July 12, 2019 

Portfolio Allocation

Current Position Performance

Highlights from the Week

Biggest Winner: Yeti (YETI)

Yeti (YETI), the outdoor consumer products maker, is popular once more, earning an outstanding +10.1% this week and accumulating +126.82% in gains for the year. We still can’t get over how this one performs, but it definitely earns its place as this week’s winner.

Biggest Loser: Canopy Growth Corp (CGC)

The Great Cannabis Selloff has returned and it turns out that the previous one was just a trailer of what was to come – Canopy Growth (CGC) released very disappointing earnings and fired its founder because of it, causing a huge sell-off in the pot sector. CGC is leading the way down, losing an epic -14.82% this week closely followed by Aurora Cannabis (ACB) down -10.21%, New Age Beverages (NBEV) down -8.67% and Cronos Group (CRON) getting hit for -6.87%.

If you’ve ever wanted to see a real-world example of why it’s important to diversify your portfolio, our Trades in Play fits the bill with four of our now 15 positions in the same sector. To learn what you should do to create a diversified portfolio, check out our post: How to Make a Trading Plan.

We also have a Biggest Loser runner-up this week: Slack (WORK) earns its spot after news that Microsoft (MSFT) is eating their lunch resulted in us cutting our losses and running from the stock. Read more about what the heck happened below.

This Week’s Trades

Advanced Micro Devices (AMD): Profit-Taking

AMD (AMD) showed instability on Monday which made us uneasy given the current market conditions and overbought nature of this outstanding semiconductor. We took profits at $31.31 to lower our per-share cost to $7.96 a share.

In true Get Irked fashion, research firm Nomura released an analyst report one day later on Tuesday upgrading AMD based on their upcoming CPU and GPU chips set to release later in July, causing the stock to pop.

This kind of news event is exactly why we’re huge proponents of Selling in Stages. By not selling all at once (or buying a stock all at once, too, for that matter), investors and traders can capitalize on further potential upside profit while still locking in gains or add to their position at lower levels, further decreasing the per-share cost of a position.

Our next sell target is at a new all-time high price of $39.53 where we will fully remove our capital investment as well as take some significant overall profits. This high would represent significantly overbought conditions for AMD where we would expect the stock to pull back substantially.

Our next buy target is at a much lower historical level of support at $23.61 should AMD pull back if we experience a market-wide correction.

AMD closed the week at $33.21, up +6.07% from where we sold on Monday.

Nio (NIO): Position Reduction

Nio (NIO)’s epic rise from the ashes continued with a +6.6% pop on Monday. Despite still being significantly under our per-share cost, we decided to reduce our position size by selling some shares at $3.48 which we bought at an average price of $2.60, raising our per-share cost 3.66% from $4.37 to $4.53, but capturing a 33.97% gain on those shares while also getting our downside exposure more in line.

While we expected Nio to pull back from $3.50, its 50-day Exponential Moving Average (EMA), it actually ended up doing the opposite, rocketing even higher in a seemingly impossible move. This continued upside indicates Nio may have hit its capitulation point at $2.35.

In stocks, capitulation is the point where traders reverse course from the prevailing trend. These points happen when a stock becomes so overbought or so oversold that the “smart money” sees that anyone who has wanted to sell the stock has already done so and starts buying. The same happens in reverse, when a stock reaches such high levels that it becomes apparent that all the buyers who want to own the stock already do so.

The course of action at capitulation points is to do the opposite of the current trend – buying a stock if it’s in a downtrend or selling a stock in an uptrend. Timing a capitulation is harder said than done, of course, as doing so is basically calling a top or a bottom in a stock – an action that’s incredibly difficult to accurately predict.

On Wednesday, Nio released its Q2 vehicle deliveries which beat expectations, causing the stock to continue its upward trajectory further before pulling back to its 50-day EMA at the week’s end.

We have sell targets at much higher key resistance levels determined using Fibonacci Retracement techniques: $4.42 (which raises our per-share cost by $0.01 to $4.54), $5.43, $6.48, $7.47, $8.83, $9.40 and ending at $10.48 where we will pull our entire capital investment and let the profits run.

NIO closed the week at $3.45, down -0.09% from where we sold on Monday.

Revolve Group (RVLV): Profit-Taking

Revolve Group (RVLV) popped on Monday following bullish analyst reports, triggering a sell order to take profits at $39.77 which lowered our per-share cost to $35.50. RVLV ended up peaking at $41.20 before pulling back substantially to $37.49 on Tuesday.

Our next sell target is slightly below Revolve’s all time high at $48.25 (its high is $48.36) followed by new highs at key levels: $52.75 and $58.00 where we will pull out our initial capital investment along with additional profits, letting the rest run.

Our next buy target is $33.82, slightly above a key Fibonacci Retracement level of support with additional buys targeting lower levels: $31.86, $30.76 and $26.86.

RVLV closed the week at $37.74, down -5.10% from where we sold on Monday.

Slack (WORK): *Closed Position: -11.50% LOSS*

Initially, Slack (WORK) appeared to have finally experienced its oversold capitulation point on Tuesday, opening down at $34.50 where our open limit order filled at $34.63 before the stock rallied through the remainder of the day.

On Wednesday, news broke that Internet magazine, Recode, released a damaging survey showing that companies are slowing their spending on Slack, preferring to utilize Microsoft’s Teams product, a near carbon-copy of Slack, which the mega-conglomerate offers for free as a part of its Office 365 offering.

On Friday, the news really hit the stock as Microsoft released numbers showing it currently has 13 million users using Teams with many coming online monthly. This compares to Slack’s somewhat paltry 10 million users with only a few thousand of those actually using the paid premium service.

WORK sold off in an epic fashion during trading on Friday, triggering a stop-limit order we placed to lock in our losses at $33.62, a total loss of -11.50%.

As the stock adage goes: Your first loss is your best loss.

Although WORK may recover and survive, we no longer have faith in the thesis for this stock. Competition and market/sector downturns are one thing, but when a Death Star like Microsoft (MSFT), Amazon (AMZN) or Alphabet (GOOG) targets your only product with a free alternative, that’s simply a recipe for disaster. 

Do you remember the online calendar subscription service that never made it public? Destroyed by Google Calendar. How about Yahoo Mail or Hotmail? Sure, they still exist but do you know anyone without a Gmail account?

Did you ever buy anything from Yahoo Auctions before eBay killed it? And, do you use Evernote or do you use Microsoft’s OneNote which does everything Evernote does and comes free with Windows?

This may be a David vs. Goliath story, but Goliath has a machine gun and David’s throwing paper airplanes.

As a magic eight-ball might say, “Outlook not so good.” (Microsoft pun intended)

WORK closed the week at $33.73, up +0.33% from where we closed our position.

Tradeweb Markets (TW): Profit-Taking

Tradeweb Markets (TW) took off skyward on Monday, reaching a new all-time high and triggering a sell order we had in place at $47.12, making our per-share cost $33.74.

Based on historical consolidation price action, we have buy orders in place at the following levels: $42.56, $40.56, $37.55 and $34.27. Given Tradeweb’s solid fundamentals and trajectory, we have sell targets much higher at $54.16, $59.33 and $62.52.

TW closed the week at $48.25, up +2.40% from where we sold Monday.

Yeti (YETI): Profit-Taking

Outdoor consumer products play, Yeti (YETI), rocketed +46% in just over a month from its $23.11 monthly low on June 3 to hit $33.85 on Wednesday, where we took some profits, lowering our per-share cost -13.54% from $21.94 to $18.97.

Yeti has been an incredibly volatile stock since its IPO, and although its management has proven the popularity of its products and capability to drive revenue, an overbought stock is an overbought stock, resulting in us taking profits.

We have sell orders just below its all-time $36.60 high at $36.57 with higher targets if it makes the break at $38.30 and $40.25 where we will pull the entirety of our capital investment along with profits, letting the remainder of our position run.

Given its historical price action, we won’t be adding back to our position until it falls near these buying targets: $23.27, $20.40 and $18.90.

YETI closed the week at $33.41, down -1.3% from where we sold on Wednesday.

Questions?

As always, If you have questions about how we’re playing different positions or anything at all, really, feel free to leave a comment below!