It is one of those days when the indexes are covering up a lot of weak action. Breadth isn't bad at around 3550 gainers to 4200 decliners but what is happening is that many of the speculative names that have been running very hot lately have reversed hard. In addition, some good earnings reports are being sold, and SPACs are not seeing upside momentum.
A good example of the difficult action is AMMO (POWW) which I've discussed often. POWW had revenue growth of over 400%, and EPS growth was 375%, both of which were better than expected. In addition, the company raised guidance going forward. Despite the good news, the opening gap was sold hard. I suspect this was due in part to high expectations for a blowout report combined with a short attack than triggered stops. The severe selling scares out folks and feeds on itself. I believe shorts will cover, and more patient buyers will take advantage of the action. I added shares this morning into the weakness.
Some of the hot SPACs are also stalling out this morning. Part of that is due to the pressure caused by the SPAC structure before the merge deals close. I've been trading Gores Guggenheim (GGPI) , which compares very favorably to Lucid Group (LCID) and Rivian (RIVN) , but it is not moving nearly as well. GGPI will be closing its deal within a month, and I expect the stock to trade much better. Decarbonization Plus Acquisition Corporation III (DCRC) is very similar.
Traders have been very aggressive with some names lately, and those names are reversing hard today. Softness in cryptocurrencies is another part of it. It is just the nature of trading at times, and we have to work our way through it with a little patience and some careful money management.
