The recent spike in volatility gives you excellent conditions to take a profit on our first trade. We outlined a bear case for U.S. retail stocks and pricing is high for our XRT puts after only a month. We recommend locking in gains today.
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With more consumers staying home while searching for entertainment, streaming services were one of the main business beneficiaries of the COVID pandemic and lockdowns. Now, restrictions are being lifted and customers are breaking out of their quarantine cocoons and seeking live venues to spend their time and money. Jim and Dan expect this leading streaming service to struggle as increased competition and slower growth brings down its stock price in the coming weeks.
AAL rallied to $26 a few days after our alert, then headed lower rapidly. This past Sunday brought news that American is cutting some of its summer flight schedule in the U.S. due primarily to a shortage of pilots, flight crews and ground support personnel. Let’s take advantage of trouble with AAL’s operations by exiting both legs of this trade today for a nice gain.
With consumer sentiment surveys in the dumps due to high inflation, many people are increasing their savings as well as decreasing their discretionary spending. Also, stressed global supply chains will keep costs for discretionary products high which will affect sales. Jim and Dan recommend this ETF weighted heavily in the Consumer Discretionary sector as lower sales volume will have a depressing effect on gross margins and send its share price lower.
Many businesses continue to suffer as the economy reopens during an uptick in COVID variants throughout the country. Combined with changing demographics, some businesses are threatened even more to stay solvent. Jim and Dan target this childcare provider that is saddled with a huge infrastructure of bricks-and-mortar facilities and associated overhead just as its potential client base is shrinking.
With a new wave of COVID spreading, the U.S. economy is slowing. Also, pandemic-related lockdowns and travel restrictions are returning to American life. This will hurt automobile travel and automobile sales. Jim and Dan target a leading automobile manufacturer that faces an overvalued stock price, a temporary production shutdown, the ongoing effects of the pandemic and a future bet on EVs that may backfire. These headwinds will depress its stock price in the coming weeks.
All signs point towards the Fed tightening its policy into a slowing economy in the opening months of 2022. We think chemical makers in particular are at risk of reporting lower margins, unwanted inventory builds, and lower sales volumes by mid- to late-2022. A stagflation environment, driven partly by high oil and natural gas prices, is bearish for chemical stocks. Jim and Dan recommend this ETF weighted heavily in chemical stocks as the best way to play a downturn in stock values as earnings will disappoint.
