SMCI TO THE UPSIDE

02/20/25 Prospero.ai Investing (196th) Edition (Midweek)

Feb 20, 2025

∙ Paid

First off - we have started to create more long-form advice pieces to demonstrate our signals around certain strategies. We will start sharing them in the midweek letter. This week: The Role of Deep Research in Investing. Let us know if there are topics you’d like us to write about!

We wanted to spend a couple of minutes this morning unpacking just how powerful Proper's tools are at predicting future price movements. Two of our biggest gains over the last few months have been in APP and SMCI. In both instances, Net Options Sentiment and Upside Breakout began to flash bullish signals before the stocks began their rise. Take a second and study APP's chart below.

Look at the left side of the chart and you can see that George made his entry on Sept 15 of last year when the price of APP was only 112.58. But WHY George made his entry is key. Within the course of a couple of days, APP's Average Net Options Sentiment skyrocketed from around 67 to 95. That's a remarkable upswing, especially when you consider Applovin was (at the time) a smallerish cap stock. If you study the movement of the Net Options Score, you can see that it would drop into the 80's or low 90's, but then run up into the high 90's BEFORE the stock made increased gains. Now check out SMCI's chart below.

Take a second and look at the Upside Breakout Score around November 17-18th. It's in the 20's. That's REALLY low. Keep in mind that Upside Breakout tracks longer term options bets on a stock. So in Mid November, Institutions had very little confidence in the future of SMCI. But they had enough confidence to ramp up their short term bets. (Likely around knowledge of their accounting situation improving) But the long term picture changed quickly. From November 18th to around December 10th, SMCI's Upside Breakout scores rose from the 20's to the mid 70's. That's quite a swing; and it tells us that institutions have become more and more confident (after months of doubt) of SMCI's long term viability. By the time George made his entry, Net Options Sentiment's one day average was up 47 points and its Upside Breakout score was up 35. That gave him the confidence he needed to jump in. It was a good decision. Bottom line is that studying Net Options Sentiment and Upside Breakout Scores can offer you incredible insight into when to make entries (and exits) in your favorite stocks. These numbers and their trends can create strong conviction for us, even in risky event driven plays like SMCI. But these types of moves require a close watch on Net Options Sentiment especially, even a 5 point move downward should be taken seriously. Now a word from our CEO.

A WORD FROM OUR CEO

We keep chugging along, beating the S&P 500 by 171% annualized, with a win rate of 68% against SPY benchmarks.

We updated our short intro + learning videos to include our new full app tour as well as advice on how to use this letter.