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Morning Commentary

Shorts Crushed

By Charles Payne, CEO & Principal Analyst
11/20/2017 9:30 AM
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Friday was an odd session that saw major indices under pressure from the opening bell, but it was a great session for most individual stocks and that’s great news.

One legitimate beef about the 2017 rally is how much only five names have been responsible for the big move, while most stocks are only fractionally higher, mostly have single digit returns.

Friday, it was the exact opposite.

On the NYSE, there were 1,876 winners versus only 1,026 losers and up volume was 70% better than down volume.  Moreover, there were 119 new 52 highs and only 31 new lows. 

 On the NADSAQ, there were 1,760 advancers and only 1,177 decliners with up 45% or more in volume and 140 new 52-week highs against only 39 new lows.

I like the idea of rotation into new names and industries, and Friday it was brick-and-mortar retailers.

The biggest winner this week is Footlocker (FL) up 34% this week.  But big winners across the board had one thing in common, huge short positions.  I’m talking the kind of short positions where the mavens of Wall Street aren’t just betting stocks move lower, they are rooting for companies to go out of business.

I have a list of potential short squeezes but because of the risk-reward dynamic I’ll probably feature them more on our swing trading service.  That being said, there are some names that should be bought and held beyond an initial short squeeze.  

GOP in the Red Zone

Speaking of squeezes there is now a blitz to get enough Republicans to support an eventual tax bill that President Trump can sign before Christmas.  While I’m not a fan of artificial deadlines, I understand the "sense of urgency" factor.

I think there are already three to six GOP Senate "no" votes with the current version of the plan and let's not forget several Republicans in the House voted "yes" assuming their concerns would be addressed in the final version. 

There’s going to be a lot of squeezing and horse-trading going on over the next few weeks.

Market Parameters

Although we saw a monster rebound on Thursday, it is clear market bias has shifted slightly to the downside. There are a lot of technical support levels to watch, but a simple guide is to watch moving averages.  I prefer the 50 and 200-day exponential moving averages. 

Dow Jones Industrial Average

Key Moving Averages

Although the Dow and S&P 500 were lower last week, great economic data and rotation into value stocks both are great signs for the rally, and of course, the nation.

Today’s Session

More consolidation in semiconductor chips with Marvell bid to buy Cavium sets the top for technology; the boarder market is otherwise nonplussed. Although this week is interrupted by Thanksgiving Day, there is a real chance for the Dow and S&P to reverse recent losses on earnings and bargain hunting.  


 

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