The Strazza Letter Articles

Welcome back for another Top Down Trade of the Week. 

This one’s a classic leadership scan.

We start with the best sectors, then drill into the subgroups. We pick one, and then take a look at the top stocks in it. 

This week, Energy is the big standout—jumping to the top of our sector rankings. 

Healthcare and utilities also made a big move up on the leaderboard as growth sectors faltered. 

Here is a look at our overall industry rankings, which shows oil & gas cracking into the top 10.

It’s not a surprise to see it there—crude oil has been squeezing higher, posting its best week since October 2022.

That kind of price action tends to light a fire under energy stocks, and that’s exactly what we’re seeing.

Let’s get one thing straight… I’m not some sort of defense industry perma bull.

Trust me, those people exist.

They hang out in the same circles as the ‘end-of-days’ folks, national debt doomers, and gold bugs.

It’s just not for me. I’m an optimist.

However, I’m also a good old-fashioned trend follower.

And these stocks have taken on a new leadership role, so we’ve been buying them. Here is Aerospace & Defense relative to the S&P 500:

This base breakout is in the books, and the path of least resistance is now higher for this ratio. All that means is expect more outperformance from these stocks over longer timeframes.

But I’m most interested in making money right now. This week, this month, this quarter.

And as I flipped through the A&D components today, there was one chart that I just...

“Look kid, if you hear the missiles are flying, you buy them. You don’t sell them.”

— Art Cashin, Wall Street legend.

No doom and gloom here. That’s not our style.

We don’t get caught up in hot headlines or silly narratives. We follow trends — regardless of what’s going on in the world. 

And right now, one of the clearest, most durable trends on the tape is in Aerospace & Defense.

And maybe it’s because of this war here, or the geopolitical issues there. Or maybe it’s just because industrials are the leaders and this is a bull market.

Here’s the thing… There will always be wars, and fear will always have a significant impact on human behavior. 

I can tell you we’re buying these stocks because of some headlines out of Russia… but that wouldn’t be the truth. 

We’re...

The multi-year distribution patterns in energy are failing and hooking higher.

And from what I understand, it’s been confusing for some people.

I get that. If you’re one of them, keep reading; we’ll unpack it all.

But first, here’s something from a note I wrote on energy last month.

“I’m making the bet that crude scoops and scores here. I think it should look a lot more like its derivative plays soon, back in its old range. And I think we can get a fast move back toward the upper bounds from there. I’m talking about a big rally that sends crude back to the 80s or 90s”.

Why in the world was I feeling so warm and fuzzy about crude oil? 

It was just completing a massive top. What a naughty technician I must be. What was I thinking?

One of the top-performing areas of the speculative growth theme has been the “new-school” nuclear trade. 

OKLO already tagged one target, SMR is on its way, and NNE is coiled and wants next. 

Click the link to read our nuclear energy deep dive.

These have been some of the top stocks off the April lows, and now the old-school names like Cameco $CCJ are powering higher too.

What I’m saying is the entire nuclear space is red-hot, and I want more of it.

Here’s the VanEck Uranium & Nuclear ETF $NLR breaking out to its highest level since 2008.

After a 50% move in two months’ time, one might think this trend is extended, but it’s not. 

This is a fresh breakout over longer timeframes, and price should keep climbing...

All things equal, I want the one that shook out the weak hands… before it left the station.

I want the one that bears had a clean chance to bury… but couldn’t.

I want the one that just trapped the shorts… then squeezed higher.

Bull hooks. Bear traps. Scoop ‘n scores. Shakeouts.

These are all powerful patterns, and are all similar because they are centered on the same thing…

Failed moves.

This is when price violates a key level and quickly reverses in the opposite direction.

“From failed moves come fast moves” is how I learned it.

And that’s exactly what is happening with Bitcoin $BTC right now. Here’s a look:

BTC ramped from about 75k to north of 110k in a matter of five weeks off the April lows.

...

We got some nice feedback on our top-down scan from last weekend so I think we’ll make it a regular thing.

This is a clear and simple leadership scan, which is why I like it so much. 

We are drilling down to a trade idea following the traditional top down approach. It doesn’t get any better than that. 

We start with the best sectors, then drill into the subgroups. We pick one, and then take a look at the top stocks in it. 

This week, Materials is the big standout—jumping two spots in our sector rankings. It’s no surprise. Commodities are on a tear and participation is expanding. This means we should expect more materials stocks to start working. And we’re already seeing it. 

Upon digging deeper, we found Metals & Mining stocks have been doing a lot of the heavy lifting for the sector....

This week was all about the bull flags.

Bonds dug in where they needed to recently.

International equities keep grinding higher with broadening participation.

And then we have the US indexes, which have been sideways, in high and tight fashion, since mid-May.

That changed this week…

The bulls got what they needed as a long list of these coils resolved higher.

We’ve been particularly interested in speculative growth, and ARKK is a great example of this bull flag theme, so let’s go there:

This is the same pattern we are seeing all over right now. A big time advance off the April lows into a 3-4 week continuation pattern.

And if there’s one thing we know about continuation patterns it is that their resolution should mark the continuance of the preceding price trend. Well, that...

Two weeks ago, I wrote about the breakout that was brewing in silver. 

And it wasn’t just about the price action in gold.

There were finally other signals emerging and suggesting higher prices for the precious metal. We just needed to see if those trends had legs. 

The silver/gold ratio is everything when it comes to risk appetite. It’s the oldest intermarket indicator in the world of commodities. Here’s what I said about it:

“If I end up being right about silver, we’re going to see the silver/gold ratio fail this breakdown and scoop higher”.

The writing was already on the wall for an epic bear trap, and this week it fired. 

The silver/gold ratio just had one of its best weeks in history and failed this topping pattern with authority. 

The analyst team is serving up all kinds of scans these days. Technical scans, fundamental scans, sentiment scans, a little bit of everything. These guys are really having a blast. 

But they are just trying to make the most out of this bull market. They know how this works.

So, we’ve been scanning for speculative growth, international leadership, mega trends, rotation extremes, fading analysts and short-sellers,… we’ve even been running scans on warrants.

We’re going to keep sharing more and more of them each week.

But the scan of the week has to be the Matt Warder-inspired Metals, Mining & Minerals Leaderboard.

Matt has become a dear friend of All Star Charts over the years and was just with us a few weeks ago out in New Orleans. We are truly blessed as Matt has some of the deepest knowledge of natural resource stocks of anyone in the business, with a focus on minerals. 

When he came on the Morning Show the other day, he dropped as much alpha in 30 minutes as any guest ever has. We must...

From the desk of Steve Strazza

Have you ever heard of the Nokkie-Stokkie?

It’s forex trader lingo for the Norwegian Krone/Swedish Krona… and right now this obscure cross is setting up for a classic failed breakdown.

After undercutting key support in early May, it’s snapping back toward this level now. And with each passing day, it’s looking more and more like a bear trap.

We’re not just writing about this unheard-of FX pair to amuse you. Believe it or not, the currency pair carries valuable insights.

It’s one of our most trusted intermarket energy whisperers.

So it's no surprise the scoop-n-score setup in the NOK/SEK looks almost identical to the one in Crude Oil Futures:

Crude is working on its own bear trap — carving out a tactical reversal pattern just below a shelf of former support.

...

The way I learned it is that gold moves first. 

And then copper. 

And finally crude oil. 

That’s the intermarket theory and order I’m familiar with for commodities. 

Jason and the guys at Gold Rush do a great job of covering intermarket relationships and what they all mean. 

They’ve been all over these commodity trends all year. Some have been great, like gold. Others are messy, like copper. And some downright bad, like crude. It’s been a mixed bag to say the least. 

But today, all the buzz is about silver. It’s having its best day of the year as it rips higher out of a bull flag. 

Our volatility squeeze indicator suggests a big move is brewing, and there is plenty of runway considering the pattern hasn’t even broken out yet. 35.25...