By Nigam Arora & Dr. Natasha Arora
To gain an edge, this is what you need to know today.
Be Careful
Please click here for a chart of Bed Bath & Beyond (BBBY).
Note the following:
- The Morning Capsule is about the big picture and not about an individual stock. A chart of BBBY is being used to illustrate the bigger point.
- We have been warning you to be careful about what you hear from momo gurus and in the media. The momo gurus’ job is to persuade you to buy stocks. It is not the momo gurus’ job to provide you with unbiased analysis or provide you with accurate information or to protect you from losses.
- The case of Bed Bath & Beyond is a magnification of what has been happening on a smaller scale in many stocks.
- One major investor is an idol of the meme and momo crowds. This major investor has a very large following. He bought BBBY stock at an average price of $15.30. Meme and momo crowds followed, running up the stock as high as $30.06.
- Bed Bath & Beyond fell as low as $4.38, creating a major loss for this major investor and his followers.
- The chart shows that the major investor’s related excitement ran up the stock to over $11 this month.
- The chart shows when the news broke of the major investor filing of buying call options with strike prices of $60 – $80. Normally, an investor would buy call options with a strike price of $80 only if the investor expected the stock to go above $80.
- The momo and meme crowd got stars in their eyes, and they were dreaming of the profits they would make when the stock would go over $80 from a recent low of $4.38. To most, it was a sure thing because the major investor was leading them.
- The chart shows BBBY stock spiking to about $28 on the news of the major investor’s option buying.
- The chart shows the Arora signal to short sell near the top.
- The chart shows that in the middle of all of this bullishness the stock unexpectedly fell as low as $18.05.
- One of the Arora signals to take partial profits was given at $18.61.
- What caused the unexpected drop in BBBY stock? It was not known at that time, but now we know that the major investor was selling.
- The chart shows that the meme and momo crowds ran up the stock again. After all, to the momo and meme crowds, every dip is a buying opportunity.
- The chart shows that a new Arora short signal was given at $20.08. The first target zone was $9 – $11.50.
- The stock fell as low as $9.80 in the Arora target zone. What caused the stock to drop? The news broke after hours that the major investor had sold all of his shares into the runup.
- The chart shows when the major investor sold his shares. The major investor pocketed $68M in profits.
- Momo and meme crowds suffered big losses. Unfortunately, many have become bag holders.
- What did momo and meme crowds learn from their big losses on BBBY? They are again aggressively buying BBBY. Why are they buying it again? They are buying because the stock has dipped and every dip is a buying opportunity.
- It is worth repeating that the BBBY story is simply a magnification of what has been happening lately in many stocks. Investors need to be guard against becoming a bag holder.
- There are many opportunities for those who can short sell. For those who do not short sell and only buy long, it is time to be patient and not get sucked into FOMO (fear of missing out).
$2 Trillion Option Expiration
Options with about $2 trillion in notional value are expiring today. It is putting downward pressure on the stock market in the early trade.
Momo Crowd And Smart Money In Stocks
The momo crowd is 🔒 (To see the locked content, please take a 30 day free trial) stocks in the early trade. Smart money is 🔒 stocks in the early trade.
Gold
The momo crowd is 🔒 gold in the early trade. Smart money is 🔒 in the early trade.
For longer-term, please see gold and silver ratings.
Oil
The momo crowd is 🔒 oil in the early trade. Smart money is 🔒 in the early trade.
For longer-term, please see oil ratings.
Bitcoin
Bitcoin is seeing selling in sympathy with selling speculative stocks related to option expiration.
Markets
Our very, very short-term early stock market indicator is 🔒. This indicator, with a great track record, is popular among long term investors to stay in tune with the market and among short term traders to independently undertake quick trades.
Interest rates are ticking up, and bonds are ticking down.
The dollar is stronger.
Trading futures is not recommended for most investors. The purpose of providing this information is to give an indication of the premarket activity that usually guides the activity when the market opens.
Gold futures are at $1768, silver futures are at $19.16, and oil futures are $88.64.
S&P 500 futures resistance levels are 4318, 4400 and 4460: support levels are 4200, 4000 and 3950.
DJIA futures are up/down 185 points.
Protection Bands And What To Do Now?
It is important for investors to look ahead and not in the rearview mirror.
Consider continuing to hold existing positions. Based on individual risk preference, consider holding 🔒 in cash or treasury bills or allocated to short-term tactical trades; and short to medium-term hedges of 🔒, and short term hedges of 🔒. This is a good way to protect yourself and participate in the upside at the same time.
You can determine your protection bands by adding cash to hedges. The high band of the protection is appropriate for those who are older or conservative. The low band of the protection is appropriate for those who are younger or aggressive. If you do not hedge, the total cash level should be more than stated above but significantly less than cash plus hedges.
It is worth reminding that you cannot take advantage of new upcoming opportunities if you are not holding enough cash. When adjusting hedge levels, consider adjusting partial stop quantities for stock positions (non ETF); consider using wider stops on remaining quantities and also allowing more room for high beta stocks. High beta stocks are the ones that move more than the market.
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Nigam Arora
Nigam Arora is known for his accurate stock market calls. Nigam is a distinguished master of the macro. He is a popular columnist with over 100 million page views, an engineer, and nuclear physicist by background. Nigam has founded two Inc. 500 fastest growing companies and has been involved in over 50 entrepreneurial ventures. He is the developer of Theory ZYX of Successful Change Management and is the author of the book on Theory ZYX, as well as the developer of the ZYX Change Method for Investing.
Dr. Natasha Arora
Dr. Natasha Arora has significant expertise in investment analysis especially biotech, healthcare, and technology. Natasha is a graduate of Harvard Medical School followed by a postdoc at MIT. She has published several peer reviewed research papers in top science journals.
