I was spending some of this weekend diving through some charts, trying to find some names I would be looking to add this coming week if the markets finally started to show some signs of bottoming. Sure enough, S&P futures opened down nearly 2% and pushed near the limit down level of over 5%. As I write this they are down over 4.45%. For all I know, futures will be halted overnight. Yields and Bonds are also continuing their dramatic moves from last week, with the US 10yr yield dropping below .50%. What is crazy about this sell-off is it wouldn't be surprising to see one tweet from POTUS or move/comments by the Fed that reverses some or all of this before the market opens.
Will be quick with this post but will: give my thoughts on where I think we are headed this week, give a few names I would play for a bounce, and a few names I would play for downside on weakness.
Where we are headed
The irony with this current sell-off is most bears are patting themselves on the back saying they called this move, yet they are the same ones who said the Fed would be the the catalyst for downside. In this easy money environment where OPM(Other People's Money) is what drives most of the market, think we have another weekly green close. It may not seem like it, but last week the S&P closed in the green as well. The $282-$284 levels on the SPY loom large. If the markets can hold that I think things are setting up for a bounce. So if I was going to be a bear, I would want to see the coronavirus impact things to the point companies start to worry about paying their bills. Based on what is going on in China right now, where business is looking to resume, don't think things ever get to that point. Time will tell. Underneath $282 on the SPY I will be looking for put positions:
Bounce Plays
I would not call the Biotech sector immune to the coronavirus scare, but would say they are the ones that are not impacted as much. They will not see the supply and/or logistical concerns you would see in other names such as the semi space who do business in China and around the world. Names I am watching closely:
ZYME:
Came down to the $37.50 level before bouncing. Should be back into the $50s when the market finds its footing:
Really love EDIT, great story with buyout potential. Could really go over that 200dma at $25:
ICPT/MDGL
Downside Plays
SPLK has the look of a stock that has lost its direction. The company just posted subpar results but it was mostly from their transition into a sub biz model. If the market is weak on Monday, think the stock comes under more pressure and may try for some puts:
LRCX was mentioned positively in Barron's this weekend:https://www.barrons.com/articles/2-tech-stocks-worth-buying-after-the-coronavirus-selloff-51583531546
It maybe a nice bounce play when markets stabilize but think there is better opportunity to play for downside if the markets fail to find footing:
May look at OLED puts and more SDS calls as well on top of what I am still holding..
The summer of 2015 was the last time we had a limit down open. I think we need to see some type of flush out first before we can say this is the bottom. Maybe it is tomorrow. Maybe it is not for a few more months.
Through this all I will continue to keep things small and look for opportunties to play call/puts on breaks of support/resistance.
See you in the chatroom tomorrow!
-JB