We have no idea why we watch it…

But it’s oddly captivating.

A man exits a pizza parlor.

He opens the box… inspects the contents… and then begins eating a big cheese-and-sauce-dripping slice of pizza.

The man is Dave Portnoy. The location is often in the Philadelphia-New Jersey-New York area. The food is almost always pizza.

The videos on YouTube last around five minutes or so.

They’re fun to watch. Portnoy seems to have fun too. But one place he’s not having fun right now is the stock market.

His “Davey Day Trader” alter-ego is taking a beating on the markets.

So what’s going on? And why should any of this matter to you? We’ll explain below…

If this is your first time reading the Dispatch, welcome. If you’ve been here before, welcome back.

At the Dispatch we have two goals:

  1. To introduce you to the most important investing themes of the day, and

  2. To show you how to profit from them.

We do this by showcasing ideas from our in-house investing experts: Dave Forest and Nick Giambruno. And from the founder of our business, Doug Casey.

In today’s Dispatch, we’ll show why you should avoid a particular type of investing… and the best place to invest instead.

It’s No Fun Watching Someone Lose Money This Way

We noted with interest this story from Bloomberg:

Pain from the selloff in the market’s riskiest assets has delivered blows to some of the most-vocal retail investors.

Take Barstool Sports’ Dave Portnoy as a prime example of investors who bet the stock market only goes up. The media star, who has a cult-like following of investors on social media, vented on his “Davey Day Trader” livestream that he’s been losing more than $150,000 every day lately and hasn’t “had a good day in this godforsaken game in a month-and-a-half.”

Dave Portnoy, the founder of the Barstool Sports website, made a name for himself as a trader during the height of the 2020 COVID-19 stock market crash.

Back then, professional Wall Street money managers flocked to CNBC and other mainstream news outlets. They told the world the stock market would collapse… and that everyone should sell. Portnoy did the opposite.

He said buy.

For example, on March 26 last year on his livestream he bought JetBlue (JBLU) stock for $11.99. He bought Trip Advisor (TRIP) for $20.55. In total, he bought around $1.3 million in stock of these companies.

JetBlue traded as high as $21.96 in March this year. Trip Advisor traded as high as $64.95, also in March this year.

Nice returns.

But both stocks have fallen since then. In the case of Trip Advisor, by almost half.

We haven’t followed Portnoy closely enough to know if he sold or if he’s still in those stocks. But based on the story from Bloomberg, and watching a couple of his recent streams, regardless, it’s not going well.

On Wednesday’s livestream he mentioned how it was tough to concentrate on anything when he’s “losing $250,000 a day, $500,000 a day.”

We sympathize. Genuinely.

It’s no fun losing money on anything, including the stock market. And we take no pleasure in watching someone lose money. So what went wrong?

Beware Ideas Without Substance

To us it looks as though Portnoy picked up on a trend – meme stocks and the fast market bounceback – and made a lot of money. But then he didn’t adapt when the trend and market changed.

We’re not even saying it was a bad idea to gamble on those meme stocks. To be honest, it’s not something we would have done. And our Casey Research experts didn’t think it was a good idea either.

But whatever. We like Portnoy. He seems like a sticking-it-to-Wall-Street kind of guy.

But ultimately, the whole meme stocks idea was, and still is, an idea without much substance.

Now, remember what we wrote yesterday. We explained that it wasn’t necessary to fully understand an idea before you invest in it. But we also said that you should at least have some understanding.

And ideally, you should have a trusted resource on whom you can rely. Someone who will do the more detailed and in-depth research for you.

That’s what a lot (maybe not all) of the meme stock guys lack. They buy the meme stocks because it’s a meme stock… and that’s where the research and analysis begins and ends.

If they’re lucky, it goes up and they get out. But checking out the price action of many of these stocks, the recent record isn’t great.

It’s fun buying a stock like AMC Entertainment Holdings (AMC) in May this year for $9 and selling above $60. We’re sure many meme stock traders did that.

But it’s not so much fun when you buy at $60… and expect it to go to $500… only for it fall below $50. The enthusiasm to keep buying and trading ideas like that soon wears off.

Again, don’t get us wrong. At Casey Research, our thing is to find, research, analyze, and recommend potentially high-reward plays. But the “research” and “analyze” are key elements of that. Without those elements, playing the stock market is reckless.

So, we’d like to leave you with this thought… to make sure you’re doing things the right way.

Do You Still Want to Own These Trades?

Check your portfolio now.

Perhaps you’re using the Casey “10 x 10” Approach (approximately 10 diverse non-mainstream investment ideas, with about 10 investments in each). On what basis have you invested or speculated on those positions?

Is it because you or a trusted resource have done detailed analysis? Or are there some plays where you’ve just gambled on an idea for the heck of it?

If it’s the former, good work. You’ve got the right idea. You should do well.

If it’s the latter… go careful. Now is as good a time as any to revisit those trades and ask whether these are ideas you still want to own.

If not, work out an exit strategy, and then stick to it.

Cheers,

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Kris Sayce
Editor, Casey Daily Dispatch

P.S. Read on for some technical analysis from colleague Imre Gams. The idea we asked Imre to look at is a complete 180-degree difference from meme stocks.

While our beat at Casey Research is looking for longer-term, non-mainstream investment ideas, we also know that trading for short-term gains is a valid way to play the markets.

So, we wondered if there was a way to do that with relatively less risk and less volatile stocks. Turns out there is.

And it’s an idea you may be able to follow in your own trading account. Check it out below…


Chart Watch

Welcome to Casey Daily Dispatch’s Chart Watch. We’ll look at the best technical opportunities in the market. You’ll see that chart analysis is a very powerful edge that every investor should have in their toolbox.

Our mission is to simplify price charts. We remove all the clutter and the noise, leaving you with a crystal-clear view of the markets.


Slow and Steady… But Still a Great Trade Set-Up

By Imre Gams, technical analyst, Casey Research

In this edition of Chart Watch we will analyze XLP, a consumer staples exchange-traded fund (ETF).

This is usually a defensive sector. The primary reason being that consumer staples are relatively stable in price. Therefore, growth in this sector tends to be slow and generally lags the broader market.

As a trader, I have little use for slow… and I would never buy and hold the Consumer Staples Select Sector SPDR Fund (XLP) if I’m looking to outperform the market.

But… that doesn’t mean I ignore XLP altogether. If you are patient, XLP can reward you with fantastic trading opportunities.

After all, since making a low in March 2020, XLP quietly rallied 50% by June 2021. Since its June high of $71.68, XLP has pulled back and confirmed a very important key level.

Let’s look at the price chart and I’ll show you what I mean.

Chart

There are two important things to pay attention to on this chart:

  1. The multi-months trend line connecting the lows from March of 2020 and 2021. This is an important support line!

  2. The $68.72 key level, which bounced prices higher in April and June.

As you can see on the chart, we’re currently getting close to a point where both these support levels will intersect.

Whenever a market approaches such an important junction, I begin to pay attention… It usually means a big move is coming, one way or the other.

If prices bounce off this intersection of supports, that would send a strong message that bulls are firmly in control of the price action. I would then look for opportunities to join in on the rally that will follow.

On the other hand, if both these support levels fail and prices break below $68.72, then I will take a big step back from XLP and likely remove it from my watchlist altogether.

The important takeaway from today’s Chart Watch is that we are equally prepared for a bullish and a bearish scenario. XLP’s price chart gives us that option.

Until next time,

Imre Gams
Technical Analyst, Casey Research