Party like its 1999?
This has been the strongest rally that I've ever experienced. I thought last year was incredibly strong, COVID was also another V recovery. But this one we have the market and Semiconductors making incredible moves and reaching levels that are the most extended in history. Its been pretty cool to witness.
I remember both of those strong rallies though the big pullback rarely came. The general market kept a pretty straight trajectory.... but industry/theme rotation was quick and harsh. Lesson here for me is focus on price and action of the stock/group infront of me. It doesn't matter if the market is extended if a group is just starting to break out. There will always be reasons to not take a trade.... hardest part is tuning most out.
I didn't trade in 1999, I've only studied it. I've always wish I traded the dot-com boom, and it seems like this is the opportunity. I'm focusing on trying to trim, increase my worst-case scenario, and really just let stuff sit as best as I can.
I know we are very extended and need to rest... we don't know if it will be a vicious pull back or just through base building. I'm not blind I see Semis are up an unsustainable amount and I wouldn't buy up here, but this move in my opinion is the start of a MUCH bigger longer-term trend. I remain cautious here with new buys and managing some big winning positions, but firmly believe this is the beginning of a bigger trend.
The theme since this rally started has been Semiconductors. Semis have moved +45% in 5 weeks. This is the strongest group by far however it is currently the most extended it has EVER been in history. The best thing would be it consolidates and rests for a few weeks. This group has showed its hand as the leaders so as semis eventually digest and extended leaders offer secondary entry points, those stocks will become focus.
When semis rest where will rotation go?
We want money to go into high growth groups. We have already started to see some rotation into some new groups that have caught my eye. Software & Space. I also want to note that within Semiconductors there a quite a few sub-themes inside we track that money has been rotating around within.
Software was one of the most beaten down groups in the last year. The entire move down it was failing to get above the 10-week. 4 weeks ago when it broke through the 10-week, it was the first real change in character. Since then we've started to see some software stocks make big moves on earnings and leaders start to show themselves. The character of software has changed and this is a top group I'll be watching outside of semis.
Space has been a tough group the past few weeks. FLY reported earnings and bought space stocks down earlier last week. Then RKLB reported and looks like the group could be ready to go. I know a lot of these names trade wide and are tough to buy on strength... but lots of potential opportunities.
My Focus
2 scenarios I'm watching for:
1. We open in last week's wick. Similar entry to my GOOGL & CRWV trades.
2. We have inside week or retest closer to base pivot ~37.
Notable Charts
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