Another week, another IT trade setup that we’re looking at. While there is a pickup in the market sentiment, the ideas with most conviction are coming through from IT.
Let’s take a look at what we have today!
Are you scared of new highs?
Who Won This Year?
IT(‘s) the Strongest
The market had been a mess for most of 2021. But even as the weakness persisted at the end of the year, we repeatedly highlighted the strength coming through in the IT space.
Well, this post is no different. We have breakouts, people! Let’s take a look!
Buying Weakness in Market Leaders
From the desk of Steve Strazza @Sstrazza
Yesterday, we wrote a post about scanning for new lows, putting our own spin on a strategy called “Wall Street’s only free lunch.”
I was joking with JC that it felt a bit uncomfortable to search through such a weak list of stocks. After all, we’re used to scanning for strength.
But the scan was a fun exercise, and we found some weakness we want to be buying in secular leaders.
The universe wasn’t exactly full of strong stocks, as we were scanning for new 52-week lows. But that’s OK; we have plenty others for that.
In this post, we’re going to walk through another scan we did internally this week. Unlike the “free lunch,” this one is more in line with our top-down approach of finding the strongest stocks in the strongest groups.
While we’re still scanning for new lows, we’re doing so on a much shorter time frame, and we’re adding additional filters to ensure all the stocks on our list are leaders.
We like to tailor our scan parameters to the market environment. As such, we’re always changing it up to adapt to the prevailing conditions.
Let’s dive in and walk through our thought process for this scan. Then we’ll take a look at some names and outline the best setups that we could find.
The idea of this scan was to find strong stocks that pulled back during December but remained above their first-half highs. We’re looking for stocks that showed relative strength and resilience during the recent volatility and recovered quickly from it.
BNN Bloomberg: Stocks, Bonds and Dutch Masters
The bond market continues to price in higher inflation and higher interest rates.
The types of stocks that tend to do well in that environment are Energy and Financials. So that’s where we’re looking.
An area that continues to see relative strength is in Semiconductors. One name in particular stands out from Amsterdam is ASML.
We talk about all of this and more in this short New Year’s Eve Clip:
The Hall of Famers (12-31-2021)
From the desk of Steve Strazza @Sstrazza
Our Hall of Famers list is composed of the 100 largest US-based stocks.
These stocks range from the mega-cap growth behemoths like Apple and Microsoft – with market caps in excess of $2T – to some of the new-age large-cap disruptors such as Moderna, Square, and Snap.
It has all the big names and more.
It doesn’t include ADRs or any stock not domiciled in the US. But don’t worry; we developed a separate universe for that which you can check out here.
The Hall of Famers is simple.
We take our list of 100 names and then apply our technical filters so the strongest stocks with the most momentum rise to the top.
Let’s dive right in and check out what these big boys are up to.
[Video] It Is Different This Time
Our friends over at Stockcharts.com asked me to put together a short video on the most important theme of 2021.
For me, it’s hard to ignore how breadth deterioration throughout the most the year impacted sentiment. This summer, the extreme levels of bullishness among individual investors and financial advisors became a headwind for stocks.
After the prices of those stocks deteriorated further into the Fall, that sentiment flipped to the opposite extreme. We came into December 2021 with the most bears in over a year and fewest bulls since April 2020.
As we enter 2022, sentiment is very different than how things looked entering 2020 and 2021.
By my work, this time is different. Very different.
Check out the video and full and then let me know what you think!
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