Week Ending January 31, 2026

The Great Mid-Cap Rotation: What Worked, What Died, and What Comes Next

Executive Summary: A Week of Violent Rotation

This week delivered a masterclass in momentum exhaustion and sector rotation. We watched AI infrastructure names explode higher early in the week, then give back gains as fast money took profits. We saw energy transition darlings like Bloom Energy get absolutely destroyed. We witnessed commodity plays—copper, uranium, gold—peak and reverse hard. And by Friday, the market was making it crystal clear which stocks have real earnings support and which ones were riding pure speculation.

The final Friday scan tells the story in one chart: AAOI up 10.2% on massive volume while Micron cratered 4.8% on 50 million shares. LITE up 2.7% while Bloom Energy, Fluence, and the entire negative-earnings cohort got pummeled. This isn’t random. This is the market separating companies with actual business models from companies trading on narratives and hope. For systematic income traders, this week revealed exactly where to focus and what to avoid. Let’s break it down day by day, then synthesize what it means for the weeks ahead.

Monday-Tuesday: The Explosive Rally in AI Infrastructure

The week started with a violent upside move in mid-cap AI infrastructure and commodity names. Corning (GLW), Ciena (CIEN), Lumentum (LITE), Celestica (CLS), and a parade of mining stocks all ripped 20-50% in what looked like a genuine breakout. The catalyst? A convergence of factors: AI CapEx spending announcements from hyperscalers, China stimulus whispers driving hard asset reflation, space/defense hype, and—most importantly—massive short covering in heavily shorted names.

This wasn’t vapor. Companies like GLW and CIEN were reporting real order flow, growing backlogs, and actual earnings beats tied to hyperscaler demand. The fiber optics, optical networking, and AI server manufacturing plays all had legitimate fundamental support. Even the commodity plays—Cameco (CCJ) in uranium, Iamgold (IAG) in gold, Century Aluminum (CENX)—had reasonable theses tied to nuclear renaissance and infrastructure spending.

But buried in the rally were warning signs. Stocks with negative P/E ratios—Bloom Energy (BE), Applied Digital (APLD), Hut 8 (HUT)—were ripping just as hard as quality names. When garbage moves with gold, it’s a sign the rally is liquidity-driven, not fundamentally selective. And that’s exactly what started unraveling mid-week.

Wednesday-Thursday: Reality Checks and Profit-Taking

By mid-week, the music started to stop. Bloom Energy (BE) got crushed 7.2%. Iamgold (IAG) dropped 6.4%. Hut 8 (HUT) fell 5.7%. Applied Digital (APLD) lost 5.3%. The pattern was unmistakable: stocks with no earnings, negative cash flow, and narrative-dependent valuations were getting destroyed. Meanwhile, quality names were experiencing normal profit-taking but holding up relatively well.

The divergence revealed exactly what we’ve been saying: there’s a fundamental difference between companies with real earnings support and companies riding pure momentum. Ciena (CIEN) pulled back 3.1% but held above key support levels. Seagate (STX) and Western Digital (WDC) were nearly flat. These stocks have actual profits, institutional backing, and durable demand drivers. When they correct, they find buyers. When speculative garbage corrects, it keeps falling because there’s no fundamental floor to catch it.

The commodity names—copper miners (ERO, SCCO) and uranium (CCJ)—also pulled back hard, down 3-6%. But these are different from the energy transition garbage. Miners have real assets, real production, and real cash flow tied to commodity prices. When copper or uranium prices stabilize, the stocks find support. They’re cyclical and volatile, but they’re not going to zero. The key distinction: commodity exposure is manageable risk; zero-earnings speculation is unmanageable risk.

Thursday also brought a critical insight: the market was rotating out of commodity speculation and into manufacturing reality. While copper miners bled, electronic component manufacturers rallied. TTM Technologies jumped 6% on real PCB demand for AI servers. Corning held its gains on fiber and glass substrate orders. The message was clear: Wall Street is moving from ‘copper will be needed someday’ to ‘these companies are filling purchase orders right now.’

Friday: The Final Shakeout and Weekend Positioning

Friday’s scan revealed the week’s ultimate winners and losers. Applied Optoelectronics (AAOI) exploded 10.2% on nearly 12 million shares—a company that makes optical components for data centers finally getting recognized for having real revenue growth. Lumentum (LITE) up 2.7% on 7 million shares, continuing its steady climb. TTM Technologies up 1.78% on 4.3 million shares, consolidating Thursday’s 6% surge.

But the real story was the bloodbath in former high-flyers. Micron Technology (MU) absolutely cratered 4.8% on a staggering 50 million shares—the highest volume name on the entire scan. This wasn’t just profit-taking. This was institutional distribution. MU trades at 39 P/E with slowing memory pricing, and the market is finally waking up to the fact that not every semiconductor stock deserves AI-level valuations.

The negative-earnings cohort continued to suffer. Bloom Energy (BE) down another 3.3% on 11.4 million shares. Fluence Energy (FLNC) down 2.5% on 7.3 million shares. Allegro Microsystems (ALGM) down 2.8% on 5.2 million shares. Viasat (VSAT) down 2.3%. Every single one of these companies has a negative P/E ratio. Every single one burns cash. And every single one is getting systematically destroyed as momentum fades and fundamentals matter again.

Meanwhile, the quality names showed resilience. Corning (GLW) up 0.24% on 13.4 million shares—massive institutional volume holding the stock steady. Ciena (CIEN) down only 0.68% on 3.2 million shares, barely a scratch after a huge run. Coherent (COHR) down 1.7%—high valuation (306 P/E) but profitable with tech moats. These are the names that survive rotation because they have earnings floors and institutional support.

Five Key Themes from This Week

1. Liquidity-Driven Rallies End When Liquidity Tightens

Monday and Tuesday’s explosive rally was driven by rates stabilizing, liquidity loosening, massive short interest getting squeezed, and momentum funds returning. When those forces converge, high-beta mid-caps rip together regardless of individual fundamentals. But by Wednesday, liquidity conditions shifted—fast money started booking profits, momentum funds rotated, and suddenly fundamentals mattered. The result? Quality names corrected 3-5%. Garbage names fell 20-40% from highs.

2. Negative-Earnings Companies Are Death Traps in Rotation

Every single stock with a negative P/E ratio got destroyed this week. BE, FLNC, HUT, APLD, ALGM, VSAT—all down 20-40% from weekly highs. These companies don’t have earnings floors to catch them when momentum reverses. They burn cash, depend on narratives (hydrogen! solar! crypto! AI!), and evaporate when those narratives cool. For income traders, the lesson is brutal but simple: rich IV on unprofitable companies is a trap, not an opportunity.

3. Commodity Plays Need Price Stability to Work

Copper miners (ERO, SCCO) and uranium plays (CCJ) ran hard early week, then reversed violently. The thesis—electrification needs copper, AI needs nuclear power—isn’t wrong. But commodity stocks are leveraged bets on commodity prices. When copper or uranium prices stabilize or pull back, the stocks get hit twice: once on the commodity, once on sentiment. Unlike unprofitable tech, these companies have real assets and cash flow, so they find floors. But they’re not collar-friendly until commodity prices stabilize.

4. Manufacturing Reality Beats Narrative Speculation

The biggest insight of the week: the market is rotating from ‘this commodity will be needed someday’ to ‘this company is filling purchase orders right now.’ Electronic component manufacturers—TTM (PCBs), GLW (fiber/glass), AAOI (optical components), LITE (optical networking)—all rallied or held steady because they have actual order books from hyperscalers. These aren’t speculative bets. Microsoft, Amazon, Google, and Meta are writing checks. That’s investable.

5. High Volume on Down Days Means Distribution, Not Opportunity

Micron (MU) dropping 4.8% on 50 million shares is institutional distribution, period. BE down on 11.4 million shares, COHR down on 7 million shares, FLNC down on 7.3 million shares—when stocks fall on massive volume, it’s not ‘cheap shares for smart buyers.’ It’s institutions heading for the exits. High volume on up days is accumulation. High volume on down days is distribution. Know the difference.

The Survivors: What Held Up and Why

Not every stock got destroyed this week. The names that survived and even thrived share common characteristics: actual earnings, institutional support, liquid options markets, and durable demand drivers. These are the stocks systematic traders should focus on for income strategies.

Ticker	Week Performance	Why It Matters
GLW	Strong +4%	Best collar candidate. 58 P/E with real earnings. Fiber optics, specialty glass for data centers. Boring company, exciting demand. Friday held steady on 13.4M shares.
LITE	Up +15%+	Optical networking for AI clusters. 262 P/E reflects explosive growth. Friday up 2.7% on 7M shares. Use wider collars due to volatility but trend is intact.
TTM	Up +7-8%	PCB manufacturer with explosive AI server demand. Thursday +6%, Friday +1.8% on 4.3M shares. 78 P/E but growing fast. Let it consolidate then add.
CIEN	Slight pullback	AI networking equipment. Friday down 0.68% on 3.2M shares after huge run. Normal profit-taking. Support held at 230. Still Tier 1 collar candidate.
WDC/STX	Flat to slight down	Hard drive storage for AI data. Minor weakness is consolidation. 28-50 P/E with actual profits. Institutional backing. Perfect for selling puts on dips.
AAOI	Explosive +10%	Optical components for data centers. Friday +10.2% on 12M shares. Negative P/E is concerning but revenue growing. High risk, high reward. Watch for follow-through.

The Casualties: What Died and Why It Won’t Come Back

Some stocks didn’t just pull back this week—they broke. These names revealed fundamental problems that momentum was masking. For systematic traders, these are cautionary tales about what happens when you confuse liquidity-driven rallies with investable business models.

Ticker	Week Performance	The Autopsy
BE	Down 20%+	Hydrogen fuel cells. Negative P/E, burns cash. Wed -7.2%, Fri -3.3% on 11.4M shares. Momentum died, no earnings floor caught it. Dead money.
FLNC	Down 15%+	Battery storage. Negative P/E. Friday -2.5% on 7.3M shares. Government subsidy dependent. If energy transition hype fades, this follows BE lower.
HUT	Down 10%+	Bitcoin miner pretending to be AI play. Wed -5.7%, then continued bleeding. When crypto sentiment turns, this collapses further. Pure speculation.
MU	Friday -4.8%	Huge institutional distribution. 50M shares on down day. Memory pricing slowing. 39 P/E doesn’t justify slowing growth. This is distribution, not opportunity.
ALGM	Down 8%+	Semiconductor with negative P/E. Friday -2.8% on 5.2M shares. Losing money in hot semi market signals terrible competitive position. Avoid.

What Comes Next: Strategic Guidance for the Weeks Ahead

This week taught us exactly where the opportunities and dangers lie. The market has made its preferences clear: companies with actual earnings and order books survive rotation. Companies that burn cash and depend on narratives get destroyed. For systematic income traders running collars, wheel strategies, or put-selling programs, here’s what matters going forward.

Near-Term Setup (Next 2-4 Weeks)

We’re entering a critical earnings period. GOOGL reports February 4, LLY reports February 11, and NVDA reports February 25. These are the companies that will determine whether AI infrastructure spending is accelerating, stable, or peaking. Until we get through this earnings gauntlet, volatility will remain elevated and momentum will be choppy.

For collar traders, the best strategy is patience. Let earnings pass, let IV crush happen, then establish positions 2-3 weeks after reports. The sweet spot is when stocks have found support post-earnings but IV is still slightly elevated. Don’t sell puts into earnings unless you’re deliberately trading the event. Wait for the dust to settle.

Focus on the Tier 1 survivors: GLW, CIEN, WDC, STX, LITE. These stocks held up during rotation, have institutional support, and offer liquid option markets. Any 3-5% pullback in these names is an entry opportunity, not a reason to panic. Use wider strikes on LITE due to volatility. Tighter collars work fine on GLW, WDC, and STX.

Medium-Term Themes (Next 2-3 Months)

The rotation from commodity speculation to manufacturing reality will continue. Copper and uranium may find floors if commodity prices stabilize, but they’re not systematic income candidates yet. Wait for 30-40% corrections from highs, then reassess. CCJ at $90-100 would be interesting. ERO needs copper prices to stop falling.

The electronic component manufacturers (TTM, GLW, AAOI, LITE) will continue to benefit from hyperscaler CapEx. This isn’t a one-quarter story. Microsoft, Amazon, Google, and Meta have multi-year build-out plans for AI infrastructure. These companies are filling orders that were placed 6-12 months ago and have visibility into the next 12-18 months. As long as hyperscaler spending continues—and all indications suggest it will—these stocks have fundamental support.

Watch for broadening participation. If the rally was healthy, we’d see money rotate from semiconductors into industrial automation, into power infrastructure, into cooling systems. If participation narrows and only a handful of names keep working, that’s a warning sign that the AI infrastructure thesis is losing steam. So far, participation is actually broadening—TTM, AAOI, and other second-tier plays are finally getting recognized.

What to Avoid Completely

Any stock with a negative P/E ratio should be off-limits for systematic income strategies. BE, FLNC, HUT, APLD, ALGM, VSAT—every single one got destroyed this week. Rich IV on these names looks tempting until the stock gaps down 20% and you’re stuck owning unprofitable businesses with no path to profitability. The premiums aren’t worth the risk.

Also avoid stocks showing massive distribution volume. Micron’s 50 million share down day on Friday is a giant red flag. When institutions are selling in size, you don’t want to be the one catching the knife. Let MU find a floor, let it consolidate for weeks, then reassess. Same applies to any stock showing repeated high-volume down days.

Finally, avoid parabolic movers immediately after big runs. When stocks go vertical—up 50% in two weeks—they need time to consolidate. That consolidation can be sideways (best case), a 20-30% pullback (normal case), or a complete reversal (worst case). Don’t chase. Let the move complete, let the stock digest gains, then enter on weakness if fundamentals support it.

Final Rankings: Your Systematic Income Watchlist

Based on everything we saw this week, here’s the definitive ranking for systematic income strategies. These are collar-friendly stocks with liquid options, institutional support, and earnings floors.

Tier 1: Core Holdings (Sell Puts on Any 3-5% Weakness)

1. GLW (Corning) – The gold standard. 58 P/E with real earnings. Deep options. Institutional quality. Any pullback is a gift.2. WDC (Western Digital) – Storage for AI data. 28 P/E with profits. Minor weakness is consolidation. Perfect for puts.3. STX (Seagate) – Same story as WDC. 50 P/E, actual earnings, institutional backing.4. CIEN (Ciena) – AI networking. 296 P/E reflects growth. Support held at 230. Still Tier 1 despite valuation.

Tier 2: Tactical Opportunities (Use Wider Collars, Smaller Positions)

5. LITE (Lumentum) – Optical networking. 262 P/E, volatile but profitable. Use wider strikes.6. TTM (TTM Tech) – PCB manufacturing. 78 P/E, explosive growth. Let it consolidate from +6% move.7. COHR (Coherent) – 306 P/E stretched but profitable with moats. Only for aggressive traders.8. AAOI (Applied Opto) – Just broke out +10%. Negative P/E is concerning. Watch for follow-through before entering.

Tier 3: Watch List (Wait for Deeper Corrections)

9. CCJ (Cameco) – Down 3.9% this week after huge run. 148 P/E needs perfect execution. Wait for 25-30% off highs.10. CVX (Chevron) – Reported earnings Friday. 4.4% yield provides cushion. Wait for post-earnings settle.Copper miners (ERO, SCCO) – Real assets but need commodity price stability. Not ready yet.

The Avoid List (Do Not Touch)

BE (Bloom Energy) – Negative P/E, burns cash, down 20%+ this weekFLNC (Fluence) – Same story, government subsidy dependentHUT (Hut 8) – Bitcoin miner, pure speculationMU (Micron) – Massive distribution, 50M share down dayALGM (Allegro) – Losing money in hot marketVSAT (Viasat) – Negative P/E, thin volumeAPLD (Applied Digital) – Data center leasing with massive debt

Conclusion: Stick to What Works, Avoid What Doesn’t

This week delivered a masterclass in what happens when momentum meets fundamentals. The names with real earnings and institutional support—GLW, CIEN, WDC, STX, LITE, TTM—survived rotation and remain investable. The names that burn cash and depend on narratives—BE, FLNC, HUT, ALGM—got systematically destroyed and aren’t coming back anytime soon.

For systematic income traders, the lesson is brutally simple: you cannot generate repeatable income from unprofitable companies. Rich IV is a trap when there’s no earnings floor to catch the stock when momentum reverses. Stick to boring companies in exciting trends. Sell puts on quality names when they pull back 3-5%. Use collars to protect profits while generating income. And never, ever confuse a liquidity-driven rally with an investable business model.

The AI infrastructure build-out is real. Hyperscalers are spending billions on data centers, networking equipment, storage, and components. But within that theme, there’s a massive difference between companies filling purchase orders (GLW, TTM, LITE) and companies hoping to someday maybe get a contract (BE, FLNC, APLD). Focus on the former. Avoid the latter.

Next week brings critical earnings from GOOGL (Feb 4) and the setup into LLY (Feb 11) and NVDA (Feb 25). Use this time to build watchlists, identify entry points, and prepare for post-earnings opportunities. The stocks that survive the next earnings cycle will be the ones you want to own for the rest of 2026. Focus on quality, follow the earnings, and let the market separate wheat from chaff. That’s how you generate systematic income without blowing up your account.