Winter Portfolio 2016: First Edition
Winter Portfolio 2016: First Edition
Brrrr. It's getting quite cold out there (in the Northern part of the globe). For all my traders in South America and Australia, keep enjoying your nice weather.
It's officially 2016 and some really wild and weird events have already transpired. The first four and five days of 2016 were the worst in record for the start of a brand new year. Notice these two images. These are for the S&P500 and the Dow Jones Industrial.
It's safe to say 2016 will continue to be one interesting whirlwind of a ride for investors. My objective in this portfolio is to simply focus on five stocks specifically, track them over the winter season and possibly make some money trading them. Just recently in a Real Life Stock Review, I changed my long-term perspective on the markets from bullish to neutral. This is a big deal. I often consider myself a perma-bull as it relates to investing and trading for the long term. (I mean, that's the only way to be in my opinion). If and when the market does crash, it's going to be a move unlike any move before. It will be much more volatile and scary than 2008 and cause a massive transfer of wealth! I hope you are with us to either profit from the move or perhaps just protect yourself and hedge it.
Earnings season is upon us! My analysis, as usual, will begin before the earnings release and let you know my viewpoints and plans going into earnings and then after. I will be writing two more follow up articles, so make sure to keep your eyes peeled for that!
#1 AAPL - analysis on 1/12/16
AAPL is always with us in these reviews. Everyone loves it, or hates to love it, but this company will be relevant for a very long time.
We had numerous analysis and trades on AAPL in recent articles. The most recent one specifically was 'If AAPL closes below $105, I am bearish. Stop at $110. Target 1 $95. Target 2 $92.â€
As it stands AAPL is nicely below the $106 support. I think at this point, going into earnings, the bearish trend is confirmed and we short the pullbacks. Earnings report is on 1/26. Here are my thoughts from here.
If AAPL trades up into or around the $104-$105 region before earnings and then gaps down on earnings, that is going to be a monumental bearish signal for me. I would surely expect $95 as a target and likely even lower if that 'Helen of Troy'-like support at $95 doesn't hold.
The only real bullish sentiment I will have on AAPL is if it has a few black candles prior to earnings and then opens above $110. That is plausible because at this point, that's only a 10% gap. Then the trend line that you see coming down from the highs would become a small issue.
$106 is going to be the battleground - the Gettysburg for AAPL. Its stock price will likely be determined entirely on that level and what happens on earnings. Am I a buyer down at $95? Yes. But only small bites with light risk because on an intermediate trend level AAPL has made lower highs and on weekly charts shows a lot of signs of a potential Head and Shoulders, much larger than the one in 2012-2013. A break below $95 for AAPL will likely be cataclysmic.
#2 BP - analysis on 1/12/16
The big question for anything oil or energy related is 'When will they bounce?â€ It's going to be very hard to time the bottom on oil and energy. The value of the US dollar is staying strong and commodities have been hit very hard. USO made another incredible low and energies just keep selling. We have had bearish trades on MOS and XLE recently, along with others, to capture some quick profits.
This particular trade on BP is very much a 'buy low, hold for a long time, capture some dividends in a foundational portfolio and sell highâ€ kind of set up. Many traders were thrilled to own some shares of BP at $35 (including me) and now that it has rolled over hard, $27 seems like the next place to possibly pick up some shares. Could BP go lower? Absolutely. That's what risk mitigation is for. Regardless of how bullish you are, long term on the company, sector or industry, my suggestion is still to mitigate risk. If your plan is to hold shares of BP for five to six years plus and it does dip below $26.85 specifically, then buy some insurance. Buy some puts, hedge the investment, sell the puts and bring cash in, then buy some more shares at a lower value potentially.
I do not foresee a massive gap on earnings, but I am excited to see how BP interacts with the $26.85 support price. This is the same support price it bounced off of nicely in 2010. Really though, a break below that and it's a very valid possibility BP makes it back down to $21.35.
#3 DIS - analysis on 1/12/16
Have you seen the new Star Wars movie yet? You've no doubt heard about it. The movie is already shattering all types of records and it's on pace to make a historic amount of money. Disney did well buying the franchise. The actual profits from the movie and merchandise won't likely hit the books until March, though. This stock has actually been quite volatile recently.
If you are interested at all in Elliott Waves, you can see on this daily chart my current Elliott Wave count. I think DIS just formed a C wave of types. The big question here would be 'Is the C wave over?â€ I personally argue, no. I would really like to see DIS make it back down to $94.23, which is a great longer term buying location. However, DIS did trade back down to the same support area that formed the beginning of the 2-3 Wave back in September-October. Meaning, DIS could bounce here a little.
Today's gap is pretty bullish, especially on the hourly chart, and for my day traders or super short term swing traders, if you're looking for a bullish move on DIS I think you could reap some bullish profits into the $104 area and maybe as high as $108. Here was some of my analysis on DIS from this morning.
Earnings are pretty far in the distance, but if you are an avid fan of this stock and looking to own shares one could consider a Jan 22nd $95 put sale for a measly $0.20 cents. Hey, if you already want to own share it's a great place to buy (in my opinion).
Plus DIS might be ready to open a park in Shanghai in June 2016, according to Reuters. Should be a fun one to watch.
#4 BABA - analysis on 1/12/16
For all intents and purposes, BABA is smack dab in the middle of a large resistance and support. I love to buy it back down around $58 and people love selling it in the mid 80's. This is one of the few newer tech stocks that IPO'd in recent years that haven't gotten hosed. (Welcome, FIT, GPRO and ETSY).
Today was a pretty bullish gap up on BABA, but it's about to battle all of the bearish gaps from late December and early January. The pink lines represent a little bit of a distribution phase that BABA was in and it's my consensus that BABA might retest that break out and then potentially roll back over. (Yes, possibly all the way back to $58.13). It will depend a bit on earnings as well as YHOO's performance, which is also at a pretty low level and decent support of $29.
In the next three to four days, I could see being slightly bullish on BABA. Then, one could look to short this retest.
#5 FB - analysis on 1/12/16
This is another stock I am bullish on going into 2016. Any company with that many followers/users and contains that much information on the general public is a wealth of information and a wealthy company.
Again, if you find yourself a fan of wave counting, I think FB is in a Wave 4 or completing it soon. It is also trading into the 100 simple moving averages on the daily, which it has bounced off of nicely in recent months. Also, $98.94 is a really strong support. Will it bounce from here? Likely a tad. I am at least more bullish to neutral on the stock. It's been a 'slow grinder' for the last few years, taking its sweet time to move higher. But, it has been moving higher! As earnings approach, it is likely FB will do the same thing it has been doing for years: keep creeping higher. A good one to buy the dips on.
Any stop on a bullish trade right now would be about $95. That's a decent place to have it as there is some bearishness brewing out there in the general markets right now. Some stocks and the general market ETF's like SPY and IWM are close to a support. It will be interesting to see how strong a bounce is or how long it might last.
I am really excited to see how earnings affect the stocks in the coming weeks! If you have any questions or need anything else, feel free to email me anytime at firstname.lastname@example.org.
Until next time traders! Remember, Love life, live life and trade it!