KNOW YOUR ROLE
02/22/26 Prospero.ai Investing - 295th Edition (Weekend)
Before we jump into the article today, wanted to highlight the stock tip that we gave you last week in our newsletter? It was $ABVX, an up and coming pharmaceutical company we feel could be a target for acquisition. Since last weeks’ letter it’s up +4.67%. You can read our research report HERE. Now let’s jump in.
Picture this: Game 7 of the NBA playoffs. Two seconds on the clock and the game is tied. The star player of your favorite takes a last second shot to win the game, but is fouled. He has to make one free throw to win the game. He walks slowly to the free-throw line – and the arena explodes in chaos. The opposing fans screaming, stomping, waving anything they can grab to break his focus. It feels like a freight train is exploding through the arena. One shot for all the marbles. But despite the chaos all around him, the pro stays ice-cold. Routine bounce, eyes locked on the rim, deep breath. He shoots……
Swish. GAME OVER.
That’s the exact mindset and level of discipline George Kailas (our CEO) is preaching right now to the Prospero family. Over the last couple of weeks we’ve found ourselves in the middle of another headline hurricane. Tariffs, Iran, government shutdowns etc; and we’ve noticed that so many retail traders are trying to capitalize and trade on those headlines. But that is a fool’s errand. On Friday, consumer cyclicals rip because “tariffs are toast, refunds are coming!” Positions load up fast. Then Saturday rolls in and President Trump hits the airwaves: “We’re exploring every option. No refunds.” Boom. Monday opens and suddenly those Friday winners may look hungover. The exact plays that felt so smart 48 hours earlier are now sweating bullets.
George isn’t debating tariff policy. He’s warning that trying to trade these event-driven fireworks is almost always a retail trader’s nightmare. But George’s message is three brutally simple words: Ignore the noise. Just like the NBA star in the midst of the chaos. Stay focused and go back to the basics. And it’s a message that we need to pay close attention to. Because the reality is that retail traders are fighting this market environment with three hands tied behind their backs:
1. Speed — Algorithms are Terminators on Red Bull. They ingest headlines, cross-reference conflicting reports, and fire orders in microseconds. By the time the headline even hits your X feed, they’ve already made their move, putting you behind the curve.
2. Access — Hedge funds pay serious money for government “whispers” and entrenched contacts. And unless you are Baron Trump’s best buddy or married to one of Trump’s granddaughters, odds are, the big money desks will always have more info than you. So thinking that as a retail trader you can navigate this environment is to hope you get lucky, at best.
3. Execution — Even if lightning strikes and you nail the thesis at the same instant as the machines, your broker (Robinhood especially) puts your order in the back of the line. Algos go first. Every time.
After all that, now add the Trump-era chaos multiplier: Headlines reverse faster than a bad reality show. One court ruling, one weekend interview, one tweet, and your whole setup flips. Try and short a bounce? The next wire story sends it ripping the other way. It’s not trading or investing, it’s trying to find a strawberry seed in a running smoothie blender. The antidote? Stay laser focused in the midst of the chaos. Stick to your process like that free-throw shooter sticks to his routine. Tune out the mob, keep your eyes on what actually works, and let the circus entertain itself.
At Prospero, the process we always preach is straightforward and battle-tested:
• Hunt for stocks that look great in our signals—meeting clear technical confirmation.
• Wait for good entries and exits—no forcing trades, no chasing, just high-probability setups with defined risk.
• Hedge when it makes sense to protect gains or limit damage.
• Stay disciplined, no emotion— no fear, greed or FOMO, revenge trading. It almost never works out.
One final thought. The news cycle is designed to pull you into the screaming crowd. Winners are the ones who block it out, follow their routine, and drain the free throw while everyone else is yelling.
Stay steady, traders. The game is long, and the quiet, disciplined ones usually cash the biggest checks.
A WORD FROM OUR CEO
The fast turning headlines make it a tough week but we our paper trading portfolio is doing well in a year many funds are struggling, we are currently 57% above the market on an annualized basis, with a 53% win rate against SPY benchmarks.
Our short intro + learning videos get you up to speed on how best use our letters and app to increase your wins.
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KNOW YOUR ROLE
Market/Macro Update w/ Cap/ Value Analysis
QQQ and SPY Net Options Sentiment
Sector Analysis
How we view the Sector performance and momentum
Portfolio Strategy
Putting it all together to make a portfolio that first controls for risks but also has upside
Longs
Adds —> Keeps —> Drops
Shorts
Adds —> Keeps —> Drops
Portfolio Summary
CAP / VALUE ANALYSIS
Small Cap and Large Cap Growth with quite the resurgence here this week, seems like they were broadly oversold the last couple of weeks, especially in the large cap space where institutional ownership reached recent lows. Value still performing well over the last month, but we’ll see if there’s any significant reversal trade to growth next week.
XLK still bearish after an okayish earnings season with no real catalysts at the moment. Wouldn’t be too bearish as in previous weeks, but no reason to be overweight either.
XLI NOS rebounded and is now just above the bull line, wouldn’t be wise to skew too far short right now as sentiment is better than at the start of the week thanks to the tariff decision. But stay tuned on that, will those tarrifs actually be paid back? Anyone’s guess.
SECTOR ANALYSIS
Communication Services rebounding after being broadly oversold, could be a great entry point for longer term minded investors depending on the stock. Industrials continuing its strong run right now as the AI trade really broadens out similar to the last couple of weeks, as investor focus shifts from tech to metal and physical. Consumer Defensive still the bulwark of decent returns but also retracing a bit since the trade became a bit crowded especially in the larger names.
PORTFOLIO STRATEGY
With XLK NOS being in the same place broadly as last week but XLI NOS being incrementally more bullish, we won’t be any more bearish and shrink our exposure, keeping our focus on Tech shorts and core longs while we wait and see if any catalysts show up on the horizon. 4 Longs, 5 Shorts.
Long / Bull Moves – TPL, CRDO, LEU and ABVX holds / TMUS, CROX and ZS drops
Portfolio Strategy
We are sticking to our highest conviction longs only right now. With half of the portfolio (ABVX and TPL) strong bets to hold their ground if the markets dip to start the week.
Holds
TPL a good keep with the way Energy has been performing as of late, with great Net Options and decent Momentum. CRDO was kept because of its Net Options. LEU was kept as well for Energy exposure and Net Options. Finally, we liked mid cap ABVX with good Upside Breakout and Net Options.
Drops
TMUS, CROX and ZS were all dropped because of poor Upside Breakout and Momentum.
Short / Bear Moves – HUN and POWI adds / HPE, PSNY and AMD holds / CTLP, AAL, IAC, FTB, REZI and DELL drops
Portfolio Strategy
AMD continues to show a very low Momentum score making it a great hedge against our risk longs (CRDO and LEU) but we expand out with some other smaller caps that could get hit hard if the market opens weak.
Adds
HUN was an easy add at the top of our screener with Basic Materials pulling back a bit good to add a short position. POWI was added for Tech exposure with favorable Momentum and Net Options.
Holds
HPE was kept for Tech exposure and poor earnings power. PSNY was kept as a Consumer Cyclical short. AMD was kept for Large Cap Tech exposure.
Drops
CTLP was dropped as we found better slightly larger cap opportunities. IAC, FTV, REZI and DELL were al dropped as they performed poorly in our screener.
Portfolio Summary
Long / Bull Moves – TPL, CRDO, LEU and ABVX holds / TMUS, CROX and ZS drops
Short / Bear Moves – HUN and POWI adds / HPE, PSNY and AMD holds / CTLP, AAL, IAC, FTB, REZI and DELL drops
4 Longs: TPL, CRDO, LEU and ABVX
5 Shorts: HUN, POWI, HPE, PSNY and AMD
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