🗞️The Wrap: Going Low

Oil is going low, FIFA and COD servers are getting a serious workout and we see the serious downside of volatility plays. Plus, traders buying the dip to perfection.

5 Companies Turning Up in the Shutdown

  • Zoom (ZM) +21.9% this week
  • Microsoft (MSFT) +8.3%
  • Activision (ATVI) +2.7%
  • Verizon (VZ) -7.4%
  • TakeTwo (TTWO) +1.1%

Sub-Zero

Tom Brady signing with the Bucs is a reminder that anything can happen. As if we needed another reminder after this virus outbreak anyway. While it would take a brave trader to project negative oil prices, it is definitely an outcome to consider possible.

You read that right. Negative oil prices. Just as we get used to negative interest rates.
The thing about oil is it takes up a lot of space, with the current oversupply, only so much oil can be bought at the low prices and stored. Once maximum storage is reached, on top of the low demand, oil can just keep going south. Read this article for some more depth.

Gas prices are negative in parts of Texas right now and from time to time electricity prices too in California.

Cheap oil is great for airlines and cruise ships but they just can’t take advantage of that right now.

Big Data

Internet Service Providers are getting a real work out right now. For every hour spent pretending to pay attention in a Zoom meeting, there’s another few playing XBox. Data from Verizon shows that gaming is up 75% week on week while general web traffic is up 20%.

Interestingly, social media usage is flat and video streaming is only up 12%. We couldn’t spend more time on Facebook or Netflix if we tried!

At the same time, we’re dialing in more than ever. The average call volume last week was double that of a typical Mother’s Day.

Shutdown

A quick history lesson. We’ve lived through the volatility and know the massive run (and pull back) long vol products have gone through (VIXY, UVXY, TVIX). Traders also have the option to short vol through SVXY if they expect a quiet time.

XIV used to act similarly to SVXY, except when it lost 92% in one trading day in February 2018. The Dow had its worst ever day, at the time, and volatility spiked. Just like that, one of the more profitable trades for years lost all value.

It’s a reminder that volatility products move quickly and can gap up and down massively overnight; which is why you might see common advice to not hold too large of a position long term. As glamorous as those TVIX gains were, the way down has been just as sharp.

Top 5 Gainers

  • Performance Food Group (PFGC) +92.7% in the last week
  • Penn National Gaming (PENN) +80.2%
  • Ryman Hospitality (RHP) +61.0%
  • Seaworld Entertainment (SEAS) +53.1%
  • Caretrust REIT Inc (CTRE) +52.9%

Top 5 Fallers

  • Two Harbors Investments (TWO) -68.1% in the last week
  • New Residential Investments (NRZ) -53.6%
  • Blackstone Mortgage Trust (BXMT) -40.4%
  • Chimera Investments (CIM) -37.8%
  • Starwood Property Trust (STWD) -37.2%

What We’re Reading | Trade Like a Stock Market Wizard

There’s understandably a focus right now on fundamentals; what sort of debts are companies holding, how revenue is affected by the virus.

But there’s more than one way to make money in markets and Minervini’s work is the best introduction to technical analysis I’ve come across. His lessons helped me save my bacon in this crash.

This book walks through the fundamentals of chart reading and how to make money in the market. His strategies won’t be for everyone but everyone should consider this school of thought. Check it out as an eBook here.

The reason for this specific book is Minervini’s chapters on market crashes. Like how the best performing stocks at the end of the last bull run tend to be the market leaders in the next run.

Get a taste of what this guy is about by checking out his Twitter.

Trader Teaser

XX + YY + ZZ = XYZ. What is Z? X, Y, Z are all positive, whole numbers.

Best Buy | PENN +94%

This trader took a gamble on a gambling stock and timed the bottom perfectly. Selling at Tuesday’s close and locking in 94%. This stock traded as low as $3.70 last week too.

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