Don't Let FOMO Make You Stupid
Feeling like you're missing out? Read this before you "scratch that itch.' Here is what I’m doing, plus three stocks I nibbled on today.
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Market participants were caught by surprise when stocks jumped sharply at the open on Thursday after a weak close on Wednesday, following the announcement of the Fed’s half-point cut.
There wasn’t any significant news overnight that caused the abrupt shift in market action. Market players decided to embrace the "soft landing" scenario and that trapped bears that were looking for a "sell the news" reaction to gain traction.
As is often the case when there is a big "risk on" shift, the money goes primarily into the most liquid big-cap names and the ETFs. The Magnificent Seven (MAGS) names are leading with a jump of about 3.5%, and the Nasdaq 100 QQQ is up 2.8%. Breadth is more than 4 to 1 positive, and there are already more than 1,200 stocks at new 12-month highs.
One illustration of how this action is mostly driven by ETFs and from the top down is that there is a fairly narrow group of stocks up more than 10%. This isn’t speculative-driven stock picking. It is big money trying to add exposure by buying ETFs and indexes.
This is great action for positions that you are already holding, but it makes it very hard to put more cash into work. Extended charts are even more extended, and most entries are now chases.
Feeling FOMO
It is extremely important to recognize that you are likely feeling some FOMO and want to scratch the buying itch. If you do buy, then make sure you stay prudent with entries and leave room to make additional purchases as things calm down again.
I have nibbled at three names so far Thursday.
Viking Therapeutics VKTX is working on an obesity drug that has had very good preliminary data and limited side effects. It will be releasing data in early November, and recently received a "buy" rec from JPMorgan JPM and a $80 price target. The stock is not extended and is testing overhead around $67.50.
TeraWulf WULF is a Bitcoin miner that uses zero-carbon energy and is powered by nuclear, hydro, and solar. It also has some AI data center aspirations similar to Core Scientific CORZ and was listed in recent SEC filings as a holding of Stanley Druckenmiller.
Delcath Systems DCTH is a small, under-the-radar biotechnology name. It is an interventional oncology company focused on the treatment of primary and metastatic liver cancers. The company is just starting to recognize substantial revenue, and it recently had some good data that sent the stock up sharply. It is fading back down to support on thin volume, and I’m going to increase my exposure.
I’ll keep digging for more ideas and will keep you posted.
At the time of publication, Rev Shark was long VKTX, CORZ WULF and DCTH.
Please note that due to factors including low market capitalization and/or insufficient public float, we consider several of the names mentioned to be small-cap stocks. You should be aware that such stocks are subject to more risk than stocks of larger companies, including greater volatility, lower liquidity and less publicly available information, and that postings such as this one can have an effect on their stock prices.
