“Smart Money” Makes Dumb Mistake!

If you read financial media, you’ve most likely seen the stories surrounding the Archegos implosion.

In short, the private investment firm Archegos Capital Management was way over-leverage and found its way into a multi-billion dollar margin call.

But I’m not here to talk about the story… I’m here to talk about the opportunity!

Thanks to “smart money” making dumb mistakes, we have a handful of stocks that went through massive forced selling…

All the selling has made them discounted and ripe for trading with in-the-money options!

Here’s a graphic with the stocks that were affected the most:

Now, I’m not recommending you buy into all of these stocks, but I DO think some deserve a closer look…

For example, GSX Techedu Inc. (GSX) is now down around it’s one year support level, using an in-the-money option here could provide HUGE returns if it sees some bullish momentum soon!

Bottom line: When “smart money” makes dumb plays, we have the opportunity to profit!

Keep it In the Money,

Alan Knuckman
Editor, In-The-Money

Chart of the Day: Nasdaq in no-man’s land

In late February, we discussed the relative weakness of the FANG+ names – and how we were getting dangerously close to a “put up or shut up” moment in some of these former market leaders.

At the time, Apple Inc. (NASDAQ: AAPL) had dropped more than 10% from its January highs. Microsoft Corp. (NASDAQ: MSFT) was down almost 5%. And the mighty Tesla Inc. (NASDAQ: TSLA) failed to maintain its January momentum, breaking below its 50-day moving average for the first time since November.

And this was before the growth stock meltdown took hold.

Since late February, we’ve seen many popular tech names slip into oblivion.  Beyond the FANG+ names, some of the hottest tech trades of the COVID era abruptly retreated as much as 50% off their all-time highs.

Naturally, these mini-meltdowns have bogged down the tech-heavy Nasdaq Composite. While the Dow and S&P consolidate their recent pushes to new all-time highs, the Nasdaq remains approximately 8% below its high-water mark as of Wednesday afternoon.

Right now, we have a situation where the Nasdaq is below its 50-day moving average after trending lower for six weeks…

Unless we see a meaningful push back toward 13,400, I suspect this choppy action will continue, potentially culminating in a trip back toward 12,000 – which just so happens to be an important confluence of support areas (green line).

Bottom line: Be prepared for anything in this market!

— Greg Guenthner