Real Life Trading Summer Portfolio 2016: Second Edition
Hello traders, friends and otherwise lovely stock market acquaintances. I hope you are doing most marvelously.
I am getting all prepared and ready to hop on board the S.S. Awesome Cruise Ship for this Real Life Trading Alaskan Cruise adventure. Literally every single person I've talked to about this cruise absolutely loved it. I've never been, so I'm quite thrilled!
Earnings season is and was in full swing. At this point in August, the big boys have released their numbers and the markets have been printing higher highs. As of today, August 2nd, 2016, the S&P and Nasdaq are showing some healthy signs of a rest. I'm glad to see it. From here, I'm anticipating either some soft lower lows, or a nice bounce. Either way, let's be prepared.
Each season we at Real Life Trading create a portfolio of five stocks to follow. They aren't just blind 'buy' recommendations. Sometimes I'm bearish on them, sometimes I'm bullish and sometimes I want to implement some epic option strategies. Either way, we embrace the overall awesomeness of our readers and Real Life Traders from all over the globe. Let's continue to enrich lives together! Thanks for reading and let me know if you have any questions. Let's get started, shall we?
SQ: Analysis on August 2nd, 2016
Square, Inc. develops and provides payment processing, point-of-sale (POS), financial, and marketing services worldwide. It provides Square Register, a POS software application for iOS and Android, which enables sellers across a range of business types to itemize products or services for faster checkout. Payments and payment processing has been big business for a long time now and likely will continue to grow.
In the last article, I mentioned selling the July $9.00 put at $0.20 cents for anyone who wanted to own shares. Once again, that put sale expired worthless on SQ. That makes three in a row. 'So, what now on SQ?'
Well, it appears SQ is still in a large channel of some sorts. It also could be forming a very small inverted head and shoulders on the daily between June and end of July. A close above $9.35 appears to be a close past the neckline.
Earnings is right around the corner and it's anyone's guess how our SQ will report. My thoughts:
If SQ gaps down but opens above $9.00, I'll remain more bullish to neutral longer term on it.
If SQ gaps up and opens above $10.50 - it's likely gone for towards the moon. I would see that as a pretty strong gap. Next target on this channel could be $14.73 with a stop either below the all time low or a tad around $9.00. I would be looking to play this one with shares rather than options, unless I plan on selling puts again.
SQ price from the first article: Up $0.33 [3.3%]
2. GOOGL: Analysis on August 2nd, 2016
Oh boy. Good 'ol GOOGL. Just making a mockery of stock prices. Here's a Jerremy Newsome fact. Anytime the name of your company becomes a verb or adjective in the daily societal language, it's doing well - buy shares. In the first edition of this portfolio, I mentioned the $530 Jan 2017 put sale. Well, my buddy Stan J is still in that one, but per my plan I did buy to close it when 50% of the premium evaporated.
Our last analysis on GOOGL almost made the trading record books (if there was one). We predicted a bounce off of $700 to occur on July 6th. Well, safe to say, it did just that. Its earnings numbers were incredible. Some quick highlights 'Revenues of USD 21500 million, net earnings of USD 4877 million. Gross margins widened from 61.85% to 62.19% compared to the same period last year, operating (EBITDA) margins now 34.69% from 32.38%.
Year-on-year change in operating cash flow of 30.57% is about the same as the change in earnings, likely no significant movement in accruals or reserves.â€
The earnings gap on GOOGL was quite bullish, even though it did approach some previous all time high resistance levels, begging for supply to come, which could cause GOOGL to sell off a tad. $810.35 is its previous all time high, even though in pre-market before earnings it posted $820 exactly. My take? I think it gets there.
What's the plan? Well, it's a tough one. I'm considering the 830/840 bear call spread in combination with the 765/755 bull put spread to complete the condor. Main issue? Premiums are whack. I want $1.00, minimum. One might be able to get filled for that limit, but that's only 10% or not including commissions for a full three weeks. That trade is only 'okay'.
I think GOOGL has no issue climbing back up to the $820 post earnings / pre market high. A better play might be buying the $805 Sep call if GOOGL crosses $802.21 with a stop at $793 and $820 as the target. Either that, or a bull put credit spread by itself: maybe the $760 / $755 for Sep.
I would like to see more of a rotation down on GOOGL and then a bounce, but if GOOGL trades under the previous all time high for a while and breaks out, be bullish.
GOOGL price from the first article: Up $88.30 [12.43%]
3. AAPL: Analysis on August 2nd, 2016
Analysis on the last two has been a little winded, I agree. I try to be short and sweet on AAPL.
Strategy: Analyze and look to buy Sep $110 calls. Presently, they are trading for about $0.80. I find that to be very cheap and Sep is plenty of time to allow this insanely bullish gap on AAPL to continue.
Downside, very strong bearish trend coming in and the QQQ's are at a really good resistance presently. I feel there is more upside to be had. Simply be cautious with your stops and give AAPL time to run. Targets are $108 and $112. I will wait for AAPL to hopefully hit $112 before I do any covered call sales.
AAPL price from the first article: Up $8.59 [8.95%]
4. MRO: Analysis on August 2, 2016
One of my 'losers' from the previous article. I was bullish on MRO and MPC and got stopped out of both positions. Hey, it happens right?! Lose small and lose graciously. Losing is not the same as failing.
The candle on July 12th I thought was going to be 'the candle' to make some higher highs on MRO. Nope. Apparently not. This beast has earnings coming up soon. My plan is to be slightly bullish and look for a buying opportunity or candle as long as MRO doesn't open below $11.00. Otherwise, the chart will be damaged for a bit. If MRO can bounce off of this $12 channel, it looks like a classic buy low, sell high opportunity. Speaking of, I have three other put sales out there for similar stocks. BHI, RIG and BP. All three would be solid if we can buy this healthy pull back after some large run ups in the oil sector since Feb.
Otherwise, If MRO gaps up on earnings, potentially above $13.50, it could be nice gap that would create a move back into the resistance of this channel, distribution phase.
MRO price from the first article: Down $2.78 [17.7%]
5. NKE: Analysis on August 2, 2016
I really do feel Nike isn't going to be running anywhere, anytime soon. It had an absolutely break-taking streak between 2009 and 2016. The July put sale did expire worthless. It appears NKE is going to be forming a large distribution phase for quite some time, likely one to three years where it chops around between $50 and $65, probably. Obviously a fun channel to trade! So, let us be prepared.
The $50 Sep 2016 put sale is selling for about $0.26 cents right now, which isn't terrible. It's not great either. I usually want at least 1% of the stock's price when selling. Which would be $0.50 in the scenario. Now, if you really want to own shares at $50, this is a nice deal. $50 is a great place to own NKE in my opinion. Otherwise, on the short-term frame, I am very neutral on NKE. Long term, bullish to neutral. Nothing too classy or sexy to see here.
NKE price from the first article: Down $1.69 [3.03%]
My friends, thank you so much for reading and supporting Real Life Trading! Our mission is To Enrich Lives and it's been a remarkable 20 months already. It's truly an honor to to trade with each of you!
If you have any questions, just let me know! Otherwise, until next time readers - remember, Love Life, Live Life and Trade it!
C.E.O and guy with the fast 40-yard dash time at Real Life Trading