Trade Alert: Don't Overthink It
We passed on a boring-seeming Top Name earlier this week that spiked 10% after hours yesterday. We're not passing on this one. Plus, bullish trades on three more exiting names.
A Reminder Not To Overthink The Process
One lesson from this week came from a stock we didn’t trade. Earlier in the week, FedEx (FDX 0.00%↑) was one of our system’s Top Names, and it also passed our falling knives screens (RSI between 40 and 70; Chartmill setup rating 6 or higher), but I passed on it in part because I thought the current Gulf war might weigh on the company through higher fuel costs. Then it reported earnings Thursday afternoon and jumped about 10% after hours. That was a useful reminder that if we’re going to use a systematic process to surface promising names, we shouldn’t talk ourselves out of setups just because the macro backdrop feels noisy.
So today, I’m not going to make that same mistake. Our first trade below is on another seemingly boring Top Name from last night’s ranking that also passes our RSI + Setup screens. It may not sound exciting at first glance, but neither did FedEx.
Four Strong Setups That Still Aren’t Overextended
The other three names here come from outside our current Top Names list (one is a former Top Name), but all of them fit themes we’ve been focused on. One is a current winner for us in directed energy and missile defense that still looks attractive enough to re-enter. Another is an oilfield-services company positioned to profit from repairing and restarting damaged Gulf energy infrastructure. And the third (the former Top Name) is a previous winner in optical networking and test infrastructure.
What all four names have in common is that they still pass our RSI + Setup screens, which suggests that despite their strong momentum, they are not yet overextended to the upside. In a market this noisy, that combination of momentum and restraint is exactly what we want to see.
Today’s Top Names Trade
Agribusiness / boring-but-beautiful value theme
