way to bet on a near-term move higher or lower in the stock market is buying stock options. Call options are a bet that prices will soon be higher. Puts are a bet they will be lower.

The put/call ratio, which can be plotted on TradingView with the symbol “PC,” gives net reading.

A number ABOVE 1.0 means traders are buying more puts than calls. Market participants are extremely bearish and betting on a near-term crash.

One might think this would be the time to SELL stocks. But here’s what you have to remember…

The average trader stinks.

They panic and sell at the bottom. They chase trends and buy hot stocks at the highs. Following the herd is a good way to lose a lot of money.

Instead, you want to do the opposite. When traders start panicking and load up on put options, that is usually the best time to buy.

Take a look at this chart (again, you can recreate this easily in TradingView)…

On top is the S&P 500 index.

Below is the put/call ratio (ticker symbol PC). I have added a solid white line at the 1.00 reading I mentioned earlier.

Notice how each time the put/call ratio reached 1.00 it marked a low in the market. I marked the S&P chart with a white arrow at each occurrence.

These were great opportunities to buy the dip.

Even in the 2022 bear market, when stock prices fell for nearly a year, the put/call ratio identified turning points for short-term rallies higher.

In the chart below which covers the 2022 bear market period, I have added a 10-day simple moving average in yellow.

This helps to “smooth out” the ratio during times of higher volatility like we experienced then.

Waiting for the moving average to hit that 1.00 put/call ratio pinpointed the best buying opportunities, even in a terrible market.

This indicator is looking for extremes. It spots periods of exaggerated bearishness when traders are overreacting to some recent event.

Traders are people. They are emotional. They overreact.

Our job is to remain rational. 

Obviously, that is easier said than done. That is why tools like the put/call ratio are so valuable.

If you want to add this chart layout to your TradingView suite, here’s how to do it.

Click here to open the chart in a web browser.

Click ‘Copy’ in the top right corner of your screen. If you are not logged in to TradingView, you will be prompted to do so.

Then save the chart as a layout and name it “Put/Call Ratio” (or whatever you like).

You can then access it any time by selecting ‘Load layout’ and choosing “Put/Call Ratio.”

Best wishes for your trading,

Good evening, and welcome to this week’s edition of Stealth Trades!

The divergence could not be any clearer.

Money is pouring into real estate stocks while tech suffers a wave of profit-taking.

The chart above shows the 1-month performance of the real estate sector (measured by IYR) against the Nasdaq Composite index.

The picture is even more obvious on our TA Industry Strength indicator. It compares the relative performance of 40 different market sectors over a given time period.

Half of the leaderboard is tied to real estate. Home builders, utilities, insurance companies and banks (especially those heavy in the mortgage business) benefit directly from housing booms.

All have demonstrated above-average performance in the recent market decline.

One of the major forces behind this shift is a decline in interest rates. After four years of record rate hikes, the market is finally pricing in cuts from the Fed.

The 10-year bond yield fell 100 basis points from May to August.

30-year mortgage rates, which started the year at around 7.7%, are at 6.5% today. It’s not a huge drop, but many buyers who have been on the sidelines watching rates soar for the last couple years are taking what they can get.

Last week saw the largest increase in home refinance applications in over a year. New home applications are more of a lagging indicator but expect to see those metrics shoot up over the next month or two as well.

Right now, the market is in limbo. We saw a nice recovery this week following the weekend selloff, but the market needs to firm up before giving the all clear.

I want to see stocks forming tight, shallowing bases and then following through to new highs. Until that time, it would be wise to restrict new purchases to the absolute strongest area of the market, which, right now, is the real estate sector.

Here are a couple setups I am watching:

Weyerhaeuser Company (WY)

WY is a lumber company. It not only owns significant timberland and real estate, but the company also manufactures and distributes forest products.

This is more of a cup with handle pattern than a traditional shallowing base, but there is clear resistance near the $32 level.

Public Storage (PSA)

PSA is a real estate investment trust which owns and operates self-storage facilities nationwide.

In the weekly chart above, you can see a huge base that has formed over almost two years. $315 has been kryptonite for buyers since mid-2023, and every attempt to breach has failed.

A breakout above this level is where things could get interesting.

Simon Property Group (SPG)

SPG is another REIT, but instead of storage facilities it owns and develops commercial shopping centers. The company owns a portfolio of outlet malls, entertainment venues, dining strips and other mixed-use facilities.

This chart is the cleanest of the three. After a strong rally at the end of last year, the stock has consolidated around the $145 – $155 range for most of 2024.

If SPG breaks out from here on above-average volume, it could be a great buy.

Best wishes for your trading,

Good evening, and welcome to this week’s edition of Stealth Trades!

The stock market is in the middle of a bloodbath.

The Nasdaq fell more than 3,000 points from the highs in early July to Monday morning.

When big drops like this happens, everyone wants to know the reason. There’s always something to point to. But in my opinion, last week’s events were simply the straw that broke the camel’s back.

I typically put this email out on Friday evening. But with so much activity taking place, I wanted to see how things shook out today before sharing my thoughts.

Anyway, here’s what happened…

Friday’s jobs report was 35% below expectations. Economists were expecting 175k new jobs created last month. Turns out it was only 114k. This goes directly against authorities who have been adamant about the US not being in a recession.

Interest rates are crashing…

The 10-year bond yield fell 50 basis points in just over a week as investors began pricing in expectations of Fed rate cuts.

But not every country followed suit. Japan, where interest rates have been the lowest in the world, decided to RAISE interest rates to combat inflation.

No one was expecting it. And the market reacted violently.

Japan’s Nikkei index fell 12.3% – the worst single-day drop since Black Monday in 1987.

Japan’s stock market fell more than 20% in total last week, wiping out all of its 2024 gains. And because of the global market we live in today, the ripple effects hit every major market this morning.

The Nasdaq opened down 5.4% this morning – adding to a 2.4% decline the day before. The S&P, Russell and Dow all dropped as well.

But it wasn’t just the meltdown in Japan that cratered stock prices over the weekend.

America’s favorite value investor, Warren Buffett, also revealed damaging news on Friday. His quarterly report showed that Berkshire Hathaway sold more than half its position in AAPL stock last quarter.

AAPL makes up roughly half of Buffett’s stock portfolio, making this a huge move to safety. Berkshire now holds its largest cash position ever – a record $277 billion.

In fact, Buffett now holds more T-bills than the Federal Reserve.

Investors have been cautiously bullish all year in my opinion. After the AI boom, valuations have become somewhat inflated.

One metric investors watch to gauge this is the ratio of Total Market Cap to GDP. It reflects what percentage of gross domestic product the US stock market is worth.

According to Buffett, markets are overvalued when this figure exceeds 120%. Last week it was at 193% – the highest reading since the 2021 highs.

And when the world’s most famous stock picker starts heading for the exit, other investors are going to follow.

So, what now? Is this the beginning of another bear market? Or will this be just another pullback – albeit a fast and deep one?

It’s too early to say. In my opinion, the level you want to watch is 510 on the SPY (S&P 500 ETF).

This was today’s low following the Japan crash. It also coincides with the May pivot that triggered the most recent rally.

If this is indeed a short-term dip, investors should continue buying at these discounted prices and push stocks higher. If the Monday low is broken, that means assets are still too expensive, and we will likely fall further.

The only upside here is that interest rates have come down. This should help bolster the home construction market and, if we see some emergency rate cuts, push other stocks higher as well.

We are already seeing these effects now. If you look at the top-performing market sectors over the last month, you’ll notice the top 5 are all tied to construction.

Right now, this is the only corner of the market where investors are finding safety.

Stocks like D.R. Horton (DHI) and Generac (GNRC) are providing good buying opportunities on this dip.

If I had to bet on one sector in the second half of 2024, it would be new home construction.

Best wishes for your trading,

Good evening, and welcome to this week’s edition of Stealth Trades!

This week, I am doing something I have never done before.

I am giving away all the details of our newest insider stock pick.

This alert was sent to members of the Insider Effect trading service on Friday morning.

It is not something we will be doing again. But I wanted you to see the depth of our research (and potentially make a few bucks alongside us).

The full details are below…

BUY ALERT 07/26/24

Douglas Elliman (DOUG)

Douglas Elliman (DOUG) is a real estate brokerage and services company based out of New York. Starting out as a basement store on Madison Avenue in 1911, the company changed hands multiple times before being acquired by the Vector Group – a diversified holding company.

At the end of December 2021 – at the height of the bull market – the Vector Group spun off DOUG as its own public entity.

Unfortunately, mortgage rates rose dramatically after the IPO, and the stock was punished in a big way. 

The real estate business, especially the mortgage and brokerage side, are directly affected by interest rate changes. So, it is no surprise that the fastest rate hike cycle in history led to a severe decline in DOUG’s stock price. 

The chart below shows the inverse correlation between mortgage rates on top and DOUG stock underneath.

But the opposite is also true…

Significant rate cuts, like the ones the market expects from the Fed over the next 18-24 months, should positively affect companies like Douglas Elliman.

Which is why we were excited to see a large cluster buy from company insiders this month.

On July 9th and 10th, four insiders acquired 680,148 shares of DOUG for a combined personal investment of just over $780,000. 

This is the most significant insider buying activity in the history of the company, and it took place in just 48 hours.

Chairman & CEO, Howard Lorber, made his largest purchase since 2022.

So did Richard Lampen, the company’s Chief Operations Officer and Director Michael Liebowitz.

Mark Zeithchick’s back-to-back buys were his first ever.

The real estate brokerage industry is going through tough times. Mortgage rates surged from 2.6% in 2021 to nearly 8% – shrinking demand for already unaffordable homes. 

Things are not much better on the commercial front.

The table below shows the decline in commercial real estate transactions over the last two years.

Throw into the mix a landmark antitrust suit against the National Association of Realtors, and it’s been rough sailing for the industry.

But, as usual, insiders know more than us. They have access to better information. And they have a history of making well-timed buys before positive company or industry-wide news.

Odds are the decline in DOUG stock is overdone. The market has a tendency to overreact to bad news, and share prices often fall well below fair value.

Based on insider activity, that appears to be the case today.

From a technical perspective, the stock appears to have bottomed out in June. 

After a significant decline like we have seen here, we like to see a stock “carve out a bottom” off the lows. This represents accumulation by large investors as short sellers are shaken out and firms buy up as much stock as they can at discounted prices.

I have drawn out this formation in white on the daily chart below:

In my experience, it is rare to see large insider cluster buys near the lows for no reason. Whether executives expect to announce company-specific news that will benefit the stock price or are simply taking advantage of discounted prices is yet to be seen. 

But this activity seems highly opportunistic to me. 

Factor in the rotation into small-cap stocks we’re seeing right now, and we believe it prudent to take a position in this low-priced stock alongside the insiders.

Action to Take:  Buy Douglas Elliman Inc (DOUG) stock at the market. Then place a sell stop order at $1.10 to risk 17% on the trade.

Speculators may consider the DOUG Oct18 $2.50 call options (.DOUG241018C2.5).

To learn more about the Insider Effect trading service, click here to watch this week’s webinar where I outline the entire strategy.

Good evening, and welcome to this week’s edition of Traders War Room!

This was not a fun week for tech stocks. The semiconductor trade is souring as Nvidia, Broadcom, Super Micro Computer, and other top names are seeing heavy selling.

The Nasdaq index fell nearly 4% this week – its worst since April.

Few stocks are breaking out into new highs right now. So, instead, we want to be looking for pullback buys.

Pullback buying is different from buying a breakout. What you want to find is a key level that is likely to support prices where buyers are prone to step in.

When the S&P 500 set up in a breakout pattern last year, it was actually less risky to buy a new high since this meant the consolidation was over (see chart below).

But today, you’ll want to take a different approach…

There are two places to buy pullbacks – moving averages and support levels. Let’s start with moving averages since this is the simplest method.

Stocks that trend well, especially large cap stocks, tend to find support at one of their key moving averages on the way up.

The two I watch are the 21-day exponential and 50-day simple moving average.

For very strong stocks – those rising 15-20% per month – I like to buy on pullbacks to the 21-day. Below is a daily chart of Zscaler (ZS), a leading cloud-based cybersecurity stock.

Notice how the 21-day EMA (blue line on chart) “supports” the stock price on the way up. Any touch of this line is typically a good place to buy during a strong trend.

We saw the same thing last year with CrowdStrike (CRWD) – the cybersecurity company responsible for a major tech outage Friday morning.

For slower-moving stocks – those going up 5-10% per month – I like to watch for pullbacks to the 50-day moving average.

This is a heavily defended level in Stage 2 uptrends where we typically see institutional buying.

This is Microsoft (MSFT) during the powerful run it made in the 2^nd quarter last year:

Notice how support is found at the 50-day moving average (red line) each time it is hit.

For large, blue-chip stocks, the 50-day moving average is by far my favorite place to buy during trends. If a stock cannot hold its 50-day, it is likely in trouble and not experiencing the kind of institutional buying that leads to large moves.

So that’s the quick and easy way. Look for leading stocks in strong trends and buy on pullbacks to the 21 or 50-day moving average depending on how rapidly price is rising.

If you are unsure which to use, just split the difference and try to buy between the two. You don’t need to risk more than about 15%. When bought at proper support, the stock should reverse soon and resume its uptrend.

The other place to buy pullbacks is at previous support and resistance zones. This works on both individual stocks and indexes.

Below is a weekly chart of the S&P 500 index:

Notice the initial breakout in April of last year that we discussed earlier. This was a resistance level the market could not get above.

The rally that followed handed us big gains before running out steam and pulling back. Where it stopped, however, was not a coincidence.

What was resistance often becomes support, and this became a powerful support level where investors could buy the pullback. You may remember this setup when I pointed it out in October – the week before this huge rally began.

You will find this same approach useful for individual stocks. Let’s take Salesforce (CRM) for example…

Here you can see a clean breakout entry from May of last year at the $200 level.

Now look what has happened over the next six months:

This $200 resistance level then served as support and created three great buying opportunities before the next rally higher.

Previous highs or lows can also serve as future pullback buy areas. In the daily chart of Microsoft (MSFT) below, we see the all-time high it made last July.

Six months later, after the stock had surpassed this level, it became a new area of support and a great place to buy on a pullback.

This time, it coincided with the 21 and 50-day moving averages.

Three levels of support at the same price on a market-leading stock during a bull market? That’s a buy signal all day long.

These simple techniques will help you buy pullbacks at areas with the least amount of risk and the greatest chance of a quick bounce higher.

On June 17^th, our stock of the week was NuScale Power (SMR) – a nuclear company building small modular reactors to power AI data centers. It quickly doubled from there.

But today it is presenting an opportunity to buy it on a pullback. In the chart below, I have drawn the initial breakout pattern in yellow.

I have also added a white dashed line at the $10 area. This was the March high which became short-term resistance in May and June.

It also coincides with the 50-day moving average (red line on chart). This confluence of multiple levels of support makes for a higher chance of success.

SMR is a mover. It makes sizable moves in both directions. So, I would probably buy at multiple prices and “scale in” to the trade.

In my opinion, the buy zone is between $10.00 and $11.50. If this stock is still being bought by institutions, that is where I expect them to get aggressive. 

If SMR gets much below $10 I want to be out.

Best wishes for your trading,

The Nasdaq and S&P 500 indexes briefly made new highs this morning before retreating into the close.

It feels like the market needs some time to digest what just happened.

Last night’s humiliating debate made it abundantly clear that President Biden is incapable of a second term. Democrats are no doubt working on replacing him before November.

Who they select, how it transpires, and what shakes out over the next few weeks could have a significant impact on Wall Street’s expectations for the future.

Monday will be telling. But until then, let’s look at a new trade idea…

The company is Micron Technology, ticker symbol MU. Micron is a large-cap semiconductor manufacturer. But unlike Nvidia, it specializes in memory and storage solutions, not compute.

Micron reported earnings on Wednesday revealing a 2% revenue beat and earnings that were 29% above analyst expectations. Despite these numbers, MU shares fell 7% the next day.

My guess is that investors wanted to see a bigger surprise. Given the high demand for AI and record growth from peers like Nvidia, Micron’s 2% sales beat wasn’t enough to keep the momentum going.

But the news looks better than many realize. During the earnings call, Micron executives revealed that its high bandwidth memory is sold out for 2024 and most of 2025. Imagine if Tesla had pre-sold every car it will make this year and next. That would be huge news.

Out of 39 analysts covering the stock, 35 rate it a BUY or OVERWEIGHT. 2 have it as a HOLD and 2 UNDERWEIGHT. The stock has zero SELL ratings.

But what caught my eye was the chart setup.

As you know, I prefer stocks that “trade well.” These are names that tend to respect key moving averages, consolidate cleanly, and move swiftly on breakouts.

MU is just such a stock.

It trends well. It moves cleanly into new highs. And it respects past breakout areas.

We often areas that were resistance quickly become support when the stock pulls back. Let’s look at what Micron (MU) did back in November:

After a 5-month consolidation period, the stock broke through its $72 resistance area. It then retested this area in December where it served as support and launched MU higher.

The same thing happened in March…

A breakout above $90 followed by a quick burst higher, a quick retest, and then it took off.

Which brings us to today…

MU formed a textbook shallowing breakout pattern in April and May before breakout out on above-average volume. But the stock has now pulled back. It sits right on the previous breakout area that, if history repeats itself, should serve as support.

The nice thing about setups like this one is that risk is fairly small. Since we are buying off support where the stock should bounce, we don’t need to give it much room.

The 50-day moving average (red line on chart) is at $127 – just 3% below the current price. If MU gets below there, I would start to worry.

If it were me, I would buy here and place a sell stop order at $124. This will give Micron a little breathing room, but still represents a miniscule 5% risk on the trade.

MU is up 170% from its 2022 lows. It is a leading stock in the leading group in a strong bull market. The chance to buy it while only risking 5% is a dream setup for me.

Anything can happen. But great stock traders learn how certain stocks behave. They look for precedent then try to exploit these patterns with a favorable risk/reward ratio.

The chart below shows all three of the setups we just walked through.

Personally, I like our chances on this one.

Best wishes for your trading,

Good evening, and welcome to this week’s edition of Stealth Trades!

The chart almost speaks for itself.

1,153% in a year and a half.

Nvidia’s value has soared from $279 billion in October 2022 to a mind-boggling $3 trillion today.

It took Apple 37 years to become the world’s first trillion-dollar company in 2018.

Nvidia just added a trillion dollars to its market cap in 37 days.

The numbers are hard to even wrap your mind around. As of this writing, Nvidia is now larger than:

• 5x the market cap of Tesla
• 6x the market cap of Walmart
• The entire crypto market COMBINED
• Canada’s GDP plus $1.2 trillion in cash
• GDP of every country in the world except 7
• Amazon and Berkshire Hathaway COMBINED
• The market cap of the entire French stock market
• Collective net worth of the 12 richest people in the world

We used to have a saying at a brokerage company I worked at – when you start taking screenshots of the trade, it’s time to sell.

NVDA could go higher. I will be the first to admit I did not see it going this far. But at this elevation, the stock feels like it has further to fall than fly.

After gapping up to new all-time highs Thursday morning, shares fell 6.5% from opening bell to close.

And as of noon, it is down another 3.3% today.

I have spoken a lot this year about Nvidia being the clear market leader. So, it is no surprise to see the indexes stall in response.

One stock, however, is up on the day…

In last week’s edition, I recommended NuScale Power (SMR) – a company that builds nuclear reactors to power AI data centers. I also sent out a video Monday morning breaking down the trade.

SMR is up 17% this week. It was up even more before NVDA began pulling back on Thursday.

Hopefully you made some money on this one. If so… well done.

As a general rule of thumb, I like to sell some of the position once it gets up over 20%.

In a slower-moving stock like AAPL or WMT, I usually sell half to two-thirds of the position. But with a fast-moving name like SMR that hit the 20% target in 3 days, I only want to sell a quarter of my position and let the rest run.

Everyone is different. How you manage the trade is up to you. But I like to nail down profits when they’re on the board.

Another fast-moving stock I’m looking at is Costamare (CMRE).

Not to be mistaken with Costa del Mar, the sunglasses manufacturer, Costamare is a marine shipping company.

The shipping sector has been a top-performing group for the last several months.

The only area that rivals shipping’s performance is the semiconductor sector which is heavily weighted with NVDA stock.

But unlike NVDA, which went down Thursday and Friday, CMRE went up. The stock gained 8.5% while the broader market pulled back.

This kind of performance divergence is something I love to see – stocks capable of advancing when the rest of the market is pulling back.

Costamare has a relative strength rating of 98. In other words, it is outperforming 98% of all stocks in the market. It is in the top 2%.

I have added the relative strength line to a daily chart of CMRE below.

Notice how it is pointing straight up.

Note also the volume candles across the bottom of the chart. CMRE is surging on consecutive days of above-average buying volume. That’s exactly what we want to see – pullbacks on light volume and surges on higher.

While it can sometimes be risky buying stocks that are extended, CMRE just went through a correction. It pulled back 10% in the first two weeks of June.

This, at least to me, looks like profit-taking. And with that out of the way, the stock is now free to resume its trend higher.

Let’s see what happens next week.

Best wishes for your trading,