![[Gamma] Scalping Please](https://ibkrcampus.com/wp-content/smush-webp/2024/04/tir-featured-8-700x394.jpg.webp "[Gamma] Scalping Please")
By J.C. Parets & All Star Charts
Monday, 22nd May, 2023
1/ Speculative Growth Joins the Party
2/ Robotics Stocks Build a Base
3/ Stocks Over Bonds
4/ Mining Stocks Lose Key Support
Investopedia is partnering with All Star Charts on this newsletter, which both sells its research to investors, and may trade or hold positions in securities mentioned herein. The contents of this newsletter are for informational and educational purposes only, however, and do not constitute investing advice.
1/ Speculative Growth Joins the Party
Participation is expanding to even the most speculative of growth stocks. One of our favorite indexes for gauging the behavior of this risk-on group is the ARK Innovation ETF (ARKK).
ARKK had one of its best days of the year today as price reclaimed a key level of interest with authority.
While the rally doesn’t even put us close to the upper bounds of this base like we’re seeing with other technology and growth indexes, it is still an important level. Here’s the daily chart:
Whether we anchor a volume-weighted average price (VWAP) from the 52-week high or low, or even the year-to-date high, they all end up around the same place in this $38 to $39 zone. Coincidentally, the long-term moving average is flattening out at the exact same level. We also have a shelf of pivot highs here from March and April.
The bottom line is that the current level represents a major confluence of interest. The fact that price ripped through it with such force can only be interpreted as bullish. As long as today’s move holds, ARKK could head back to its pivot highs and eventually complete this base.
From a risk appetite standpoint, it’s also a positive development to see investors move out on the risk curve and bid up the most speculative growth stocks in the market.
2/ Robotics Stocks Build a Base
We’ve been noting a pattern of more sectors and industries resolving higher from reversal patterns. This is especially true when it comes to tech-related groups.
The Artificial Intelligence and Robotics ETF (ROBT) does a great job of illustrating this theme.
As you can see, price is pressing against the upper bound of this base as buyers continue to absorb the overhead supply.
Notice that momentum is in a bullish regime, as the 14-day relative strength index (RSI) hasn’t reached oversold conditions in the past few months, and the 200-day moving average is starting to curl higher. All this is evidence that a change in trend is likely underway.
Under this scenario, we could see breakouts in the strongest AI and robotics stocks.
3/ Stocks Over Bonds
One of our favorite ways to measure risk appetite is through the stocks vs. bonds ratio, as it tells a story of where the alpha is and how market participants are positioning. Bonds represent defense, while stocks represent offense.
Last week, the ratio of the SPDR S&P 500 ETF (SPY) vs. the iShares 20+ Year Treasury Bond ETF (TLT) closed at new all-time highs after emerging from a tight consolidation. Here’s a look:
Seeing this ratio reach new highs indicates that the market continues to reward investors for buying equities over U.S. Treasuries. This is a sign of risk-seeking behavior and is a common characteristic of bull markets.
As long as these new highs remain intact, the alpha will likely remain in the stock market, which would favor equities over their alternatives for the foreseeable future.
4/ Mining Stocks Lose Key Support
The bears appear to have found a new home—gold mining stocks.
Silver’s breakdown earlier this month raised the caution flag for the entire precious metals space.
Less than two weeks later, gold futures and mining stocks are falling under the wrath of increased selling pressure.
Check out the Gold Miners ETF (GDX) undercutting a key polarity zone:
Risks are now likely to the downside for these mining names as sellers take control.
While precious metals could be on the cusp of a new secular uptrend, bulls need more time to accumulate these stocks and their associated rocks.
—
Originally posted 22nd May 2023
Disclosure: Investopedia
Investopedia.com: The comments, opinions and analyses expressed herein are for informational purposes only and should not be considered individual investment advice or recommendations to invest in any security or to adopt any investment strategy. While we believe the information provided herein is reliable, we do not warrant its accuracy or completeness. The views and strategies described on our content may not be suitable for all investors. Because market and economic conditions are subject to rapid change, all comments, opinions and analyses contained within our content are rendered as of the date of the posting and may change without notice. The material is not intended as a complete analysis of every material fact regarding any country, region, market, industry, investment or strategy. This information is intended for US residents only.
Disclosure: Interactive Brokers
Information posted on IBKR Campus that is provided by third-parties does NOT constitute a recommendation that you should contract for the services of that third party. Third-party participants who contribute to IBKR Campus are independent of Interactive Brokers and Interactive Brokers does not make any representations or warranties concerning the services offered, their past or future performance, or the accuracy of the information provided by the third party. Past performance is no guarantee of future results.
This material is from Investopedia and is being posted with its permission. The views expressed in this material are solely those of the author and/or Investopedia and Interactive Brokers is not endorsing or recommending any investment or trading discussed in the material. This material is not and should not be construed as an offer to buy or sell any security. It should not be construed as research or investment advice or a recommendation to buy, sell or hold any security or commodity. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.
Disclosure: ETFs
Any discussion or mention of an ETF is not to be construed as recommendation, promotion or solicitation. All investors should review and consider associated investment risks, charges and expenses of the investment company or fund prior to investing. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.
Disclosure: Futures Trading
Futures are not suitable for all investors. The amount you may lose may be greater than your initial investment. Before trading futures, please read the CFTC Risk Disclosure. A copy and additional information are available at ibkr.com.
Join The Conversation
If you have a general question, it may already be covered in our FAQs. If you have an account-specific question or concern, please reach out to Client Services.