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   Strategies & Market TrendsTrader J's Inner Circle


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To: Madharry who wrote (54550)4/6/2022 10:06:10 AM
From: Trader J
   of 55477
 
Value: The value play is still working it seems but I still can't get excited about most stocks right now with the overhang of some of the negative catalysts, primarily geopolitical, inflation and Fed. There are a lot of big flies in the market ointment right now that have a lot of downside potential and I don't think the markets have truly priced them in. To me, it's priced for a soft landing in all of them and I that's a three way parlay I don't think I can get behind.

That said, I'm still looking to snipe where I can and I want to take those other positions in some of my favorite long term tech plays that I missed in the last couple of weeks. Playing the long game can be tough in a market like this because the tides can be violent both ways over the short term. It's why I'm definitely shading to small additions where I can and retaining the cash.

We just have to each, individually, pick our spots for those names we want to enter.

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To: Trader J who wrote (54552)4/6/2022 10:09:27 AM
From: Trader J
   of 55477
 
QCOM/MU: Both of these coming back into range and I'll end up with both at some point shortly. MU at $69 looks really good and QCOM around $133 is my goal, but I'll probably wade in sooner on both.

AMD and other semis in the same boat.

This is just an unwinding of the upside trade in the names that occurred recently and most are approaching their recent lows again.

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To: Elroy who wrote (54546)4/6/2022 10:14:42 AM
From: Trader J
   of 55477
 
ROKU: Just realized that I did not answer you last couple of questions Elroy.

ROKU is an aggregator of streaming more than a pure streaming content play, though they are expanding their offerings. For me, with a cost of $27/shr., it's now as much about the capital gains as anything. The story has shifted, not changed, as it relates to streaming but I still like the position of ROKU, especially with their OS on top TVs and their position as an aggregator of the space. I LOVE taking my ROKU stick with me on trips still and their intl. expansion still has opportunity though results have been mixed.

I expect they'll be a buyout target unless they misplay their hand and try to become the next big streamer and compete with those already in the space (I hope not). They are still earning a ton of revenue from the primary streamers and their ad dollars are still increasing as well.

It's not the play it was when it was close to $500 and I still lament only unloading 50% of my position on the second ascent of the stock, but I'm still holding because enough of the story remains in tact and I don't want to take $100 in cap gains.

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To: Elroy who wrote (54547)4/6/2022 10:30:09 AM
From: Trader J
1 Recommendation   of 55477
 
SNOW: We all have to pick our spots on those tech and specs we like. TWLO and SNOW are two of my top names because of their positioning and performance in their markets.

When I say I'm focusing on quarterly earnings and profitability in short order, I mean that I'm looking for continued expansion of their top and bottom lines over the next few quarters to show me that they navigate these more difficult and competitive waters.

I don't like speaking in what I call "absolutes" if I can help it. Words such as: will, won't, always, never, can't, etc. Too dangerous and I'm rarely the person who says I "know" what will happen. All I have is my experience, knowledge, work ethic and strategy that helps me place my chips in such a way that allow for maximum gain while minimizing catastrophic losses on those which don't pan out.

Thus far my strategy has worked very well for me but I don't spend too much time looking in the rear view. It's important for understanding how to improve my own results by being very aware of not only my failures but also my successes. Those, together, create a roadmap for us to be even more successful going forward and I'm a slave to that thinking.

With TWLO and SNOW, both have worked their models with precision and execution to provide for many great years ahead. But as any story, there's a lot of chapters and success is never guaranteed.

So, do I have any idea if they will be the winners in 7-10 years from now? Well, if I didn't think they were going to be, I wouldn't be invested for the long term. But, at the same time, I make sure my positions aren't overweight case I'm not correct.

But there's an important part to this which many fail to understand or execute themselves. Too often traders and investors see their stocks as all or nothing affairs. Positions I/we take should always be continuously evaluated to ensure the story stays intact. When that story changes, so too does the investment thesis and you need to, at least, reevaluate to see what it means for the position. We can all go position blind and hang onto our favorite stocks even when the story breaks down. In most all cases, we're given opportunities to exit at a point to minimize loss, take gains, reduce weight, etc.

It's not always easy to do but looking objectively at our holdings, the positive and negative catalysts and the story/investment thesis to each are paramount to long-term success. I fall into that trap as well but try to learn from each experience.

Cheers and thanks for the question.

TJ

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To: Trader J who wrote (54552)4/6/2022 10:35:18 AM
From: Madharry
   of 55477
 
i got scared enough by this market to sell my rblx at a loss, as i dont know where the potential bottom is that for that one. I really dont get the volatility. why should a stock like moderna get clobbered? or the semiconductor stocks for that matter. I just dont get what has changed in the last two days we have known for some time that the fed would start selling off assets and raising rates. but i think housing demand continues to be strong.

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To: Madharry who wrote (54556)4/6/2022 12:00:07 PM
From: Trader J
   of 55477
 
It's a volatility game now. Housing demand remains strong in a trailing figure but mortgage applications are tanking at the hands of rising rates and that's likely going to continue as less people can afford new homes at elevated prices. Home prices by inflation and supply-demand models will need to come down.

Inflation always occurs well before the impact of raising rates to fight it, though can invert the yield curve as we're seeing now. So along with rising energy prices, war, fading supply-demand trends, etc., we're starting to price in fear of recession or worse. I think it's well justified.

We've long known the Fed would stop printing money and would start raising rates but as I was pounding my fist on the table about this not being a transitory situation mid last year while the Fed sat on their hands, what we've seen now is hyper inflation and now the Fed is forced to consider EXTREMELY aggressive rate raises instead of .25 bps raises. I won't be surprised to see another 200 bps of increase by EOY. Furthermore, if they don't, then they may not get inflation under control.

MRNA, just like RBLX and all other names like this are trading stocks due to their visibility in the space. I would argue MRNA should NOT be defined as such but because of Covid and vaccine issues, they are and they trade like a trading stock. As such, they will be whipped with the VIX.

The techs have seen a great bounce of late and this is now unwinding. It's basically an understanding by retail, as I've been saying for a bit now, that the bottom is definitely not necessarily in.

If "the bottom is in" then that means all negative situations are already priced into the market and there is NO WAY that is the case in my mind. That's about as much of an absolute statement as you'll get from me. LOL.

Cheers all.

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To: Trader J who wrote (54557)4/6/2022 12:30:01 PM
From: Madharry
   of 55477
 
i would like to see a break out of new mortgage applications versus refinance applications and or approvals. do you know a source for that. I would expect that refinancing would be zero at this point.

I am amazed at the weakness in semiconductors as well. I am very confused at what the fed is thinking. In my opinion the fed has no arrows that are going to curtail existing inflation. all they are going to do is get people pissed off enough that they are going to vote for a regime change. they systemic and geo political problems that have caused this inflation are not going to go away. In my opinion what affluent people can afford to pay pretty much dictate prices for most things. if enough people can pay $13 for a hamburger in a bar thats what the price is going to be. and the fed raising rates by 3% is not going to make that price go down. the price of oil and gas at the pump is also not going to be affected in my opinion. what will be affected will be the pricing of stocks of companies whose cash flow is mostly in the future. so it could tank the ipo market and raised the cost of companies doing business which will mostly likely cause prices to increase not decline . So to me this is all very much like treating a virus with an antibiotic.

I suspect what they will do is make the dollar stronger relative to other currency as foreign money comes in to take advantage of higher interest rates.

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To: Madharry who wrote (54558)4/6/2022 12:42:21 PM
From: Trader J
   of 55477
 
I used to have a great link for those types of things but don't any longer. Now I just listen to reports as they come out monthly. Nothing will ever be "zero" of course and, in some cases, those with hybrid loans or those other than purely fixed, can still use the current market to refinance rather than risk a balloon of some sort. They are still historically low, just not what they were.

It's the same recurring dance we see in times like these, with multiple economic tumblers falling in place for either upside or downside. Also factor in the increasing min. wage for places like restaurants and they have received a double whammy of cost ... arguably triple given that patron numbers remain down across many segments. But, for some, price isn't an issue. It will ALWAYS be an issue for me as I tend to be very careful about how/where I spend money, regardless of how much I have. I just won't pay $18 for a burger if I have any say-so and am not surprised by the choice. If I'm getting a gourmet burger, I'll pay $13 but once the price gets above $15, I start saying "no thanks." I'm sure we all each have our break points for certain things like that. When I go to a nice burger joint and see a bill of $60 for two ... it makes me reassess the priority. I'll instead go to my favorite fish place and get dinner for two for $30 instead.

My favorite pizza place, which does amazing pizza, is now $40 for a family combo pizza. I'm still willing to pay it on occasion, but maybe once or twice a year at most. I'll just use my Papa Murphy's coupon in most cases.

All of what is going on in the market economic wise should have been expected to a point when considering all the stimulus. But then throw in second-wave Covid, war in Ukraine, supply shortages, etc. and it was nearly impossible for forecast the music continuing to play.

Then, with housing prices going nuts while all this is going on ... it's easy to forecast major softening there too. If I had a second home (I do have a cabin) to retire to right now, I'd sell this one and sit back and wait. I think I'll be able to get it for 20% less shortly. I've been looking at a snowbird home to get out of the PacNW winters for a couple months each year but won't pony up the current prices. Waiting for the glut and fall at the hands of economic tumblers all catching up with the overheated market.

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To: Trader J who wrote (54557)4/6/2022 1:52:34 PM
From: John Koligman
   of 55477
 
Just to throw an outlier out there, I read a transcript of an interview where Larry Summers said rates might need to go as high as 5% if the Fed were serious about inflation. His predictions on inflation have been pretty good so far.

nytimes.com

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To: John Koligman who wrote (54560)4/6/2022 4:07:09 PM
From: Trader J
   of 55477
 
Hey there John, I certainly don't disagree as the Fed held off for so long that they aren't going to be able to tame inflation through minor policy tightening in my estimation. They may need to over correct in the opposite direction by a measure, in quick order, to fight it well. While 5% would be catastrophic for the markets across many sectors, the fixed income plays that would result would be pretty phenomenal. I could be well willing to rotate into fixed income for quite the long term if I was able to get north of 5% ... and many others would too.

Higher interest rates would remain the wooden stake in the heart of the markets. Once yield can be obtained elsewhere, the income rotation would be very real.

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