Yo Pit Crazies!

On Friday morning, did you think we would be near all-time highs by Monday at the close? 

Now I understand that is a big surprise for everybody. VIX traded as high as 29 on Friday morning, and by Monday afternoon was closing near 18. I can’t remember the last time I saw a pre-market print of VIX trading at 29 with basically two trading days difference at 18. 

This is some historic movement.

But what didn’t happen is even more important:

• The bank scares that we saw on Friday didn’t materialize.
• The trade situation with China didn’t get worse.
• The No Kings March on the weekend was just a bunch of people protesting.

News in general just did not pan out as bad as traders thought on Friday morning.

So the truth of it all is: in trading, yesterday is not today or tomorrow.

Looking Forward

When we look at this going forward, we still have a government shutdown that has no end in sight. The No Kings March was a protest against the current Trump administration, and there might have been some hope that keeping the shutdown going longer might give the Democratic Party a little bit more to go on.

If you look at stock prices in general going through shutdowns, stocks are illiquid. 

Volatility remains slightly elevated, but after the shutdown, stocks historically have gone higher as far as I can remember.

The Key Lesson

The thing to remember is: what happened yesterday is not necessarily what’s gonna happen today or the next day. 

That’s one thing that has to do with using my option fingerprint methodology to look for stocks. Stocks that didn’t look good just a week, two weeks, or three weeks ago could look great in a month or two.

A Real Example: Block Inc. (XYZ)

I’ll take an example from one of my Flash stocks: Square, which is now Block Inc.

When I put the trade on, Square was $60 and it wasn’t doing very much. But it was accumulating huge open interest..

What happened three months later? Anything even remotely connected to Bitcoin flew, and Square was a Bitcoin payment processor. Just that news alone sent the stock almost to $100.

Bottom Line

What I would say is:

• The shutdown is likely gonna last.
• Earnings are good enough for stocks to rally. Buy some calls. Don’t be a chicken.
• What happened yesterday is not necessarily what’s gonna happen today or tomorrow.

Mostly, you just have to know how to look for opportunities.

Someone who seems to find opportunities that no one else knows about is Frank Gregory. Together we run the Capitol Gains newsletter.

He’s one of the most interesting people you’ll ever meet. And he’s one of the best stock pickers I know.

Click here and check out his free newsletter, Power Moves.

Take care!

AG