Swaggy's Top Stonks - Meme Stocks & Option Flow
Swaggy's Top Stonks - Meme Stocks & Option Flow
Swaggy’s Top Stonks. We compile and analyze data from multiple sources bringing you the top trending tickers from around the internet. If you haven’t subscribed already, please do so below.
Swaggy's Top Stonks
Together With...Vig.io
August 9, 2021
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This Week's Letter
Meme Stocks - The Underdog List
Earnings SZN
Unusual Options Activity
Cleveland Cliffs (CLF) Company Analysis
Trending Tickers
Meme Stocks - The Underdog List
What happened this past week with Robinhood (HOOD) and their stock price is confirmation that more often than not the FOMO trade is an expensive lottery ticket. HOOD stock price doubled in just 3 trading days before crashing down before rocketing back up.
It's difficult to play with FOMO. We've all been there with the trade that "could have been" if we just held onto it for "x" more days. The fact is, if a stock price goes up 30-40% in a single day, most people who still have their sanity would sell the position. To beat yourself up over a trade that "could have been" 300% is unreasonable, so don't be too hard on yourself.
With volatile stocks like this it's good to give yourself a price target or entry point that you wouldn't mind begin building a position. For myself, with HOOD that price is around $35-40 per share. If it eventually get's there again then I will start a position. If the stock goes to $100 in the next few weeks then unfortunately I will have to pass until new fundamentals change my mind.
I've put together an "Underdog" list of meme stocks. These names have all previously reached somewhat of meme status (maybe not as much as AMC and GME), and could potentially be at more fair entry points than buying on FOMO. Here they are.
Jumia Tech (JMIA)
Jumia is an e-commerce platform that has been given the nickname the 'Amazon of Africa'. The stock became popular on WSB last November when the share price rose from $18 to $50 in under a month. JMIA has been on a serious down-trend and is currently at around $20.
Nano Dimension (NNDM)
NNDM is a tech company that gained popularity at the start of the year after the stock completed a 1,600% gain and meteoric rise. ARK ETFs hold roughly 18 million shares of NNDM and WSB has been known to like the stock. The periods on the chart below where the hype spiked to roughly 0.70% share of ticker mentions had a nominal mention count of about 100 per day. From the highs the stock is down 60%.
Senseonics Holdings (SENS)
SENS is a medical tech company who's stock price exploded with the Gamestop madness and also with round two of the AMC squeeze. Looking at the chart the stock price is extremely volatile and has the potential to be driven by sentiment.
Gaotu Techedu (GOTU)
Another Chinese education stock that has taken a massive beating recently. The stock is down 97% (!) from the highs from earlier this year. I am not quite sure what caused the recent sentiment spike on WSB for this ticker, but maybe they are buying this dip after the stock has reached earth's core.
Earnings SZN
Another week of big names coming up with earnings this week. Here's what I'm watching:
Monday
Purple Mattress (PRPL) - BMO
AMC Entertainment (AMC) - AMC
SmileDirectClub (SDC) - AMC
Tuesday
FuboTV (FUBO) - AMC
Unity (U) - AMC
Upstart (UPST) - AMC
Coinbase (COIN) - AMC
Playboy (PLBY) - AMC
Wednesday
Target (TGT) - BMO
Nio (NIO) - AMC
Coupang (CPNG) - AMC
Bumble - (BMBL) - AMC
Thursday
Palantir (PLTR) - BMO
Disney (DIS) - AMC
Rocket Companies (RKT) - AMC
AirBnB (ABNB) - AMC
Sundial Growers (SNDL) - AMC
ContextLogic (WISH) - AMC
Unusual Options Activity
A powerful tool I implement with my investing is Vig.io unusual options activity. Option flow is used to read the general direction as well as for monitoring uptick in volume, sentiment, and hype in the markets. Personally, I use it to look at large directional bets placed on stocks on my watch-list. I'm an affiliate so if you want to get started on the free trial you can also apply the code SWAGGY10 to receive $10 off your monthly subscription ($40/month). They also have a slick mobile app to go along with it.
Many times I'll see people comment "but what if the bet is just a hedge". Simply put, it doesn't matter if it's a directional bet or a hedge. Let's say we KNOW the trade is a hedge, we still don't have any idea what's taking place behind the scenes. It's impossible to know the full details of any trade and what other positions the player is thinking with this trade. What we can determine by using our knowledge is to make the best guess as to the direction of the bet. If a player is betting aggressively on a direction, or protecting aggressively against a position, it's still aggressive behavior behind that move. Even if they are opening multiple long positions against a huge short position, that means they are still showing urgency to create movement in the same direction as if it were a directional bet. Opening aggressive positions in one direction will always be seen as an aggressive position regardless of external factors, period.
This kind of option flow happens frequently in large/mega-cap names and can sometimes be difficult to decipher. So what I generally look for is option flow in mid-cap stocks that might be influenced by a 500 thousand dollar bet. In an ETF or mega-cap that size trade will barely even move the needle.
With Vig.io you can either find scans that meet pre-set variables and criteria, or you can create a custom scan based on what you are personally looking for. Below is the sentiment for one of my favorite scans, the "Roaring Kitty Calls" on the app. Keep in mind sentiment is green for all of them because it's only looking at calls, but here I can get a feel for what's happening with each ticker based on the size of the trade blocksand if I see something unusual. This is from Friday so I'm seeing a lot of DKNG activity (they released earnings on Friday), so I will usually poke around to see if anything comes up from other stocks on my watchlists.
Here are the results from a custom scan I ran on Friday. It included calls and puts and the criteria was:Greater than $50k and less than $500k in option premiumExpiration at least 1 month out to 1 year (remove short-term YOLOs and hedges)Trade block volume of at least 500 contracts (usually removes mega-cap and large ETFs)It's a great way to see if anything interesting is going on with the ticker and then you can look under the hood to try and figure it out. Option flow is more like a piecing a puzzle together instead of following some of these trades blindly.
Company Analysis - CLF
For those of you interested in reading about popular WallStreetBets ticker CLF (Cleveland Cliffs), TheStonksHub released a fantastic free DD on the company that has a lot of information on the recent growth CLF has seen in the steel industry. Here's the intro, but you can read the whole thing here.
Business Overview
Cleveland Cliffs (CLF) is the largest flat-rolled steel producer in the United States. Their recent acquisitions of assets from ArcelorMittal and AK Steel have allowed them to vertically integrate each step of the process in steel production. From mining raw materials (pellets, metallics, coal/coke) to the steel-making process (stamping, tooling, and tubing) everything is now done in-house.
CLF’s product mix encompasses all things steel, mainly: hot-rolled, stainless & electrical, cold-rolled, coated, plate, and others. They have an industry-leading market share with automotive vehicles, which consist of predominantly trucks/suvs (82% versus 18% sedans). Their total end-market mix consists of:33% is allocated to auto32% is used in distributors & converters24% is with infrastructure & manufacturing11% in the “other” category.
The Market Opportunity
I’ve read quite a few articles comparing CLF and the steel industry to the average cyclical commodity market, but is that really the case? It’s a fools game to think that steel will have a similar correction as to what lumber prices and many other commodities have recently gone through. I will be the first to admit that the current prices of steel may not be sustainable, but the “steelmageddon” many analysts are expecting may never come. One year ago (August 2020) U.S HRC (Hot-Rolled Coil steel) pricing was at nearly $400. CLF CEO Lourenco Goncalves acknowledged the steel industry may never see those prices again.
The smaller steel-mills that have traditionally undercut prices in an attempt to gain market share have all been buried during covid or bought up by larger companies. Steel is no longer looked at as being a true commodity and demand is very robust. The auto-industry that has recently showed a slow in demand due to microchip shortages will have nowhere to go when demand picks up again, thus steel-suppliers have the upper hand.
Continue Reading: CLF - The Turn-around Story in Steel-Making
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