THE METALS DIVERGENCE
Last week I showed you how hedge funds structure trades that win even if they’re wrong.
Today, I’ll show you how to actually implement that framework into one trade idea.
This morning’s CPI print strengthened the exact thesis we built last week:
Down 0.42% compared to last month
Annual inflation slowed to 3.46%
You shouldn’t stop at the headline number, as right now there are two massive forces having a direct impact on the path of inflation:
Iran and Hormuz
AI infrastructure demand sucking down available material stocks
Fuel prices helped this inflation pullback, but surprisingly it wasn’t the one responsible for the entire move lower.
It was actually used car prices and medical care commodities.
Now here’s where it gets interesting for the metals play I proposed last week:
Stellantis reported a 10% surge in new vehicle orders
Car insurance costs are headed lower due to these lower vehicle prices
If inflation gets back into a normal range, rates could follow and make financing cheaper vehicles more affordable
The PMI showed us automotive demand could be about to break out, inflation just told us why.
And exactly the reason I believe my long candidate could beat earnings this quarter and give us a quick profit opportunity.
But,
If I’m wrong, I still want to get paid or at least contain my losses.
That’s where the short candidate comes in, a company that bet it all on data center expansion, is a perfect insurance policy now that data center construction growth fell below 5% for the year.
You have the setup, now it’s time for the individual stocks and how to structure the trade.
Here’s the metals trade that wins (even if I’m wrong):
Subscribe to our premium content to read the rest.
Become a paying subscriber to get access to this post and other subscriber-only content.
Upgrade