The Strazza Letter Articles

Welcome back for another Top Down Trade of the Week. 

This is a classic leadership scan.

We start with the best sectors, then drill into the subgroups. We pick one, and then take a look at the top stocks in it. 

This week, Financials is the big standout—climbing five spots in our sector rankings.

While Technology holds the top spot, it’s worth highlighting Financials this week. 

The consolidation in the Financial Sector SPDR $XLF is likely to resolve higher soon- just like Technology $XLK, Communications $XLC, and Industrials $XLI did this week. 

These are all very different sectors, but they share one critical thing in common. These groups all represent risk appetite. 

The market is on offense right now, so we’re going to keep fishing in risk-on areas. 

...

If you see a bull flag… Buy it. 

It’s what we’ve been telling our clients, and it’s been our mantra internally.

This has been the top pattern to profit from lately. Period.

It’s simple, reliable, and works best in bullish environments like this one.

I’ve been putting more and more money behind these patterns over the past few weeks. Not only do they keep resolving higher, but the reaction legs have been fierce— some going flat-out vertical.

Here are two recent examples to illustrate how I trade this formation.

First up: Micron Technologies $MU.

After a strong leg higher, $MU formed a textbook bull flag. I bought the $MU 7/18 $120 calls...

The team and I have been digging through our currency charts today, trying to figure out if we should trust these new lows in the Dollar Index.

And the truth is, there is plenty we could say about dollars right now, but I don’t think it would help.

The Dollar Index is going to go in the opposite direction of these bull flags in EUR and GBP.

It’s really that simple. 

And as far as other currencies go, I think we can expect them to follow the majors. Some of them are already breaking out. 

Remember, the major developed currencies started trending well against the dollar first, and then emerging currencies gradually followed. 

I expect that intermarket cadence will continue during the next wave of dollar weakness.

And it looks like it already is. Here’s the Euro and Pound resolving their coils higher against USD:

Both of these currencies ramped to fresh multi-year highs in April and have been consolidating in continuation patterns ever since.

This action reminds me of some of the ...

There comes a time in every bull market cycle when the worst companies are the best stocks.

And this is a feature as far as I’m concerned… not a bug. 

It speaks to the offensive nature of the market. 

We call it bullish risk appetite, and it’s happening now.

If you know what to do with this kind of market, you can make a killing renting the right stocks at the right time. 

I did a livestream with my friend Herb Greenberg today, and we caught up afterward. I always love hearing his perspective on the stocks we’re trading.

It’s tough to be bearish on some of these speculative growth names in an environment where shorts are getting squeezed, but Herb is the best in the business when it comes to flagging bad actors, so I had to ask him...

“What do you know about this...

I’m going out for drinks tonight with a good friend who owns a real estate agency in Key West.

We’re going to talk about home prices, inventory levels, and mortgage rates… and I can’t wait.

The truth is, I’ve been thinking about the housing market a lot lately. I’m really into it.

Rose and I have decided to give the mainland a shot and are moving up to the Naples area this week. We’ll miss Key West, but we are excited about this new chapter in our lives.

We took our time searching for a place over the past year or so. In the process, I’ve spent countless hours on Zillow $Z and have looked at a variety of South Florida homebuilder communities— from Lennar $LEN to Taylor Morrison $TMHC and Pulte Homes $PHM. 

I’ve dealt with Rocket Companies $RKT, with whom I have my first mortgage. 

And this past week, it’s been all about shopping for furniture on sites like Wayfair $W.

Welcome back for another Top Down Trade of the Week. 

This one’s a classic leadership scan.

We start with the best sectors, then drill into the subgroups. We pick one, and then take a look at the top stocks in it. 

This week, Technology is the big standout—climbing seven spots in our sector rankings.

While Energy maintains the top spot, Industrials and Communications have also gained ground.

Here is a look at our overall industry rankings, which shows semiconductors jumping into the top 5.

Semis just failed to complete a top relative to the broader market and are now reasserting their leadership.

If this risk-on group is in good shape, then stocks...

The major averages were lower this week, but it was still a win for the bulls.

Here’s why…

Since the market bottomed over two months ago, the best stocks have been the riskiest ones.

Of course, I’m talking about the impressive leadership from speculative growth.

We’ve seen this story before, though. We’ve actually already seen it several times in the current cycle.

Speculative tech was an area of standout leadership during the Q4 2023 rally.

The space also outperformed in a major way during the post-election ramp-up coming into the year.

But the momentum and relative strength didn’t last in either of those cases…

I think this time is different…

And the relative trend between the flagship ARK fund and the S&P is a big reason why:

“I’m gobbling up COIN calls.”

It’s what I told Breakout Multiplier members I was doing during last week’s strategy session.

Today, Coinbase stock rallied 16% after Congress passed the Genius Act, providing regulatory clarity for stablecoins. 

The company also announced the launch of a stablecoin payments stack for e-commerce platforms. The news tanked blue-chip payment names, Visa and Mastercard.

And that’s just the disruptive nature of this business. 

I think Coinbase is one of the most exciting long-term growth stories out there. 

They keep doing all the right things. And now that they finally have a clear and supportive regulatory backdrop, they can execute freely. 

But that’s why I own the common stock… 

The short-dated calls I’ve been pounding the table about have nothing to...

I was joking with Patrick earlier, and I told him I buy every ticker he texts me these days. 

“Buy first. Ask questions later.” 

But I was just alluding to the fact that it seems like every bullish chart pattern is working out here. 

I talk to my friends about what I’m seeing and trading throughout the day, and many of us have been on the speculative growth train. 

It’s insane how well these junky stocks are working. And it’s a longer list of them every day. 

I know almost for a fact that a good deal of these are probably zeros over the long run. That doesn’t matter. 

What matters is that they are working now. 

It’s the kind of market to take shots on the crazy stuff. And we have been doing it more and more because we keep being rewarded.  

It’s...

Welcome back for another Top Down Trade of the Week. 

This one’s a classic leadership scan.

We start with the best sectors, then drill into the subgroups. We pick one, and then take a look at the top stocks in it. 

This week, Energy is the big standout—jumping to the top of our sector rankings. 

Healthcare and utilities also made a big move up on the leaderboard as growth sectors faltered. 

Here is a look at our overall industry rankings, which shows oil & gas cracking into the top 10.

It’s not a surprise to see it there—crude oil has been squeezing higher, posting its best week since October 2022.

That kind of price action tends to light a fire under energy stocks, and that’s exactly what we’re seeing.

Let’s get one thing straight… I’m not some sort of defense industry perma bull.

Trust me, those people exist.

They hang out in the same circles as the ‘end-of-days’ folks, national debt doomers, and gold bugs.

It’s just not for me. I’m an optimist.

However, I’m also a good old-fashioned trend follower.

And these stocks have taken on a new leadership role, so we’ve been buying them. Here is Aerospace & Defense relative to the S&P 500:

This base breakout is in the books, and the path of least resistance is now higher for this ratio. All that means is expect more outperformance from these stocks over longer timeframes.

But I’m most interested in making money right now. This week, this month, this quarter.

And as I flipped through the A&D components today, there was one chart that I just...

“Look kid, if you hear the missiles are flying, you buy them. You don’t sell them.”

— Art Cashin, Wall Street legend.

No doom and gloom here. That’s not our style.

We don’t get caught up in hot headlines or silly narratives. We follow trends — regardless of what’s going on in the world. 

And right now, one of the clearest, most durable trends on the tape is in Aerospace & Defense.

And maybe it’s because of this war here, or the geopolitical issues there. Or maybe it’s just because industrials are the leaders and this is a bull market.

Here’s the thing… There will always be wars, and fear will always have a significant impact on human behavior. 

I can tell you we’re buying these stocks because of some headlines out of Russia… but that wouldn’t be the truth. 

We’re...