A Brutal Reversal
The Nasdaq fell more than 5% earlier today. Chip and data-center stocks are taking even bigger hits, with double-digit declines across the AI trade.
The immediate fear is that the Democrats’ midterm sweep will bring pauses in data-center construction. That threatens orders for chips, power equipment and the rest of the AI supply chain, which was already contending with expensive financing.
Credit markets were already showing strain before today’s selloff. The AI buildout increasingly relies on borrowed money. By mid-October, CoreWeave’s 2031 bonds had briefly yielded 16% before retreating to around 14%. Construction delays can push back the revenue needed to service that debt.
Blood In The Streets
“Buy when there’s blood in the streets,” goes the market maxim commonly attributed to Nathan Rothschild.
We keep a watchlist for days like this. The name we’re trading today has already been a winner for us multiple times this year. Recent earnings reinforced our thesis for it, and today’s broad selloff is offering us a significantly lower entry price. That’s prompted a rare intraday trade alert. Our investment case and proposed trade are below for paid subscribers. Before we get to that, a few notes about how you can limit your downside risk in light of today’s market conditions.
Don’t Die—Limit Your Downside Risk
As a reminder, our iPhone hedging app scans for the optimal puts and collars to protect your stocks and ETFs at the lowest possible cost. Enter what you own and the largest decline you’re willing to accept, and the app does the rest. Tap or click the illustration below to see the app.
On the web, Portfolio Armor Basic includes those individual-position hedging tools plus our daily Top Names.
Across 175 completed weekly cohorts, our Top Names averaged 18.06% over the next six months, versus 9.87% for SPY.
Portfolio Armor Premium adds our hedged portfolio construction tool, which combines our hedging algorithm with our top names: enter a dollar amount, and the maximum decline you’re willing to risk over the next six months, and it constructs a hedged portfolio designed to maximize your potential return while strictly limiting your risk to your stated risk tolerance.
Three Ways To Invest
Our Substack options trades are our most aggressive approach. Buying our system’s Top Names gives you unhedged stock exposure. The Hedged Portfolio Method builds protection into every position.
The graphic below compares representative return illustrations for those three approaches, with protection built into the third. Tap it for the underlying records and calculations.
Today’s Blood In The Streets Trade
Theme: AI optical interconnect bottleneck.
RSI: 38; Chartmill Technical Rating: 4; Setup Rating: 3; Fundamental Rating: 4
