I'm Eyeing Two Stocks on Fed Day, But Proceed With Caution

Fed Chair Powell Delivers Semiannual Monetary Policy Report To Congress

Early action is poor on Wednesday morning after oil spiked higher on concerns about the destruction of additional energy infrastructure, and the producer price index came in hot.

Breadth is running around 33% positive. Relative strength of the Nasdaq 100 (QQQ) and the Magnificent Seven (MAGS) is a mild positive amid the weakness. The typical pattern is playing out in thinner names which are being dumped due to index and ETF selling pressure. That leaves traders wondering why a stock they own is down when nothing specific has changed. That is the "innocent victims" dynamic and it is worth keeping in mind before making any hasty decisions.

With the Fed decision and Jerome Powell press conference coming this afternoon I do not expect to do much until that is out of the way. It is a good time to think rather than act.

Marking Positions to Market

One exercise I find particularly useful in a market like this is marking all positions to market. That means viewing every position as if I just bought it today at the current price. Unrealized gains or losses become irrelevant. What matters is the play I would have if I bought the stock right here based on where it is trading now and what the chart looks like today.

This approach forces clarity on positions that have slipped and where inaction has set in. One of the most damaging patterns in trading is freezing when a stock acts poorly, ignoring the deterioration, and hoping it comes back. More often than not it continues lower and in many cases will not see a meaningful recovery for a very long time. The mark-to-market reframe breaks that inertia. Set clear stop levels based on the current price. Build a strategy around the revised cost basis. And keep in mind that selling is never final. You can always rebuy if conditions change. Be ruthless about having a plan and sticking to it even if it feels like you are admitting a mistake by not selling earlier.

What I Am Watching

In this type of market, the single issue that drives my buying decisions more than anything else is relative strength. The stocks holding up best right now are the ones most likely to attract aggressive buying interest when conditions improve.

TeraWulf (WULF) is one name I am watching closely for exactly that reason. It has held up reasonably well in the data center group, spiked a few times on news flow, but has not yet generated the kind of sustained momentum that would make me want to add aggressively. The setup suggests it could attract strong interest when investors warm back up to data center growth. I do not know when that happens but the stock is worth watching closely and I’m poised to add as soon as I see some price action I like.

Solaris Energy Infrastructure (SEI) is driving me a little crazy right now. I have discussed it several times and carry a core position I want to build on. It broke out nicely on Tuesday and is up an additional 5% today. In retrospect, I should have added more yesterday. It is a harder chase right now but that kind of breakout behavior in this type of market is a strong signal. Stocks that break out when everything else is struggling tend to be the leaders when conditions finally turn. Investors who use the CANSLIM approach will recognize the pattern immediately. I will keep watching it very closely.

The work I need to do between now and the Fed decision is to identify more names with that kind of relative-strength profile. Strong action is what I want to see but I also do not want to be chasing stocks that have already moved parabolically. There is a balance between strength and extension.

We will see what Powell has to say this afternoon. If he creates some volatility, that could open up some tradeable opportunities.

At the time of publication, DePorre was long TeraWulf (WULF), Solaris Energy Infrastructure (SEI).