Be forewarned…this article is not going to be about technicals. As a professional trader sometimes story-telling is the best way to understand someone else’s trade or get in your own (as elaborated on in my last post on “Engineering a Trade“). So why did BTC/USD have that huge spike to 19,000 and that huge correction back down? What’s happening with BitCoin?
I’ve been missing for a while from the blog; for that, I must apologize. For those of you on my unusual options alert service, we’ve been doing quite well I’d say.
But that’s beside the point. Tonight in my chat room I was reminded of a fun story that exemplifies what I’d call ‘designing’ a trade (or even engineering a trade).
Engineering a Trade
Last October, a good friend of mine was going for an interview to go work at a hedge fund. He wasn’t sure what to say at his interview so he straight up asked me if I had any advice.
Luckily for him, I was in the middle of engineering a trade that would shit a decent amount of my asset allocations towards a sector and out of a few currency trades. Talking about a prior trade prospect after it has come to fruition might seem like bragging.
- $S has been the subject of lots M&A speculation since announcing interest in such a deal.
- $TMUS and $CHTR have been the primary targets mentioned in mainstream stories, but neither makes sense.
- $ERIC may be the true target and mainstream financial news may have slipped with a tip-off.
- Timeline of news on $ERIC vs that of $S is oddly fitting
Sprint ($S), a telecommunications company of which Softbank ($SFTBY) owns 80% of, has been in and out news cycles about a possible merger or acquisition for most of the year.
This years’ hype began on February 17th, 2017, when Reuters reported that Softbank was looking to sell their equity in Sprint to Deutsche Telekom, the parent company of $TMUS.
Today’s announcement by Fed Chair Janet Yellen is supposed to give the markets an update of the timeline for when and at what pace the Federal Reserve’s Balance sheet will be cut.
When you look at the sheet, it is a pretty frightful thing and one that makes for some pretty easy headlines.
So my last “stocks to watch” post turned out to have a 100% winning rate. Had you taken on any of the positions listed there, you would have profited (to various extents and %s of course).
While that may be the only time that ever happens, I just felt like bragging a little bit. 10/10 on weekly stock pick performance is..well…pretty good.
But regardless, don’t consider all of the trades listed below to be profitable necessarily; some will, some won’t. That’s just how it is.
What this list is meant to be, is a list of stocks for you to consider adding to your watchlist. Nothing more and nothing less. With that said, here are some of the tickers that’ll be on my watchlist.
I wanted to do a quick follow-up piece to my recent articles “Solar Eclipse Resolution and Why I’m Watching $RSX” and “The Hurricane Harvey Trade Nobody Is Talking About…Yet.”
In the resolution article, I noted/proved that what financial astrologers have spoken about (longer than I have) and that the general pattern solar eclipses cause on the market had done as predicted; $VIX spiked up leading up to the eclipse and then started to come back down soon after it was over.
Russian Stock Markets and the 2017 Solar Eclipse
Hurricane Harvey has the mainstream financial news companies hyper-focused on which stocks or futures they think you should trade during the storm.
Most of the snippets I’ve seen or the commentaries that I’ve read focus on the obvious stuff.
Energy names in the oil and gasoline sector, home builder stocks (like $LOW and $HD), generator companies ($GNRC – I sent to the text alert service and traded it also. I bought calls Friday and sold most of them Monday pretty soon after the opening bell @ +155%), and insurance companies.
Last night though, as I was going over some money flow data from the day’s session I noticed something odd. Most of the major banks had net positive flows despite lower stock prices. This is very typical of institutional buying. The banks with the most in-flows were $C (+243.81 mil), $JPM and $WFC. They all have fairly large lending entities.
So I decided to see what storms have done to the financial sector in general in some of the larger more recent storms.
If you want to skip to end, the trend is that they move up during the duration of the storms and then continue onward in their prior trend afterwards. So watch those three tickers above as well as $XLF. I’ll be buying some more bank exposure as soon as I see the sector start to make a strong move up.
Trading Hurricane Harvey With Bank Stocks: Little chart history anyone?
October 25th, North American Storm Complex
Bottom Line: Watch bank stocks for a possible swing-trade soon.
The Solar Eclipse Resolution
So, as I went into more depth about on Sunday night, there seems to be market impact via solar eclipses…namely a $VIX ramp the week before the eclipse and then some volatility chop. The chop is normally in a downward trend afterward though.
You can check that post for some historical charts and the chart leading up to the eclipse yesterday. For simplicity, I’m just going to post the days leading up to yesterday on $VIX and this ‘resolution’ that is occurring so far (pull back).
Hurray, you were seemingly right so far! I wish I took your $NQ_F and $HG_F trades!
Yeah, that’s actually true. Those both worked out very well for me (copper is a highly conductive metal…magnetism and electricity are obviously related, so the impact of it caused by the solar eclipse is implied).
This is a new type of post that I will try to make each week (usually weekends, but sometimes during the week) where I share some stocks to watch, or at least that I’ll be watching based on recent Unusual Options Activity as well as some other market factors.
For full disclosure, I will let you know which ones I have positions in already. The names on this list that I don’t have positions in are names that I’ll be eyeing for opening positions in.
Stocks To Watch Early On In The Week of August 21st, 2017
Tomorrow’s Solar Eclipse and Its’ Impact on Markets
Tomorrow, August 21st, 2017, a solar eclipse will occur. The eclipse will be visible as a total eclipse by a band stretching across the USA from Oregon to South Carolina, and as a partial eclipse in the rest of the country and world.
Such an event usually brings me back to elementary school when we would typically get an extra recess to go out and watch it.
I have an insatiable curiosity about things that interest me The simple explanation behind a solar eclipse is fairly easy to grasp, even when you’re young; the moon is at an angle that sets it between the sun, such that the sun seems to blocked out (eclipsed, if you will) by it. Even studying physics in college doesn’t give you much more than that beyond the specific axial angles the occur at.
But after spending over a decade in financial markets and letting that curiosity remain insatiable, I’ve read and continue to read a great deal about the markets and things that influence it.
Now here’s where it gets weird…
The vast majority of financial writers and investors are quick to pass off the notion of such events as having any sort of impact on the markets as being ridiculous and purely pseudo-science.
But there are some well-recognized investors that take/have taken financial astrology seriously, with one of the most notable being W.D. Gann (listed as one of Investopedia’s Top 10 Most Famous Traders in the World).
Gann, in-fact had an entire section of his reading list for students that covered financial astrology.
Maybe it’s not so weird after all
Let’s think of it like this for a minute. The gravitational effects of the sun on the Earth are what keep it in its’ orbit. The power of the moon’s gravitational effects on the Earth are strong enough to create ocean waves.
We, despite our appearances, are composed of individual molecules (in-turn composed of individual atoms). The gravitational impact on atoms is widely accepted amongst the modern scientific community; depending on the size of the atoms and their proximity to each other, the larger body will pull on the smaller atoms.
I came here to learn about trading! What are you yapping about?
During a solar eclipse, the gravitational pull from other stellar bodies on every atom on our planet is impacted; if you think about it, there’s really no other alternatives.
Our bodies, including our brains, are therefore impacted by such lunar and solar events in some way. Typically the time leading up to an eclipse guides us towards a great deal of negative energy, which can cause the choices that we, our political leaders, as well as players in the market are making without us (or them) even being cognizant of our thought processes being altered.
And now the point.
Historically, solar eclipses have been correlated with periods of high volatility in the markets (up and down). This correlation is seen the week leading up to and after the week after the eclipse.
Well, last week, $VIX saw the first significant spike it’s seen in a while (roughly a week before tomorrow’s eclipse)..
The last solar eclipse visible from the USA was on May 20th, 2012…
And then before that, May 10th, 1994.
Ok! Ok! Enough charts!
There’s much more to the theory of solar eclipses and their impacts on markets. Not all eclipses are visible from every country and there’s talk about the impact being different based on which countries they are indeed visible from and the how this alters the impact. For an interesting read check out this little blog here.
The same site, in and attempt to prove the sanity of those who would believe such things is where I got the reading list from Gann that I posted above.
So What Does This Solar Eclipse Mean For Markets and Volatility?
Well, we’ve already seen what happens in the week leading up to solar eclipses with regards to $VIX; it ramps up. Typically, we see some chop in volatility the week after the eclipse, with it sometimes rising, but usually, the ramp resolves itself.
If recent history repeats itself, we should see the higher levels of volatility remain as the week starts, but then observe it start to trend downwards with a bit of chop as it resolves itself.
Will it happen? I have no idea, but I love looking at markets from novel ways and seeing what happens. I’ll write a follow-up article next week with what ended up happening.
Eclipse Date Source: https://www.wikiwand.com/en/List_of_solar_eclipses_visible_from_the_United_States