Adding to a Health-Related Name as SpaceX Sucks Up the Oxygen

The narrow momentum action that we saw on Monday is even more narrow on Tuesday with SpaceX (SPCX) being the primary beneficiary. The Nasdaq 100 (QQQ) and Magnificent Seven (MAGS) were the leaders Monday but are in the red Tuesday while SpaceX moves up more than 13%. SpaceX is sucking up the oxygen in the market and is now the meme stock du jour.

Overall market breadth is positive at around 57% due to relative strength in the Russell 2000 (IWM) but new 12-month highs are down to about 125 names due to rotational action. The pockets of 10% movers list is also notably shorter.

I continue to be focused on managing positions tightly and keeping accounts as close to highs as possible. I’m not interested in chasing strength particularly in the technology area. I’m still looking for buys and am focused on things with relative strength that are not extended.

Looking for Setups With Relative Strength

One example of that setup that I added to Tuesday is Hims & Hers Health (HIMS). HIMS was a retail favorite when it was focused on compounding GLP-1 drugs. That business has essentially disappeared and HIMS is now moving into other areas like peptides. It has also moved aggressively to expand its business internationally.

Analysts are still cautious about HIMS stock but it is turning up after a decline from the $70’s to the teens. Retail investors like the name and may pursue it aggressively on good news.

My Strategy

While many investors are rushing right now to increase their long exposure, I’m moving in the opposite direction and using strength to raise cash and aggressively cutting laggards. I’m anticipating a period of consolidation and rotation, which will be triggered by a lack of a positive catalyst until we move into second-quarter earnings season.

I’m making a few selective buys like HIMS and am not concerned about the market running away to the upside.

At the time of publication, Rev Shark was long HIMS.