Compare Catalysts Like a Trading Pro

As I always say, we just want a catalyst.

But all catalysts are not equal. Today we’re going to compare catalysts for two recent runners. Knowing which catalysts have legs, and which are laughable, can help you make better decisions. What’s a strong catalyst in this market?

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The Big Picture

A lot of what drives big moves in momentum stocks and day trading is headlines. Headlines often create the initial move. They’re worth tracking. But to do that, you have to understand what’s really driving the market.

Right now, the semiconductor and AI plays are driving the market. Even with this big pullback, it’s the semis and AI plays.

Now, if you look at the leaders like Intel (NASDAQ: INTC), Micron Technology (NASDAQ: MU) and Sandisk (NASDAQ: SNDK), they’re great for long-term holds. But as day trades, they’re too big, too slow, and too expensive.

So, that’s why we focus on lower-priced stocks. Because when they move, they tend to move faster.

With that big picture backdrop, let’s look at…

A Tale of Two Catalysts

As a reminder, these are very speculative stocks. They create plenty of trade opportunities, but they’re day trades. The first stock below is an example of why I always emphasize this.

Now, knowing that AI and semiconductor plays are driving the market, let’s start with a catalyst that had potential. That is, until the company did what penny stock companies do.

The Catalyst That Plays On the Market’s Big Driver

On Monday (June 22), Nexentis Technologies (NASDAQ: NXTS) made a big move from $5.02 to $23.80.

What creates a move from $5 to $23 with a small cap like NXTS?

Here’s the headline:

Now, if you think about what’s really driving the market, that’s a good catalyst.

First, you have AI. Then you add drug discovery to it and it sounds like something you could get excited about. It’s a catalyst that should have legs and it instantly made NXTS a top watch on Monday.

That said, NXTS is a good reminder about why these speculative stocks are day trades only.

Yesterday (June 23) the stock dropped in premarket trading after the company filed this 8-K reporting a $2.9 million private placement below its closing price.

Now, had the company held off on the private placement, I would’ve been looking for a day 3 surge. But this is what happens with speculative companies. They almost always need to raise money. So, they announce something that looks good to get the stock price up, then they do an offering.

The Catalyst That Should Be Laughable

After the market closed on Monday, Catheter Precision Inc (AMEX: VTAK) announced that its subsidiary, Flyte, partnered with a PGA Tour pro.

So, you have a low float stock, many times a former runner. It’s a former robotics company that does 3D cardiac mapping. The subsidiary is an aviation company expanding into professional sports.

They hired a spokesman, some guy I’ve never even heard of. No offense, but I don’t follow golf very closely. Occasionally I watch the Masters and that’s about it.

It’s not the greatest catalyst in the world. That said, trade ‘em, don’t date ‘em.

Here’s what happened with VTAK…

Again, we’ll trade anything. But it’s pretty hard to get excited about that catalyst.

My Take

With the amount of opportunities and patterns playing out, it’s good to compare and contrast catalysts. I’ll take an AI sympathy catalyst over a spokesperson for a sketchy penny stock subsidiary 99 times out of 100. Always do your due diligence.

Watchlist

I don’t often talk about ETFs here. But on days where you have big pullbacks in the hot sector, reverse ETFs can be good “wallet padder” trades.

This is Direxion Daily Semiconductor Bear 3X Shares (NYSE: SOXS), the reverse semiconductor leveraged ETF:

These tend to move slowly, but when they hit the Oracle algorithm signal they’re pretty consistent.

On My Radar

• Pullbacks happen. I’m still bullish chip stocks and AI
• I love this: NVIDIA (NASDAQ: NVDA) is pushing into robotics
• More on chips and the AI buildout: Chuck Schumer is bat guano crazy.