Warren turns to Elon and says, “I own this place. Bought it back in 2008. Made me a lot of money.”

Elon looks at Warren. “That’s neat. But you know what the difference is between you and me?”

“What’s that,” says Warren.

“About $1.3B.”

According to the Bloomberg Billionaires Index, Elon Musk’s surpassed that of Warren Buffet last week to make him the 7th richest person in the world.

To be fair, Warren’s given a lot of money away to charity, and Jeff Bezos could crush both of them with his wallet.

Yet, it highlights the lunacy of this market.

In the last 12 months, General Motors took in $135B in revenue and $4.7B in net income. It has a market capitalization of $34.9B.

Tesla, on the other hand, grabbed $26B in revenue with -$0.136B in net income. 

Their market cap…$286.33B

This week’s jump focuses on fantastical stories like these along with critical market moving headlines and events.

Because knowing how to combine the story and chart analysis helped me cash in one of my biggest trades of the year!

 

*Please see disclaimer below

 

But, stories and charts aren’t much use unless you understand what to look for…

Which is why going over examples help…

…and why I created this video lesson on the trade.

 

Valuation shmaluation

 

I’m old enough to remember when analysts and investors looked at what a company earned.

They’d sit down with a slide rule (ok maybe not that old) and create discounted cash flow analysis and look at earnings stability.

Then we got this thing called the ‘internet.’

…and everything changed.

Companies saw multi-million and billion-dollar valuations based on clicks and eyeballs. No one cared that they never earned a single penny or sold a thing…

Until they did.

 

Nasdaq Composite Weekly Chart

 

Let me point out something real quick – the green line 200-period moving average.

That is a great indicator to use in trading, which I talk all about here.

Today’s market hold so many parallels, they might as well be twins.

Real ones, not like Arnold Schwarzenegger and Danny Devito.

I mean, look at the price action in Nikola (NKLA) which is still months/years away from a dime of revenue…

 

NKLA Daily Chart

 

And don’t get me wrong, Milton is a great CEO. He was a fabulous guest during his interview we did for Raging Bull Elite members.

But a market cap of 19.58B…

 

Something smells fishy…

 

Here’s the thing – I don’t need every tick in a stock to make sense.

I make plenty of trades on momentum stocks that tend to garner ludicrous valuations.

Heck, just the other day, I made a trade in a stock just because Robinhood trades were piling in. No idea what the company did…but I walked away with a profit.

 

What’s moving the markets this week

 

So, do corporate earnings matter at all?

Actually, yes, just not the way you think.

It’s all about perception – what the marginal dollar thinks about.

Look around the last few weeks and you’ll have seen money rotate from one place to another. Other than a few companies like Apple (AAPL), Amazon (AMZN) and tech elevating indexes, no new money has entered all the other thousands of stocks.

But all that could change this week.

We kick off earnings season with banks like JP Morgan (JPM), Wells Fargo (WFC), and Citigroup (C). 

These financial mammoths peel back the veneer the Fed put on the economy, letting us see what’s really underneath.

And I can tell you something – if investors hear one whiff of potential credit market problems, you won’t be able to sneeze before the next selloff. 

Right now, we’re being propped up by Fed funny money. But, like bad high school magician, they’ve really only got one trick in their bag. They try to dress it up different ways, but it’s all the same thing.

If they can’t keep the lending markets liquid, that won’t just be the straw that breaks the camel’s back, that will be the hay that smothers it.

 

My gameplan – keep it classy

 

Not suit and tie classy. No, I’m talking about education classy.

And that all starts with my Total Alpha Masterclass, available for signup right now!

Click here to register for my Total Alpha Masterclass.

 

Stocks I want to bet against this week…

SC, DFS, PENN, IWM, SNAP

 

Stocks I want to buy this week…

MJ, DKNG, FSLY, PYPL, OKTA, ZM, TWLO, MTCH, NOW, CVNA, ABT, GAN, ECL, CARR, GDX, EXPE, RNG, NEM, CLX, EBAY, VAPO, NKLA, CTXS, COUP, WK, PTON, SHLL, RH, AVLR, SHOP, JNJ, SONO, MSFT, SPOT, TDOC, TTD, GOOGL, ROKU, CRSP

 

This Week’s Calendar

 

Monday, July 13th

  • Major earnings: Pepsico (PEP)

 

Tuesday, July 14th

  • 6:00 AM EST – NFIB Small Business Optimism June
  • 7:45 AM EST – ICSC Weekly Retail Sales
  • 8:30 AM EST – Consumer Price Index (CPI) June
  • 4:30 PM EST – API Weekly Inventory Data
  • Major earnings: Barnes & Noble Ed (BNED), Citigroup (C), Delta Airlines (DAL), Fastenal (FAST), First Republic Bank (FRC)JP Morgan Chase (JPM), Wells Fargo (WFC)

 

Wednesday, July 15th

  • 7:00 AM EST – MBA Mortgage Applications Data
  • 8:30 AM EST – Import/Export Prices June
  • 8:30 AM EST – Empire Manufacturing for July
  • 9:15 AM EST – Industrial Production, Capacity Utilization June
  • 10:30 AM EST – Weekly DOE Inventory Data
  • Major earnings: Bank of New York Mellon Corp (BK), Goldman Sachs Grp (GS), PNC Finl Svcs Grp Inc (PNC), UnitedHealth Grp Inc (UNH), US Bancorp (USB), Alcoa Corp (AA), Sleep Number Corp (SNBR)

 

Thursday, July 16th

  • 8:30 AM EST – Weekly Jobless & Continuing Claims
  • 8:30 AM EST – Retail sales June
  • 8:30 AM EST – Philly Fed Business Outlook for July
  • 10:00 AM EST – Business Inventories for May
  • 10:30 AM EST – EIA Natural Gas Inventory Data
  • Major earnings: Abbott Laboratories (ABT), Bank of America Corporation (BAC), Domino’s Pizza (DPZ), Johnson & Johnson (JNJ), Morgan Stanley (MS), Sonoco Products (SON), Truist Financial Corp (TFC), FNB Corp (FL) (FNB), Hunt(J.B.)Transport (JBHT), Netflix Inc (NFLX), PPG Indus Inc (PPG), Western Alliance Bancorp (WAL)

 

Friday, July 17th

  • 8:30 AM EST – Housing Starts for June
  • 10:00 AM EST – University of Michigan Sentiment for July
  • 1:00 PM EST – Baker Hughes Rig Count
  • Major earnings: Ally Finl Inc (ALLY), Blackrock Inc’A’ (BLK), Citizens Finl Grp Inc (CFG), First Horizon National Corp (FHN), Kansas City Southern (KSU), Regions Finl Corporation (RF), State Street Corp (STT), Sensient Technologies (SXT)
Author: Jeff Bishop

One of the best traders anywhere, over the past 20 years Jeff’s made multi-millions trading stocks, ETFs, and options. He is renowned as an incredible trader with a deep insight and a sensitive pulse on the markets and the economy. Jeff Bishop is CEO and Co-Founder of RagingBull.com.

Even greater than his prowess as a trader is his skill and passion in teaching others how to trade and rake in profits while managing risk.

I’ve got a great lesson for you.

Last week I managed to pull in $150,000 in profits trading Tesla intraday.

 

Total Alpha members got to watch me trade this in real-time!

*Please see disclaimer below

 

It ranks as one of my top trades of all-time. 

That alone makes it worth dissecting and examining. 

That’s why I’ve created a short video for you to check out. 

 

Click here to watch my video lesson.

 

In addition, I take the discussion even deeper. 

 

The big picture

 

First, let’s start with the context. Tesla shares soared from $950 to $1400. In percentage terms, that’s roughly what it did when it went from $600-$900 and blew everyone’s mind earlier this year. 

A parabolic move like this always has me looking for a top. The only thing I didn’t see here was the type of volume we got back on that initial move.

 

TSLA Daily Chart

 

Notice how much heavier the volume was the first time. That’s a sign of a multi-day reversal. When I see these at highs and lows, it’s a sign of exhaustion volume or a flush of buyers/sellers.

Nonetheless, the RSI (top of the charts) was already way overbought. So, I was looking for a pause somewhere along the way. The 

 

The shorter timeframe

 

Now, let’s make our way to my favorite hourly chart.

 

TSLA Hourly Chart

 

I drew two different trendlines here because let’s face it…trendlines can be subjective. 

BUT…when they land in the same area, that gives me something to work with.

You see, both of them created a shelf or point of reference. Once the stock started to crack and then drop below the 13-period moving average for the first time in a long while, I expected selling pressure to pick up.

What’s great about this trade is I’m so close to risk (AKA my stop out), that the risk/reward is fantastic. 

Using the highs as my stop, I want to get more than the distance between my entry and the top as a potential reward.

Keep in mind, this stock could have crashed hundreds of dollars in a day under some real pressure. At that point, I would have bought myself a second flamethrower!

Now, the question became whether I buy put options expiring this week or the following week. Both were extremely expensive. 

But, I went in-the-money to cut down on the extrinsic value and went with this week’s expiration.

That meant I needed to be out of the trade same day.

If I had gone with the options for the following week, I don’t know that I would have been able to go as far in-the-money because they were so expensive.

That tradeoff made me look towards the options expiring this week.

 

Selecting targets

 

Picking out profit targets is part art and part science. I know I need to balance the win-rate for the trade with the risk/reward in order to generate positive expected value.

You can read about expected value in my previous editorial.

Oftentimes, I’ll look for areas of support or resistance for my targets. This can use any of the following:

  • Moving averages such as the 13, 30, and 200 period
  • Recent consolidation levels
  • Fibonacci retracements

While this list isn’t all-inclusive, it gives the most common ways I look for support levels.

From there, I want to scale out of the trade. That means as the stock hits a target I take a portion of the trade off to lock in the profits. 

Then, I let the remainder run to another target with a stop back at breakeven on the remaining amount.

That way I lock in profits and make sure I walk away a winner.

Scaling out also allows me to hedge my bets so to speak. Rather than trying to get the exact low or high for my target, I accept I’m not that good and try to just average my way out.

 

Learn even more of my techniques

You can catch my Total Alpha Options Masterclass today. Learn some of my favorite ways to analyze and trade the market right now.

Click here to register for my Total Alpha Options Masterclass.

Author: Jeff Bishop

One of the best traders anywhere, over the past 20 years Jeff’s made multi-millions trading stocks, ETFs, and options. He is renowned as an incredible trader with a deep insight and a sensitive pulse on the markets and the economy. Jeff Bishop is CEO and Co-Founder of RagingBull.com.

Even greater than his prowess as a trader is his skill and passion in teaching others how to trade and rake in profits while managing risk.

 

Groucho Marx once said: “Politics is the art of looking for trouble, finding it everywhere, diagnosing it incorrectly, and applying the wrong remedies.”

I don’t know about you, but I try to avoid the subject as much as possible. 

I like to control everything right in front of me, especially my money. 

But this week Democratic nominee Joe Biden identified a major problem that I’ve been talking about for the last few weeks. 

Now, he’s diagnosed the situation. It follows four years of President Trump identifying the same problem and offering a SIMILAR diagnosis. 

There will be billions, if not trillions on the table, over this problem. 

And I want to show you how to get your share right away.

 

Holes in the American Economy

 

This week, Joe Biden announced a plan to revitalize the U.S. economy. 

He called for a $700 billion government-spending program that would muscle up the U.S. manufacturing and technology sectors. He called it his “Buy American” economic plan.

If this plan sounds familiar, it’s because many Presidents have pushed the nationalistic button on domestic spending for decades. President Trump has been pounding that drum for the better part of four years. 

 

 

Biden claims that his plan would be the largest investment in the American economy since World War II. The plan would see the American government purchase up to $400 billion in U.S. products over four years. Then, there would be about $300 billion in research and development for a swath of technologies like electric vehicles and 5G networks. 

And that certainly sounds like the biggest investment in the country in decades. (Of course, the first stimulus in 2009 after the financial crisis was worth $787 billion, but let’s not focus too much on semantics). 

But it’s not exactly a new direction. In fact, last month, Peter Navarro – Trump’s top trade adviser – told the media that he wanted the U.S. government to provide a $2 trillion stimulus plan to bring American manufacturers back to the States. 

That’s Trillion. With a T.

 

 

Such a plan would consist of two rules: Buy American… and… Hire American. 

So who said that we had a divide among our political parties? [sarc/]

 

All Joking Aside

 

I’m following the money right now. 

And the money is heading into U.S. manufacturing. 

There’s plenty of money to be made in software, robotics, AI, 5G, and the hyped technology that is already quite pricey. There’s opportunity – as I’ve said before – in the real estate markets as demand for industrial property is set to surge in the years ahead. 

But the one place that especially stands out is in the PHYSICAL logistics. 

That’s because areas like trucking and trains have taken such a hit due to COVID that investors have largely ignored the industry. 

Just last week, before the U.S. even introduced the next round of stimulus, the U.S. government purchased about 30% of less-than-truckload (LTL) company YRC Worldwide in exchange for a $700 million cash injection.

Yes, the Treasury Department is now a major owner in long-haul giant YRC Freight.. This is the company behind LTL company, as well as regional trucking giants Holland (Midwest), New Penn (East) and Reddaway (West).

The government now sees trucking as a strategic national security investment. 

And that’s because the government knows that it can spend trillions of dollars to bring manufacturing back to the U.S. – but it’s all for nothing unless we have a robust logistic network of physical trucks and freight vehicles to move goods across the country. 

YRC was a distressed company – and the government made its move. 

But this is just the beginning. Trump’s manufacturing stimulus plan would create an incredible boost to logistics with so much manufacturing returning back to America.

Meanwhile, Biden has already pitched an additional $1.3 trillion spending plan for American infrastructure over 10 years that would provide incentives for low-emission transportation and freight networks. 

The government is backing the freight industry. And investors are still ignoring this trend.

 

 

I don’t know about you.

But I’m eager to follow that money.

 

Author: Jeff Bishop

One of the best traders anywhere, over the past 20 years Jeff’s made multi-millions trading stocks, ETFs, and options. He is renowned as an incredible trader with a deep insight and a sensitive pulse on the markets and the economy. Jeff Bishop is CEO and Co-Founder of RagingBull.com.

Even greater than his prowess as a trader is his skill and passion in teaching others how to trade and rake in profits while managing risk.

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