Here's My Game Plan as Market Continues to React to Iran News
Five names doing well on Monday are on my radar.
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One of the more fascinating things about the stock market is that the impact of news events depends more on market conditions than the news itself. The exact same news can have very different market reactions depending on the context in which it occurs.
The market reaction to the U.S. bombing of Iranian nuclear facilities is a particularly good example. A military action of this sort, especially when the response of Iran is uncertain and could be severe, seems like an obvious negative event that would cause uncertainty and drive investors to the sidelines. That hasn’t occurred on Monday, mainly because market players are already quite worried about a number of issues and have already anticipated bad news.
The bad news that many investors have been anticipating is economic, but the market’s stubborn refusal to anticipate a disaster has left investors poorly positioned when that disaster doesn’t occur. Many pundits were predicting that U.S. involvement in Iran would be a disaster, but they appear to be wrong, just like the many bearish economists.
The big fear isn’t that the Iran situation is going to cause economic problems. The big fear is that the market is going to keep on running higher, and investors will miss out.
Ironically, technical conditions were deteriorating on Friday, but the Iran news created a "buy the bad news" event. Investors were so anxious to buy a dip that one never even developed.
The main issue now is whether there is enough buying energy to create sustained momentum. While there is strength with breadth running 2 to 1 positive, it is a wild rush to buy. It is a slow climb of the Wall of Worry and could easily fizzle out.
My game plan is to stay very selective with new buying and not chase weak momentum. The price action I see in individual stocks is mediocre.
A few names that are doing well Monday are AST SpaceMobile ASTS, Emergent BioSolutions EBS, GSR III Acquisition (GSRT), Sportradar Group SRAD, and Frequency Electronics FEIM.
The close will be very important on Monday. A close near the lows of the day will put a damper on any momentum that was developing due to this positive reaction to Iran.
At the time of publication, Rev Shark was long ASTS, EBS, GSRT, SRAD and FEIM.
