Weekly Update: The Fed Raises Interest Rates… Again
Good evening, and welcome to this week’s edition of Stealth Trades!
The Fed raised interest rates another 0.25% this week. Americans now have the highest borrowing cost they have seen in 22 years.
Powell and his clown squad continue trying to squash growth in order to combat the inflation caused by all the money they printed in 2020 and 2021.
As of this week, interest rates are the highest they have been since 2001.
So far, investors have shrugged this off, however. The 25 basis point move was already priced in, so stocks moved little on the news.
If I had to bet, I would say Wednesday was the last rate hike we will see for a while. Powell has made his point. And he has proven that he would stick to his plan until inflation was tamed.
Now sit down and let the markets work Jerome.
I have a flight to catch in a few hours, so I will jump straight into my trade ideas for next week:
Traeger (COOK)
My fellow barbecue enthusiasts will recognize this name.
Traeger changed the game a few years ago with its easy-to-use, app controlled, pellet smoker grill. The meat smoking trend grew tremendously popular doing COVID, allowing the company to rapidly grow its market share.
Several competitors have attempted to dethrone the BBQ king, but Traeger is the original and as such, sells at a premium. This is how the company is able to maintain gross margins of over 30%.
COOK went public in mid-2021 at $22 per share. It then fell 90% in last year’s bear market to less than $3.
But price has now stabilized, and the stock appears to be nearing the end of its Stage 1 basing process.
Volume is drying up nicely, the moving averages are turning upward, and volatility has come way down. If COOK can get above the $4.50 area, it could trigger a new Stage 2 uptrend and a perfect buy point.
CAVA Group (CAVA)
CAVA is a hot new restaurant chain with 263 locations across 22 states. The company plans to open 44 more this year.
The company went public in May and, so far, has shown a lot of strength.
The stock was offered at $22 in its IPO, and it hit double that number in its first trading day.
The bull case is that this could be the next Chipotle. I haven’t eaten at one so I can’t weigh in on the quality, but I would call that overly optimistic.
But I’m not looking for a stock I can hold for a decade – just something capable of delivering a quick gain.
There are two ways one could play this. The first would be buying a break above $54 to see if the stock surges when it hits new high ground.
The other trade would be buying here in the $48-$50 range with a stop loss below the initial breakout area of $46. This coincides with the 21-day moving average and should offer support if CAVA is to continue moving higher.
On Holding (ONON)
The popular athletic shoemaker has been a favorite of mine since the beginning of the year.
Hot retail brands have been some of the biggest success stories in the stock market, so I am always in search of a budding name with big sales growth like OnCloud.
The company is growing revenue at around 80% per quarter so this stock is in play until those numbers start slowing down.
ONON made new 52-week highs this week before falling 6% in Thursday’s selloff. I would consider buying on this pullback to the 21-day moving average which has supported this stock for most of the current rally.
A trader could risk 10% by putting his stop loss below the 50-day moving average.
Best wishes for your trading,
