March 27, 2022

An overbought market that stays overbought is bullish. This is the current situation.

After a big sell-off, the pattern is for the most beaten-down stocks to rally the hardest initially. We have seen this in the technology sector during this two-week rally.

Whether this continues is up for debate. The large amount of resistance on most computer-related issues turns any kind of leadership proposition into something bordering on wishful thinking. At least for the time being.

Instead, it is logical to expect commodity shares to remain the horses in this rally. They are the ones best cut out for this backdrop of high inflation, rising bond yields, an unfriendly Fed, and the uncertainty of a war which may exacerbate all of the above.

We will continue emphasizing them. These will at some point correct just like everything else. My recent comment about how the fertilizers have the best supply/demand character is based on Ukraine and Russia providing a major amount of the world's nitrogen and other fertilizer elements, not to mention wheat. Removing part of this supply from the market is expected to lead to a global food shortage.

The Ukrainian war will reduce crop plantings this spring. When coupled with increasing drought in the U.S., and reduced yields in Brazil & Argentina, the outlook for food supply chain woes is increasing and not just with energy.

As previously mentioned, the liquid glamours with estimates of 30%+ are the favored actors. Seeing Nvidia (NVDA), a recent triggered trade, and Tesla (TSLA), discussed below, set up is considered a bonus amid the austere environment for growth stocks.

We are still interested in a TQQQ entry if given the right pullback.

The following names are believed to be the most attractive for our strategy of speculation in the $13+ market. Click on charts to zoom in.

Alpha Metallurgical Resources (AMR)

Arista Networks (ANET)

Darling Ingredients (DAR)

Denbury (DEN)

Dutch Bros (BROS)

Piedmont Lithium (PLL)

Sitime (SITM)

Tesla (TSLA)

In summation, while most growth stocks remain down for the count, we are going with the flow of this rally attempt. That means buying the cyclicals which are leading the market. Let's be open for the notion of the market pulling in.

Q&A

Q: Very excited to join the report! Question on scaling into a position - If you are scaling in 50% of a position at pivot, then an add-on position (30%) when price moves up 3% from entry, and then another add-on (20%), when price moves up another 2% from entry, for the additional buys are you scaling in with keeping your initial stop loss at 4% below the initial pivot price and adjusting your additional buys for the stop being further away?

For example, if you wanted to risk 0.25% of your capital per trade in total and you scale in, you would have to adjust your subsequent buys based being farther from your initial stop or raise your stop for the additional buys? 

A: Welcome to the service. I prefer to use a weighted average price on two or more tranches instead of calculating a separate stop for each tranche. The latter can be cumbersome if you have a number of positions and need to constantly update a spreadsheet w/ the stops. I hope this helps.

Subscriber: Really admire your discipline.

KM: Thank you, but this is an area ripe for continual improvement. Let's always keep an open mind about what can happen in the market.

Kevin Marder

Trading Lessons
Introduction to the service (38:00)
Money management and risk management (20:27)
Bread and butter pullback (11:10)
Bread and butter pullback: Pt II (15:09)
Bread and butter pullback: Pt III (31:48)
Bread and butter pullback: Pt IV (30:16)
System R
Short-selling (25:53)
Wyckoff spring reversal (2:30) 
5-minute breakup test (8:01)