After very gloomy Covid-19 news over the weekend, many market players were anticipating a weak open this morning. As is so often the case, strategic buyers were so anxious to buy a dip that they prevented one from even developed. There was some selling into the open but that only lasted a few minutes before the bulls started looking for more entry points.
To navigate this market effectively right now you have to understand that there are two major groups at work. There is the big picture, market timing bears that believe that the indices are ready to top and there are the aggressive, stock-picking bulls that are enjoying some of the best speculative action since the internet bubble days.
These two groups are focused on very different things and it is causing frustration for those that are trying to be logical and analytical. Price action trumps all the negative arguments in the short term.
When trades in secondary stocks are working it causes traditional Wall Street pros to scoff at the stupidity of these traders but it also creates very positive sentiment that is very persistent and lasts longer than others think it will.
My strategy is to keep on trading what is working. Some of these trades are very high risk/high return but the key is to stay very vigilant and manage trades carefully. I am constantly buying and selling the stocks I like. I don't just make a buy and sit there.
A good example of the wild speculation right now is my Stock of the Week, Tortoise Acquisition (SHLL) . I discussed this quite a bit last week but it has the potential to be a super-momentum play because it is in the right sector and compares very favorably to Nikola (NKLA) .
The two stocks remind me of the internet bubble, 20y years ago. Neither company can be valued based on fundamentals but they can be compared to each other. If NKLA can trade this high then why can't a similar stock sell with a similar market cap? It isn't a very rigorous way to value stocks but that sort of comparison is what can make a group like internet stocks or electric trucks go nuts.