Seeking Alpha

Emerging And Disruptive Technologies - Weekly Analysis And Trading Ideas

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Includes: CIEN, FB, FIVG, GRMN, HUYA, MSFT, NOK, NTES, NVDA, RTN, SNSR, SWKS, TWTR, VOD, VRTX, VZ, WDC
by: Mitch Bulajic
Summary

Comparing to QQQ, FIVG has been outperforming, but SNSR and FIVG will outperform.

Overlaying the aggregate and individual stock scorecard leads us to a heatmap-type visualization of opportunities.

We have shortlisted a handful of buy opportunities, with specific option trades for CIEN, MSFT, RTN and VRTX.

The Theme

Our analysis focus is around Emerging and Disruptive Technologies that center around stocks that are pure-play stocks, and stocks that are implementers of such technologies with significant impact. We are following 8 benchmark ETFs that are slightly different from our old following – with the goal to focus on only one ETF per group or industry and further expand groups or industries relevant to the theme. Currently, our list of ETF-based groups we are following are:

  • Global X Social Media Index ETF (SOCL)
  • Global X Robotics & Artificial Intelligence Thematic ETF (BOTZ)
  • Global X FinTech Thematic ETF (FINX)
  • Global X Funds - Global X Genomics & Biotechnology ETF (GNOM)
  • Global X Cloud Computing ETF (CLOU)
  • Defnc Nxt Gen Shs (FIVG)
  • Defiance Qntum Shs (QTUM)
  • Global X Internet of Things Thematic ETF (SNSR)

We have also recreated our own indexes based on the published ETFs, containing top 10 by participation and equal weighted stocks from the corresponding ETF, that we will predominantly use for our analysis and presentation - to tailor to our style, to serve our analysis needs better, and to compensate for lack of clean and historical data on most ETFs above.

Technical Overview

Analyzing the trailing quarter performance of the following ETFs, our take is twofold: 1) We believe that the significant outperformance of QTUM to the QQQ (30% versus 10%) is over, and 2) we believe that SNSR and FIVG will outperform the QQQ going forward in the next trailing 3 months.

Chart #1 - QTUM, SNSR, FIVG And QQQ Three-Month Trailing Performance (Courtesy Of TD Ameritrade ThinkorSwim)

In the case of SRSR, this is a strong momentum play to have most likely an outright buy in an absolute basis, in addition to outperforming the QQQ on a relative basis. All the indicators particular in the spread (relative strength, momentum, cycles, and cumulative money flows) are very strong and pushing to the next level up, which means we should have almost certain short term and possibly mid-term outperformance.

Group_and_Spread_Chart_Guide.jpg

Chart #2 - SNSR Daily And Daily Spread With QQQ (Courtesy Of TD Ameritrade ThinkorSwim)

In the case of FIVG, this is a very strong support and bottom building that is not a clear buy signal on an absolute basis, but a likely outperform signal against QQQ on a relative basis. We are particularly encouraged by the flattening of all indicators on the spread (indicating often an end of trend) and particularly the diverging relative strength.

Chart #3 - FIVG Daily And Daily Spread With QQQ (Courtesy Of TD Ameritrade ThinkorSwim)

The Scorecard

*The ranks are valued from 0 (worst/weakest) to 100 (best/strongest)

Table #1 - Aggregate Scorecard by ETF/Group (Courtesy of Clarendon Global)

Table #2 - Individual Stock Scorecard (Courtesy of Clarendon Global)

* for better view and analysis, attached is the Scorecard below:

Scorecards.xlsx

The Short List

We have short-listed from our algorithm-generated list above with the following stocks that are showing best technical patterns and entry levels as the probable best buys and very likely outperformers to the QQQ in the next one week to one month - and in some cases one quarter.

Table #3 - The Short List Scorecard (Courtesy Of Clarendon Global)

The Trades

We have also singled out few of the stocks from our short list with best and specific strategic option trades:

Ciena Corp. (CIEN)

We're fairly bullish on Ciena going into the June 6th earnings report, due to the following reasons: a) the support at the 39-47 range developed after the June 6th earnings (which is bullish by itself) is holding very strong, b) the weekly cyclical money flows and particularly the sentiment have been consistent and strong since the late 2017 - even through this year's severe implied volatility. What is particularly interesting is that implied volatility heading into the June 6th earnings is noticeably higher than the implied volatilities we saw to the prior earnings reports (prior average @50%, current @60%), even more so when comparing the near around earnings expirations.

Stock_Chart_Guide.jpg

Chart #4 - CIEN Daily & Weekly (Courtesy of TD Ameritrade ThinkorSwim)

https://static.seekingalpha.com/uploads/2019/9/2/472270-1567447920563313.png

BUY +10 CALENDAR CIEN 100 18 OCT 19/6 SEP 19 45 CALL @.59 LMT.

Chart #5 CIEN Options Strategy P&L (Courtesy of TD Ameritrade ThinkorSwim)

Microsoft Corporation (MSFT)

Microsoft is an 800-pound gorilla and far beyond being part of disruptive and emerging technologies, it is also a premier quality stock in the chase for growth with enough liquidity and stability. Microsoft's long-term trend is well intact and a mid-term pullback with abating institutional money-flow are minimal or nonexistent. We are expecting shortly another very predictable wave of institutional money-flow, so we have calculated a minimal target by the year-end at around 148 - maybe beyond.

Chart #6 -MSFT Daily & Weekly (Courtesy of TD Ameritrade ThinkorSwim)

BUY +10 VERTICAL MSFT 100 20 DEC 19 140/150 CALL @3.87 LMT

Chart #7 MSFT Options Strategy P&L (Courtesy of TD Ameritrade ThinkorSwim)

Raytheon Company (RTN)

Raytheon has been trading in a very confined range between 170 and 193 for a while now, but we anticipate that this is going to change with vigor - given to surge in market sentiment and especially the institutional money-flows, making minimal and very probable targets at 193 and higher target at 208.

Chart #8 - RTN Daily & Weekly (Courtesy of TD Ameritrade ThinkorSwim)

BUY +10 CONDOR RTN 100 18 OCT 19 185/195/200/210 CALL @3.38 LMT

Chart #9 RTN Options Strategy P&L (Courtesy of TD Ameritrade ThinkorSwim)

Vertex Pharmaceuticals Incorporated (VRTX)

All our indicators (momentum, cycles, money flows and sentiment) are pretty much in unison and forecasting a very slow move to the upside in a well-defined upward sloping channel, with strong support at the bottom of the channel en route to the top of the channel by the end of the year with the price target at 212.

Chart #10 - VRTX Daily & Weekly (Courtesy of TD Ameritrade ThinkorSwim)

BUY +10 BUTTERFLY VRTX 100 18 OCT 19 180/195/210 CALL @4.13 LMT

Chart #11 VRTX Options Strategy P&L (Courtesy of TD Ameritrade ThinkorSwim)

Conclusion

There's many ways to trade this market - our preference and comfort zone is with strategic options spreads. But in any case, this will be a very volatile trading market going towards the year-end - particularly with these volatile high growth stocks. But we do expect, just like with any other sector or asset class, the good stocks to separate from the bad and the ugly, with much more dispersion and less correlation between the ETFs and groups we are following.

Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in CIEN over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.