Trade Alert: Taking Advantage Of The Pullback

Bullish bets on two of our system's top ten names, both of which are in the AI theme.

Back To Our Top Ten Names…

We’ve got two Top Names trades today, both drawn from Portfolio Armor’s daily top ten list. As you know, we keep gravitating back to that list because of its track record: since we launched this Substack, those top ten names have averaged 20.2% over the next six months, versus 10.13% for SPY over the same periods (as shown here: https://portfolioarmor.com/performance-top-names). Here is the chart for the most recent top ten names cohort to finish its 6-month run:

…And Back To Our AI Theme

Both of today’s trades are in the AI theme. One is a name tied to AI cloud and data centers; the other is a contract manufacturer that’s been helping build AI hardware. As we noted last week, the AI theme itself still looks intact, even if the broader market has been turbulent lately.

…While Avoiding Falling Knives

In that same post, we also talked about adapting our trading to the current environment by adding rules meant to keep us from catching falling knives when we double down on a name. One of today’s trades is a second entry in a stock where we put on our first trade at the beginning of last month. That stock meets the criteria from our “avoid falling knives” rules: the chart has stabilized (Chartmill setup rating of 5 or higher: RSI >40).

Both names have pricey options, but we’re using that to our advantage. In each case, we’re using structures that harvest elevated implied volatility to offset the cost of our bullish exposure. In both cases, we have asymmetric payoff potential, where we have a shot at significantly more upside than downside.

Details below.

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Today’s First Top Names Trade

(AI Cloud/Datacenters)