Archives for July 2020
Full Time Profits, July 19th, 2020 – NKE, NFLX, ZM
Very constructive week for stocks. There was a shakeout in tech– to be expected as many names were extended with earnings on deck– and the rest of the market held up very well.
The S&P 500 is seeing volatility contraction near the upper end of this range. That’s pretty bullish, and unless something changes we need to assume that price action will resolve higher.
Many tech stocks still have to report so those are a no-go for us, but we can start looking at some other tech stocks and a dip-buy in Nike.
Because we are expecting both realized and implied volatility to fall, we have adjusted our profit taking parameters to look for more profits.
Trade #1: NKE
NKE has not been performing well relative to other stocks. As the market trades near its highs, NKE is trading near the week lows. There is an obvious level of support just under 95. I want to see a “stop run” into that support level, and an attempt at the gap fill at 85. I don’t think the gap will fill, but instead will find buyers before that.
Trade Setup
Expected Price: 91.54
Sell to Open NKE 21Aug20 87.5/85 Put Spread
Tier 1: Enter at 0.55, Exit at 0.21
Tier 2: Enter at 0.77, Exit at 0.42
Tier 3: Enter at 0.99, Exit at 0.56
Stop Out If Close Under 87.39
Trade #2: NFLX
NFLX took a hit after its earnings event. Which is fine– the stock had gone parabolic and is due for a breather. I want to see one more decent selling event and a test of the previous swing highs.
Trade Setup
Expected Price: 474.01
Sell to Open NFLX 21Aug20 415/410 Put Spread
Tier 1: Enter at 0.7, Exit at 0.05
Tier 2: Enter at 0.98, Exit at 0.17
Tier 3: Enter at 1.26, Exit at 0.21
Stop Out If Close Under 414.89
Trade #3: ZM
Similar setup to NFLX — looking for a retest of the previous resistance level as potential support.
Trade Setup
Expected Price: 224.03
Sell to Open ZM 21Aug20 180/175 Put Spread
Tier 1: Enter at 0.65, Exit at 0.05
Tier 2: Enter at 0.91, Exit at 0.09
Tier 3: Enter at 1.17, Exit at 0.09
Stop Out If Close Under 179.89
Market Primer, July 19th, 2020
Full Time Profits, July 16th, 2020 – GLD, COST, ADBE
The churn underneath the surface is quite a sight.
Tech earnings are up on deck soon, so you’re seeing profit taking in the FANG stocks. On the other side, banks are ripping post-earnings, effectively creating a “wash” as the market goes sideways.
This is fairly constructive price action. Tech could have a few more “rug pulls” as company earnings come in, but as it stands this is fairly vanilla price action.
Key level for SPX is 3125, the longer we hold above that level the higher the odds we see continuation. Couple that with the fact that all the major moving averages are in bullish alignment and we’re still set up for trend continuation.
If (and when) the markets get too stretched then we will start looking at short-biased trades, but we simply are not there yet. We will focus on selling premium to the long side.
Trade #1: GLD
After a solid breakout to new highs, GLD ran from 165 to the low 170s. Odds are it will just continue here, but I want to be prepared if we see a decent dip. There is a gap fill and a rising 20 day moving average at 167.50, so if we come into that level I wan to be involved.
Trade Setup
Expected Price: 167.6
Sell to Open GLD 7Aug20 165/162 Put Spread
Tier 1: Enter at 0.5, Exit at 0.2
Tier 2: Enter at 0.7, Exit at 0.3
Tier 3: Enter at 0.9, Exit at 0.37
Stop Out If Close Under 162.89
Trade #2: COST
After clearing to new highs, the stock isn’t seeing much followthrough… maybe it’s time for it to dip a little further. I want to be involved in that gap fill.
Trade Setup
Expected Price: 317.2
Sell to Open COST 21Aug20 300/295 Put Spread
Tier 1: Enter at 0.85, Exit at 0.35
Tier 2: Enter at 1.19, Exit at 0.54
Tier 3: Enter at 1.53, Exit at 0.66
Stop Out If Close Under 299.89
Trade #3: ADBE
With the selloff last week, the stock has probably topped in the short term. THere is a massive level around 380 that I think will hold… in fact I think the stock will hold higher levels than that and start to create a trading range. We are “close enough” to initiate a new position.
Trade Setup
Expected Price: 421.83
Sell to Open ADBE 21Aug20 375/370 Put Spread
Tier 1: Enter at 0.65, Exit at 0.12
Tier 2: Enter at 0.91, Exit at 0.21
Tier 3: Enter at 1.17, Exit at 0.21
Stop Out If Close Under 374.89
[CLOSED] – AIG Spec Call Buy
Update: July 16th, 2020
Scaling half.
Full Time Profits, July 12th, 2020 – HD, TGT, QQQ
After a sideways correction, the S&P looks ready for another leg up and an attempt at the February gap fill. We are still in “big water, small hose” trading where the markets are flooded with liquidity and not enough investable assets. That will always drive markets higher.
I am looking for a rotation in the markets. Tech has had a good run, but many of those names report earnings very soon– expect some profit taking in the tech sector. I’m not calling for a top there– just a breather.
There’s one other market I’m focusing on, and that’s the 10 year treasury:
Rates have stayed low for quite some time– and justifiably so! We had a global pandemic that led to growth expectations to go to… well, very bad places.
Bonds sold off hard into Friday’s close, and I think that’s a glimpse of what is to come. If rates go up (by bonds tanking) then you will see moves into financials, commodity stocks, and industrials.
This market will just rotate in and out of hot areas, slowly marching higher until we finally run out of liquidity.
With the Nasdaq at all time highs and the S&P trading near range highs, it’s difficult to be bearish, or at least find bearish trades. Instead we will focus on playing the rotation and look at a “dip buy” in the Nasdaq.
Trade #1: HD
HD is trading near its highs, putting in a small “cup and handle” pattern. Look for the June highs to act as a magnet and a resumption of its trend higher.
Trade Setup
Expected Price: 250.11
Sell to Open HD 14Aug20 230/227.5 Put Spread
Tier 1: Enter at 0.36, Exit at 0.1
Tier 2: Enter at 0.504, Exit at 0.164
Tier 3: Enter at 0.648, Exit at 0.178
Stop Out If Close Under 229.89
Trade #2: TGT
This name has been consolidating since May and has held its support levels nicely. I’m looking for rotation into this name for a test of the low 120’s, then a possible breakout.
Trade Setup
Expected Price: 118.86
Sell to Open TGT 21Aug20 110/105 Put Spread
Tier 1: Enter at 0.9, Exit at 0.4
Tier 2: Enter at 1.26, Exit at 0.62
Tier 3: Enter at 1.62, Exit at 0.77
Stop Out If Close Under 109.89
Trade #3: QQQ
Simple setup here, we are looking for tech to see a “rug pull” in anticipation of earnings season. Many of the large cap tech names have seen nice runs and it would be very possible that we see some profit taking. We should be prepared if it happens.
Trade Setup
Expected Price: 253.06
Sell to Open QQQ 21Aug20 234/231 Put Spread
Tier 1: Enter at 0.6, Exit at 0.31
Tier 2: Enter at 0.84, Exit at 0.47
Tier 3: Enter at 1.08, Exit at 0.6
Stop Out If Close Under 233.89