Trade Alert: Avoiding Falling Knives

Three bullish trades that meet our stricter entry rules for this market environment.

Three Trades That Meet Our Tighter Entry Rules

Yesterday’s post laid out how we’re tightening entry requirements in this market.

All three of today’s trades meet those stricter rules.

Our first trade is in a Portfolio Armor Top Name, and it’s actually a re-entry for us—we have an open position on it expiring this Friday that’s going to be a loss.

Why go back to it now?

Because the stock has dropped ~40% since late October. All else equal, sharp short-term declines tend to improve subsequent returns for our Top Names. During that slide, the company reported earnings and beat on both the top and bottom lines. Its chart shows price pulling back to multiple support levels. And we remain bullish on its space (AI + robotics), so today’s trade goes out far enough to give it plenty of runway to recover and make new highs.

The other two names come from a Chartmill screen we built specifically for markets like this: one so tight that only a half-dozen stocks in the entire U.S. market pass it right now. It requires all of the following:

• PEG ratios < 1

• Piotroski F-Score ≥ 8 (out of 9)

• Bullish technical rating

• A “set-up” rating ≥ 7 (tight price consolidation)

One of these two names is also a re-entry for us: we exited a trade on it last week for a gain of more than 400%, and today we’re re-establishing a position using a structure that extends well beyond next quarter’s earnings release.

Our third trade today also comes from that screen, but it has a thin options chain. So instead of chasing wide bid-ask spreads, we used Black-Scholes to estimate a fair value for the combo and entered a bid below that number.

If it fills, great—we’ve entered a fundamentally strong, technically sound name at an attractive price.

If not, we won’t chase it. In this market, we’re letting the highest-conviction opportunities come to us, not the other way around.

Full details below, including (as usual) our pre-set exit instructions so we don’t have to babysit these trades after they fill.

---

Today’s Top Names Trade

AI / robotics theme