The S&P squeezed out a new high on Friday, but it was a choppy week. After opening the week lower the markets turned choppy with a slight upward bias that accelerated on Wednesday. Thursday resumed the chop, but Friday saw a gap higher and a 22-point gain on the S&P. The Russell also contributed for the last two days with a 17-point gain on Friday. We needed the Russell to find some traction if the big cap markets were going to move higher. The Russell does not need to make new highs, just maintain a positive bias.
Stop Loss Updates
Check the graphic below for any new stop losses in bright yellow.
We need to always be prepared for an unexpected decline.
Check the graphic below for any profit stops in green.
We need to always be prepared for a profit exit at resistance.
Current Position Changes
SPY - S&P-500 ETF
The long put position was entered at the open on Monday.
ADSK - Autodesk
The long position was stopped on Thursday.
DELL - Dell Technologies
The long position was stopped on Tuesday.
PAYX - Paychex
The long position was stopped on Tuesday.
WMT - Walmart
The long position was stopped on Monday.
BULLISH Play Updates
ADSK - Autodesk - Company Profile
No specific news. Shares finally failed at resistance after several tech companies disappointed on earnings. We were stopped on Thursday.
Original Trade Description: July 6th
Autodesk, Inc. operates as a design software and services company worldwide. The company offers AutoCAD, a professional design, drafting, detailing, and visualization software; AutoCAD Civil 3D, a surveying, design, analysis, and documentation solution for civil engineering, including land development, transportation, and environmental projects; AutoCAD LT, a professional drafting and detailing software; BIM 360, a construction management cloud-based software; computer-aided manufacturing (CAM) software for computer numeric control machining, inspection, and modelling for manufacturing; Fusion 360, a 3D CAD, CAM, and computer-aided engineering tool; and Industry Collections software products for professionals in architecture, engineering and construction, product design and manufacturing, and media and entertainment industries. It also provides Inventor tools for 3D mechanical design, simulation, analysis, tooling, visualization, and documentation; Maya and 3ds Max software products that offer 3D modeling, animation, effects, rendering, and compositing solutions; and PlanGrid, a cloud-based field collaboration software, which provides general contractors, subcontractors, owners, and architects access to construction information in real-time. In addition, the company offers Revit software for building information modeling; and Shotgun, a cloud-based software for review and production tracking in the media and entertainment industry. Autodesk, Inc. sells its products and services to customers directly, as well as through distributors and resellers. The company was founded in 1982 and is headquartered in San Rafael, California. Company description from FinViz.com.
Autodesk reported adjusted earnings of 45 cents, up from 6 cents in the year ago quarter. Revenue rose 31% to $735 million. Analysts were expecting a GAAP profit of 12 cents and they posted a GAAP loss of 11 cents. Shares collapsed on the news.
However, think about it. They increased adjusted profit 700% and revenue 31% and analysts were not happy. This is another case of analysts getting ahead of themselves with their forecasts.
ADSK shares are rebounding sharply and could easily make a new high in a couple weeks. I recommend we buy performance!
Earnings August 22nd.
Closed 7/25: Long Aug $180 call @ $2.70, exit .75, -1.95 loss.
DELL - Dell Technologies - Company Profile
No specific news. Shares continued to fade in a weak market after the resistance test the prior week. We were stopped on Tuesday.
Original Trade Description: July 6th
Dell Technologies Inc. designs, develops, manufactures, markets, sells, and supports information technology (IT) products and services worldwide. It operates through three segments: Infrastructure Solutions Group (ISG), Client Solutions Group (CSG), and VMware. The ISG segment provides traditional and next-generation storage solutions; and rack, blade, tower, and hyperscale servers. It also offers networking products and services that help its business customers to transform and modernize their infrastructure, mobilize and enrich end-user experiences, and accelerate business applications and processes; and attached software, and peripherals, as well as support and deployment, configuration, and extended warranty services. The CSG segment offers desktops, notebooks, and workstations; displays and projectors; third-party software and peripherals; and support and deployment, configuration, and extended warranty services. The VMware segment offers compute, cloud management, and networking, as well as security storage, availability, and other end-user computing offerings that provides a flexible digital foundation to enable the digital transformation. The company also offers cloud-native platform that makes software development and IT operations a strategic advantage for customers; information security and cybersecurity solutions; cloud software and infrastructure-as-a-service solutions that enable customers to migrate, run, and manage mission-critical applications in cloud-based IT environments; cloud-based integration services; and financial services. It has a collaboration with Microsoft to deliver a joint Internet of Things (IoT) solution. The company was formerly known as Denali Holding Inc. and changed its name to Dell Technologies Inc. in August 2016. Dell Technologies Inc. was founded in 1984 and is headquartered in Round Rock, Texas. Company description from FinViz.com.
Dell shares crashed at the end of May when they reported weak revenue as a result of the trade war with China. Shares fell from $70 to $50.50 over about three weeks. We have seen multiple tests of that support level and shares are trying to rebound.
While the trade war with China is continuing, the back to school sales which occur in Q2 for Dell should be positive. They do not report earnings until September 5th so we can use an August option to capture about four weeks of market movement.
Dell will react positively to new Nasdaq highs. The options are cheap, so we have decent potential for a rebound and minimal risk.
Closed 7/23: Long Aug $55 call @ $1.95, exit $2.05, +.10 gain.
PAYX - PayChex - Company Profile
No specific news. Shares dipped to exactly our stop loss on Tuesday before rebounding to close at the high for the week.
Original Trade Description: July 6th
Paychex, Inc. provides payroll, human resource (HR), retirement, and insurance services for small to medium-sized businesses in the United States and Europe. The company offers payroll processing services; payroll tax administration services; employee payment services; and regulatory compliance services, such as new-hire reporting and garnishment processing. It also provides HR outsourcing services, including Paychex HR solutions comprising payroll, employer compliance, HR and employee benefits administration, risk management outsourcing, and the on-site availability of a professionally trained HR representative; and retirement services administration, including plan implementation, ongoing compliance with government regulations, employee and employer reporting, participant and employer online access, electronic funds transfer, and other administrative services. In addition, the company offers insurance services for property and casualty coverage, such as workers' compensation, business-owner policies, and commercial auto, as well as health and benefits coverage, including health, dental, vision, and life; cloud-based HR administration software products for employee benefits management and administration, time and attendance, recruiting, and onboarding solutions; and other HR services and products, such as employee handbooks, management manuals, and personnel and required regulatory forms. Further, it provides various accounting and financial services to small to medium-sized businesses comprising payroll funding and outsourcing services, which include payroll processing, invoicing, and tax preparation; and various services, such as payment processing services, financial fitness programs, and a small-business loan resource center. The company markets its products and services through direct sales force. Paychex, Inc. was founded in 1979 and is headquartered in Rochester, New York. Company description from FinViz.com.
Paychex reported earnings that missed estimates by a penny and guided slightly below analyst estimates for full year earnings. Paychex said earnings would rise 8-9% and analysts were expecting 9.2% growth. Revenue guidance was for 10-11% growth and analysts were expecting 10.5% so inline.
Shares declined sharply because they had risen 50% since December. Investors have a memory and they remember the gains and the trend. Shares are rebounding from the earnings drop.
Closed 7/23: Long September $87.50 call @ $1.55, exit .61, -.94 loss.
WMT - Walmart - Company Profile
No specific news. Shares declined as the earnings cycle continued and some companies disappointed. We were stopped out on Monday.
Original Trade Description: June 9th
Walmart Inc. engages in the retail and wholesale operations in various formats worldwide. The company operates through three segments: Walmart U.S., Walmart International, and Sam's Club. It operates supercenters, supermarkets, hypermarkets, warehouse clubs, cash and carry stores, discount stores, drugstores, and convenience stores; membership-only warehouse clubs; e-commerce Websites, such as walmart.com, jet.com, shoes.com, and samsclub.com; and mobile commerce applications. The company offers grocery products, including meat, produce, natural and organics, deli and bakery, dairy, frozen foods, alcoholic and nonalcoholic beverages, floral and dry grocery, as well as consumables, such as health and beauty aids, baby products, household chemicals, paper goods, and pet supplies; and health and wellness products. It also provides electronics, cameras and supplies, photo processing services, wireless, movies, music, video games, and books; stationery, automotive, hardware and paint, sporting goods, and outdoor living and horticulture; apparel for women, girls, men, boys, and infants, as well as shoes, jewelry, and accessories; and home furnishings, housewares and small appliances, bedding, home decor, toys, fabrics, crafts, and seasonal merchandise, as well as brand name merchandise. In addition, the company offers fuel and financial services and related products, including money orders, prepaid cards, wire and money transfers, check cashing, and bill payment. It operates approximately 11,300 stores and various e-commerce Websites under the 58 banners in 27 countries. The company was formerly known as Wal-Mart Stores, Inc. and changed its name to Walmart Inc. in February 2018. Walmart Inc. was founded in 1945 and is based in Bentonville, Arkansas. Company description from FinViz.com.
Walmart has fought its way back to the prior highs after a 20% decline in Nov/Dec. They are hitting on all cylinders and no longer look like Amazon roadkill. They are fleshing out their online ordering, store pickup and next day delivery and showing no signs of losing market share to Amazon.
This is a technical position. The stock has risen to the prior highs and could be positioned to break out for a new leg higher. Options are cheap and the August option expires one day after earnings so it should hold its value. We will exit before earnings.
Earnings August 15th.
Update 6/23: Walmart said it was paying $282 million to settle a long running six-year probe into bribery of foreign officials in Brazil, China, India and Mexico. The payments were made by third party intermediaries and did Walmart did not know about the payments until after the fact. They blamed delayed accounting and lack of internal controls for third party payments in foreign countries. Bribery is a way of life in those countries.
Long August $110 call @ $2.10, see portfolio graphic for stop loss.
BEARISH Play Updates
SPY - S&P SPDR ETF - ETF Profile
The markets were choppy early in the week but a sharp rebound in the Russell late in the week helped to lift the big cap averages.
Original Trade Description: July 22nd
The SPDR S&P 500 ETF Trust seeks to provide investment results that, before expenses, correspond generally to the price and yield performance of the S&P 500 Index (the "Index")
The S&P 500 Index is a diversified large cap U.S. index that holds companies across all eleven GICS sectors.
Launched in January 1993, SPY was the very first exchange traded fund listed in the United States.
The market is struggling at the new highs. The Fed rate cut is already priced in and may actually be overpriced since the odds are better for a 25-point cut rather than the hopes for a 50 point cut that stimulated the market over the prior two weeks. With lackluster earnings and the potential for a Fed disappointment, investors are having second thoughts about buying the current highs.
The SPY has short term support at $296 and could decline sharply to $290 if the earnings continue to provide more disappointments than positive surprises.
I am recommending a short term put spread to capture any decline into August.
Long Sept $295 put @ $5.18, see portfolio graphic for stop loss.
Short Sept $285 put @ $2.80, see portfolio graphic for stop loss.
Net debit $2.38.