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Dining Discoveries, Trading like Gilligan, and the Absolutely Most Degen Way To Play A Trade Deal
Guys, I think a trade deal is about to hit. Journalists are staked out in London as U.S.-China trade talks are ongoing.
Now, I don’t have an insider feeding me tips on what’s being negotiated… but I’m “not uncertain” that both parties are prepared to come to the table. As I’m sure you are aware, the market had a “hiccup” in April when the trade escalations hit.
Watching your portfolio melt with massive overnight gaps was bad. But think about the Chinese! They’re loaded with fragility right now. They were on the brink of something VERY BAD happening in 2022 with the Evergrande collapse, and things could unwind in a trade war.
And that’s why we saw this today:
According to Bloomberg reporter Annemarie Hordern, the Chinese delegation brought in McDonald’s, Burger King and KFC.
That’s a peace offering if I’ve ever seen one.
Good News, Bad News
If a deal gets done, it will be a Narrative inflection point. This kind of binary event would cause a catalyst in news stories, which generates its own reflexivity.
Maybe some of the “low information investors” start putting money to work. Maybe those left-behind fund managers will start pouring on leverage. Maybe the Fed adjusts the Supplementary Leverage Ratio to bring some upside leverage to hold USTs.
Either way, it’s going to be a top. Not *the* top, but a local pivot.
It’s classic “buy the rumor, sell the news” kind of event… but don’t expect it to turn all in one day.
We’ve gotta break all-time-highs first.
My first impulse is that we only nose 3-5% above all time highs before we get a good cycle down.
But what if it gets nuts? I’ve been seeing some animal spirits in small caps and there’s a ton of breadth right now. What about a larger push before it’s the top?
We’ll use a Fibonacci extension of 1.27 as a first reference. I don’t care if you think this works or not— just think of it as a heuristic… and the 6500 is a good round number.
That’s about 8% higher from here. It feels like a lot, but it’s possible. A couple gamma squeezes in Mag7 stocks coupled with a chase trade could be in play.
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Three Momentum “Post-Tariff” Trades
The obvious trades haven’t been priced in.
I’ve got three stocks with clean levels that I think are going to see cash flood back in by those low information traders once they realize the second order effects:
If trade goes up, package volume goes up. And UPS has sucked for months, and just broke out:
It’s *deeply* oversold long term, and I expect that it will rip through to 110, hit some resistance, then continue up to $120 per share.
What about ecommerce?
SHOP looks ready for a continuation breakout:
I’ve got a short term target of $120.
How about shipping? I know people will flock to ZIM or GNK for a trade, but I’ve got a very degen way to play it.
CRGO does freight booking. It’s a recent SPAC, and has sold off from $10 to $2.32
Is the stock risky? You bet. But you know what’s even better?
It’s a SPAC. They have warrants.
This is thin to win. You shouldn’t even consider this idea given the risk profile of it.
But if CRGO squeezes, there’s some juice on those warrants. They traded at 0.40 at the beginning of the year, and are trading 0.16 now.
If CRGO breaks $4, then they’ll be worth a lot more. Or they go to zero. That’s the risk/reward on the setup.