🗞 Sushi & Batteries

WHILE YOU POUR THE JOE… ☕️
Druckenmiller is Back

In a late-night interview with Bloomberg, Stanley Druckenmiller (who is responsible for George Soros’ track record) came to speak about markets and his view on different assets and plays.

One of his statements concerned the fact that some instruments have been behaving as if a Trump presidential win was already secured, and that got us thinking. 🧠 

But before we draw conclusions, here’s a snapshot of what else he said in the interview:

• He regrets selling Nvidia stock, but he also made that mistake right before the dot com bubble of 2000

• He’s looking into Japanese stocks and Argentinian stocks

• He’s shorting bonds on the premise that the Fed is going to trigger premature and high inflation in the coming years

I highly suggest you watch it. It’s free on YouTube and everything else you find on this guy; he’s even beat Warren Buffett.

Speaking of picking stocks in Japan and Trump winners, let’s get on with today’s email 📧…

ACROSS THE WORLD
Japanese Excellence

We posted about the possibility of looking into Japanese stocks in recent posts, especially now that the country has hiked their bench interest rates.

Long story short, this decision hurts Japan’s manufacturing economy, which is a large part of its GDP. The country exports items like automobiles, chips, and steel.

This is why you see exporting and manufacturing stocks in Japan sell-off. Just take a look at the Toyota Motor stock price chart: 📉 

That selloff is no coincidence and is 100% caused by the dynamics we just presented. Consider this: the selloff came in way before the effects of rate hikes took place, so we can expect the opposing side of the economy (the services sector) to start rallying just as much.

These service sector stocks include some of Japan’s largest industries, such as finance and specific technological industries like cloud and other subscription services.

SONY Group

Most people associate Sony with hardware without realizing they are also moving some of their latest technology online and into the cloud.

This service-driven segment of the business defends the stock’s price action, which shows definite strength over Toyota.

More than that, Wall Street analysts seem to have landed on a $23 US share price target, calling for over 28% upside 🔥 from the stock's current level.

This is not a pitch. We’re only sending an overlay of the names we’ll consider doing a deeper dive on. We’re busy, okay?

Alright, let’s move on to our next choice:

Nomura Holdings

A bank operating in Japan’s finance sector is showing (again) significantly stronger price action than Toyota stock, which is a good sign.

I'm not telling you we’re buying this, but we will watch it closely and dig deeper into a potential buy if we find enough evidence to support it.

Here’s one last mention that requires explanation, as it operates in the same industry as Nomura to offer similar potential tailwinds to bring a new rally on the back of the more decisive price action:

Mizuho Financial Group

TRADE OF THE WEEK
Tesla Back in Fashion

We posted a successful short thesis on Tesla before they announced a disappointing set of quarterly deliveries, not to mention the selloff after the overhyped robo-taxi event.

Now that that’s passed, we are now flipping the book and considering a potential buy for the stock before earnings next Wednesday.

Here are some reasons why we even considered revisiting the facts for Tesla.

Actually, before we get on with the numbers and indicators, here’s the main reason. Stanely’s view of a Trump win being pretty much baked into the market is bullish for Tesla.

Why?

I don’t know if you have kept up with pop culture lately, but Trump and Musk are like best buddies now, and I think that the best bet to make for a Trump win (apart from crypto) is a Tesla long.

Then, we got to everything else, like the way the chart looks today to confirm the expectation for a major move coming up soon:

The chart shows some acceptance at the currently tight range, meaning no new sellers have come in to extend the previous down move in Tesla stock.

Additionally, and a reason to worry, no new buyers are coming in to save the stock from its previous fall. Still, they could be waiting for new information to go into the market.

What information? Well, we have the FOMC today, which might move the needle in the broader markets. Then we have earnings next Wednesday, which might bring the breakout move we’re all waiting for.

You can see this in the volume as well; Tesla has been getting less and less as it comes down, reiterating that no new sellers have enough conviction to bring the stock down.

However, we need to figure out whether the next move is going to be toward the upside or downside, and we asked markets to figure out where current sentiment is today.

To do this, we need to spread Tesla stock against peers in the automotive industry, specifically how it trades on a forward P/E, P/B, and how its EPS growth compares 👀:

Tesla stock trades at a premium forward P/E and P/B basis, and it is also expected to deliver above-average EPS growth in the next 12 months, telling us that the market’s perception of Tesla is still leaning on the bullish side of the spectrum.

Now for the targets, both entry and exit: 🎯 

According to the volume and market profile, we want to enter the stock at the point of control (POC) where the stock touched and then ran away from, which happens to be the area of $215 to $217.

That sounds like a reasonable entry point for us to start buying. Then, we want to exit around where Wall Street values the stock and try to align it with a low-volume area.

We are shooting for either $250 or $300 👀 a share as a potential exit, which also happens to be the valuation given by analysts at Morgan Stanley and Piper Sandler recently.

Since we now have a well-defined catalyst (earnings), we are comfortable with trading options instead of outright buying the stock today.

Which options? We saw the bulk of open interest accumulated in the $250 to $300 strike range, which is absolutely aligned with our market profile price targets as well.

We suggest you follow our Twitter account for live updates on the plays we make, such as a new short position in Nvidia stock, which is already up by 5% since we opened it, or the $USO call options we pitched based on oil prices bottoming.

NOW GO AND MAKE IT HAPPEN
Learning is Profiting

You have to be a lifelong student of this game; this is the only way the greats got to be where they are today.

So, in today’s book recommendation 📖, I plan to take decades of investing and trading experience into a condensed text to expose you to some of the best stories, strategies, and ideas in the industry. It’s one of my most recent buys, too!

To your success,

G. 🥃