The Nasdaq suffered a direct hit with a monster 315 point loss to tank the entire market. There were no winners today. Even the defensive stocks succumbed to the carnage. This was an extremely rare occurrence with A/D 7:1 declining on 10 billion shares of volume.
The S&P futures were down -9.50 earlier then rebounded back to flat before rolling over again at -3. I recommended we add to all the positions using lower strikes and entry triggers at lower price points.
After watching the futures recover 10 points I went back and removed the entry triggers.
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
AAPL - Apple Inc
The long position was stopped at $219.50.
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Full updates on all plays on Wednesday and Saturday. Only closed plays are updated on other days.
BULLISH Play Updates
AAPL - Apple Inc - Company Profile
Apple crashed with the market back to support at $216 with a $10.51 drop to stop us out. I would not hesitate to buy this dip as soon as the market finds a floor. Shares fell another $2 in afterhours. I am going to recommend a new entry with a trigger. We may not be triggered or it may NOT be the bottom. Buyer beware.
Buy Dec $225 call, expected premium $6.50. No stop.
Original Trade Description: Oct 6th
Apple Inc. designs, manufactures, and markets mobile communication and media devices, and personal computers to consumers, and small and mid-sized businesses; and education, enterprise, and government customers worldwide. The company also sells related software, services, accessories, networking solutions, and third-party digital content and applications. Company description from FinViz.com.
Support held and it is time to get long. We have been short Apple for the post announcement decline but support held and the Nasdaq looks like it wants to rally.
Apple earnings are Oct 30th and everyone will be looking for good news about the new iPhone products. Since support held, I a recommending we take a short term November position and try to catch the earnings run.
Morgan initiated coverage with an outperform rating and the second highest price target on the street at $272. That would be a 21% gain from Friday's close. The analyst believes the service business is growing faster than people expect and the average selling price will also be higher. He thinks Apple Music will contribute $30 billion in revenue by 2025 and Apple Pay will contribute $6 billion. The average price target is $232.13.
Premiums are high because expectations are high. I am using two different entry triggers and strike prices in order to not be forced into a spread. ONLY enter whichever trigger is hit first. Do NOT enter both.
Position 10/9/18 with an AAPL trade at $226
Closed 10/10: Long Dec $235 Call @ $6.33, exit $5.21, -1.12 loss.
MSFT - Microsoft - Company Profile
We were not stopped because there was no stop loss. This is a December position and plenty of time for a recovery.
I am recommending we buy this dip to support.
Buy Dec $110 call, currently $3.86. No stop loss.
Original Trade Description: Sept 29th
Microsoft Corporation develops, licenses, and supports software, services, devices, and solutions worldwide. The company operates through Productivity and Business Processes, Intelligent Cloud, and More Personal Computing segments. The Productivity and Business Processes segment offers Office 365 commercial products and services for businesses, such as Office, Exchange, SharePoint, Skype for Business, Microsoft Teams, and related Client Access Licenses (CALs); Office 365 consumer services, including Skype, Outlook.com, and OneDrive; LinkedIn online professional network; and Dynamics business solutions comprising financial management, enterprise resource planning, customer relationship management, supply chain management, and analytics applications for small and medium businesses, large organizations, and divisions of enterprises. The Intelligent Cloud segment licenses server products and cloud services, such as SQL Server, Windows Server, Visual Studio, System Center, and related CALs, as well as Azure, a cloud platform; enterprise services, including premier support and Microsoft consulting services to assist customers in developing, deploying, and managing Microsoft server and desktop solutions, as well as providing training and certification to developers and IT professionals on Microsoft products. The More Personal Computing segment offers Windows OEM, volume, and other non-volume licensing of the Windows operating system; patent licensing, Windows Internet of Things, and MSN display advertising; devices comprising Surface, PC accessories, and other intelligent devices; Xbox hardware and software and services; and Bing and Bing Ads search advertising. The company markets and distributes its products through original equipment manufacturers, distributors, and resellers, as well as through online and Microsoft retail stores. The company was founded in 1975 and is headquartered in Redmond, Washington. Company description from FinViz.com.
This is a no brainer recommendation. If the market is going to rise over the next two months, the Nasdaq is likely to be the leader. Microsoft has no skeletons in the earnings closet and hardly a day goes by without some new announcement.
Earnings are Oct 22nd and we will exit the day before.
Shares have been consolidating at the recent highs just under $115. A breakout in a positive market should hit $120 relatively easy. In theory we should wait and buy a dip to the 30-day but with a market rally potentially imminent we should take a chance now.
Long Dec $120 Call @ $1.98, see portfolio graphic for stop loss.
Previously closed 10/4: Long Dec $120 call @ $2.27, exit $1.98, -0.29.
QQQ - Nasdaq 100 ETF - ETF Profile
The Nasdaq 100 Index fell -327 points. That is massive and the big cap techs were the leaders. Our December position has lost more than 50% but we have two months to recover. I am recommending we buy this dip.
Buy Dec $177 call, currently $4.24. No stop loss.
Original Trade Description: Oct 6th.
Invesco QQQ is an exchange-traded fund based on the Nasdaq-100 IndexÂ®. The Fund will, under most circumstances, consist of all of stocks in the Index. The Index includes 100 of the largest domestic and international nonfinancial companies listed on the Nasdaq Stock Market based on market capitalization. The Fund and the Index are rebalanced quarterly and reconstituted annually.
The Nasdaq declined -3.2% or -257 points last week. The Nasdaq Composite broke through the support of the 50-day but honored the 100-day when it came within 2 cents at the low for the day.
I believe investors will buy this dip just like they bought the multiple dips over the last six months. Tech stocks are the highest growth stocks and the least impacted by tariffs.
Long Dec $187 Call @ $3.00, see portfolio graphic for stop loss.
SPY - S&P SPDR ETF - ETF Profile
The S&P crashed through the 2,800 level to 2,785. The SPY is approaching the 200-day average at 276.23. I am recommending we buy this dip. There is very strong support at 270.
Buy Dec $285 call, currently $4.47, no stop loss.
Original Trade Description: Sept 26th
The SPDR S&P 500 trust is an exchange-traded fund which trades on the NYSE Arca under the symbol SPY. SPDR is an acronym for the Standard & Poor's Depositary Receipts, the former name of the ETF. It is designed to track the S&P 500 stock market index. This fund is the largest ETF in the world.
The SPY has pulled back to the 30-day average and actually a steeper decline than the S&P-500. The SPY is near support at the 30-day average.
I believe the market is going to move higher during the Q3 earnings cycle. Once we are out of this quarter after Friday's close, we could see the market begin to turn higher with just two weeks before the Q3 cycle begins.
This may seem counter intuitive with the market weak over the last several days but the fundamentals remain strong. We just need to get past the various headlines and out of the quarter. Thursday will be an especially bad headline day so expect some volatility.
Long Dec $295 Call @ $3.97, see portfolio graphic for stop loss.
Previously closed 10/4: Long Dec $295 Call @ $4.38, exit $3.65, -.73 loss.
XLC - S&P Communication Services ETF - ETF Profile
Shares are simply reacting to the Nasdaq crash. I am recommending we average down on this position. The next two months are normally the strongest period for tech stocks with a 6% average gain and many times significantly into double digits. Buy a couple contracts and we can lower our cost and potentially make money with a lower breakeven.
Buy (2) Dec $50 Calls, currently 50 cents, no stop loss.
Original Trade Description: Sept 22nd
The Communication Services Select Sector SPDR Fund seeks to provide investment results that, before expenses, correspond generally to the price and yield performance of the Communication Services Select Sector Index (the "Index"). The Index seeks to provide an effective representation of the communication services sector of the S&P 500 Index. Seeks to provide precise exposure to companies from the media, retailing, and software & services industries in the U.S. and allows investors to take strategic or tactical positions at a more targeted level than traditional style based investing. Description from State Street Global Advisors.
With FB, Alphabet, ATVI, NFLX, EA, TWTR, TTWO and TRIP all moving to the previously dormant XLC sector ETF, the odds are good that a lot of portfolio managers will shift investments to the ETF in order to be exposed to those stocks.
The downside to this theory is the 15 or so unwanted telephone, newspaper and TV stations in the same ETF. Fortunately, those stocks I listed above make up 59.5% of the ETF so they should control the direction. After seeing the big cap techs decline for no particular reason over the last two weeks it seems obvious now that they were victims of the S&P/MSCI index/ETF restructuring.
I am going to recommend an inexpensive November option because a rebound, if it is going to happen, should be relatively quickly.
Long Nov $50 Call @ $1.30, see portfolio graphic for stop loss.
BEARISH Play Updates
No Current Puts