Hello, Penny Hawk traders!

Happy TWOs-day – 2/22/22! (I feel like my colleague Mark Sebastian with that Dad Joke™, but I digress.)

If you aren’t able to catch my LIVE Long & Short of It sessions each morning, bookmark this replay page for all my lessons and watch at your leisure.

After all, my goal is to not only hunt down profitable low-dollar trade ideas… I’m here to impart my decades of trading wisdom on YOU.

And if you’ve never successfully navigated a bear market – and many of you haven’t, considering we’ve essentially been in a bull market for years – you need guidance now more than EVER.

So if you haven’t already checked out this lite version of my Bear Market Survival Guide (Penny Nation traders receive the full version with my actionable trade ideas, and it just so happens we’re having a Presidents’ Day sale!), stop what you’re doing and read it.

In fact, during today’s 9:30 a.m. ET session, I discussed exactly where we are in the bear market cycle – and how I’m trading it – which I’ll break down again for you in today’s Penny Hawk newsletter.

I’ll also review:

  1. 4 things pinging my Bear Market antennae right now
  2. The stock market “trap doors” that should be on your radar
  3. My top 5 names from our low-priced options list
  4. And the sector to watch ahead of earnings this week

We have a lot to review, Penny Hawks, so let’s get right to it!

Volume & Trap Doors & Bears (Oh My)

I’ve been trading stocks and options for a while now (measured in decades, not years, but I don’t want to date myself too much and give Brandon more ammo!), and I don’t wave the Bear Market flag lightly.

So let me stress one more time that you need this Bear Market Survival Guide now more than ever.

In it, I answer three very important questions:

I discuss what will move stocks in the near term, where stocks are going from here, and – most importantly – how traders can profit on the move.

The last question will be answered for my Penny Nation and Night Traders over the next few months, using time-tested strategies I often use when we’re in a bear market.

And if you needed additional evidence that a Bear Market Survival Guide is necessary RIGHT NOW, you got your wish last week.

“Disappointment” is the first word that comes to mind after recent price action, and last week all but cemented the collective sense of complacency right now, which continues to cast a dangerous shadow over the markets.

Specifically, there are four things pinging my Bear Market antennae at the moment, as I told you last week:

  1. Trading volume remains light, which means the markets will be easily pushed lower. This light volume suggests investors are confused on what their next move should be. We need to see a return to heavier volume this week, if we don’t want to see more downside.
  2. The Cboe Volatility Index (VIX) – also known as the stock market’s “fear index” – has yet to approach, much less take out, its recent highs.
  3. Banks and financial stocks are rolling over.
  4. Market leaders like Apple (AAPL), Microsoft (MSFT), and Google parent Alphabet (GOOGL) slipped back below their pre-earnings prices after some great reports. Now, the Invesco QQQ Trust (QQQ) – which is basically a popular tech fund – is sitting right at a “trap door” around $340.

On that same note, in today’s 9:30 a.m. LIVE session, I updated you on additional “trap doors” that should be on YOUR radar right now.

To start, the SPDR S&P 500 ETF Trust (SPY) – which mimics the S&P 500 Index (SPX) – is sitting near a trap door around $430…

More importantly for Penny Nation members, since we love hunting small-cap stocks – the iShares Russell 2000 ETF (IWM) is just a hair above its $190 breaking point.

The IWM has been trying to range trade for the past two weeks. This is due to the fact that the small-cap index has been “pre-sold” and is down more than 20% from its highs, while the rest of the market indexes are roughly 13% to 15% off their highs.

Watch for the IWM to show some relative strength as a result, but it’s likely to be a false signal.

Stocks I’m Watching This Week

The Under-$10 Option Activity View of the Day came courtesy of Friday’s Most Active Calls (as % of Call Open Interest) list, which I went over at 9:30 a.m. and which you can see below.

These are sub-$10 stocks with daily call volume that accounted for a healthy percentage of total call open interest (OI) for the stock:

Most Active Calls Under $10 (as % of Call Open Interest) – data from Feb. 18, 2022

If you’re new to options trading, that all probably sounds like gibberish.

Never fear – we’ll look at a couple of real-life examples from the chart above, so you can better understand the significance.

You can see, for instance, that Leafly Holdings (LFLY) – which we’ve discussed a few times lately – saw more than 7,200 calls change hands on Friday. That’s 19% of the total call OI of about 37,000 contracts.

This tells us there’s bigger-than-usual demand for bullish LFLY options trades right now.

Virgin Galactic (SPCE) is in the same boat ahead of earnings.

SPCE call OI – which is a measure of all open SPCE calls across all expiration series, bought or sold – stood at just over 518,000 on Friday. So relative to that number, SPCE’s one-day call volume of around 63,500 (12% of call OI) is significant.

Meanwhile, a few stocks caught my eye on the Stocks Under $10 Most Active Options Watchlist shared this morning…

Stocks Under $10 Most Active Options Watchlist – data from Feb. 18, 2022

You can see that weed stocks like Canopy Growth (CGC) and Tilray (TLRY) remain active among option traders…

But some of the stocks that I’M watching closely from this list include Yamana Gold (AUY), Blackberry (BB), Hookipa Pharma (HOOK), Nu Holdings (NU), and fuboTV (FUBO) – one or more of which report earnings this week.

My Penny Nation family could hear more about how and why I might trade these low-dollar stocks very soon…

They’ll also be getting more info on a trio of stocks I could trade AFTER reporting earnings last week.

Speaking of earnings – there are many stocks on the above list that have upcoming quarterly reports, but the sector to watch around earnings this week is RETAIL.

Home Depot (HD) and Macy’s (M) are in the spotlight today, while Lowe’s (LOW), TJX Companies (TJX), Overstock.com (OSTK), Wayfair (W), Etsy (ETSY), and Foot Locker (FL) are just some of the retailers that could make noise around their reports this holiday-shortened week.

That’s all for today, but if you’re a Penny Nation member, I hope you enjoyed today’s exclusive afternoon F.A.S.T Scan, and if you’re part of the Night Trader family, I’ll see you at 3:30 p.m. ET in our daily livestream!

We have a lot more to discuss, so come READY.

As for the rest of you, make sure you download this Bear Market Survival Guide, and then I’ll catch you at 9:30 a.m. ET tomorrow for The Long & Short of It.

See you there!

Chris Johnson


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