One of the keys to trading success is to identify what themes or sectors are working best.
Traders always gravitate toward the strongest action and tend to make it self-fulfilling to some extent. Quite often, a couple of strong stocks in a sector will lead to strength in other names in the group.
Currently, one of the best themes I see is SPACs -- special purpose acquisition companies. SPACs were red hot back in February and then fell out of favor and were despised for months. The entire group was declared to be garbage, and even the best names were tarnished with the SPAC stink.
Over the past month or so, this started to shift. The vast majority of SPACs were trading at or below their net asset value of $10, but traders started to target some names that were completing their mergers and produced short squeezes due to a high level of redemptions.
The interest in SPACS has started to shift to companies with solid fundamentals. IonQ Inc. (IONQ) is one that has helped to get the ball rolling. After falling sharply right after its merger was complete and the symbol changed, it doubled and continues to trade well.
The Rivian Automotive Inc. (RIVN) initial public offering helped to ignite some action in electric vehicle-related SPACs. Gores Guggenheim (GGPI) is trading very strong, as traders compare its attractive valuation to other EV names. GGPI is already selling cars, while RIVN and Lucid Group (LCID) still have a long way to go before they start actual sales.
One of my favorite names right now is Decarbonization Plus Acquisition Corp III (DCRC) , which makes solid-state batteries. It compares very favorably to Quantumscape (QS) , which sells at a much higher valuation. As I write, a cannabis-related SPAC, Merida Merger Corp I (MCMJ) , is seeing some action as market participants study its favorable valuation.
I expect the SPAC theme to continue for a while. There are some exceptional values in the group that were created when SPACs were dismissed as worthless vehicles. The market is now sorting them out and finding values like IONQ and Humacyte (HUMA) , which will likely be leaders in the years ahead.