Winter Portfolio 2016: Second Edition
Winter Portfolio 2016: Second Edition
Hey Real Life Traders from around the world! How are you?! It's another exciting day to talk and type markets with you. I hope your 2016 has already been incredible and sensational.
2016 is poised to be a very challenging, volatile market. Many analysts, investors and traders are still licking their wounds from 2008. The punishment, abuse and losses are still fresh in their minds and every drop, retracement and consolidation brings to mind another likely free-fall. Eight to nine years later though, could this be the one? Could this really be the year when the bears flash their claws?
We will see. All I know is there are tons of warnings signals out there. IWM, XLE, IYT and XRT are all making severe lower lows and lower highs. As I type, we're midway into February and many of those ETF's have bounced, retraced and bounced around lethargically. DIA, QQQ and SPY have all bounced strongly off of their supports. As I've mentioned a few times, I am currently neutral on a long-term basis. I'm prepped and ready for whatever!
Let's scour these five stocks that we're following this winter season and see what kind of opportunities we can find! Ironically enough, we are back at the exact same location on the DOW and SPY as when I wrote the first edition on 1/12/16.
#1 AAPL - analysis on 2/18/16
Good ol' AAPL, right? Not much has changed since our last overview. The 200 SMA on a weekly chart is still holding massively strong at $91.89. AAPL will not traverse any lower until that support and buying price is broken. The $94 price range has been a domineeringly strong buying zone, too. AAPL continues to chop around the $97-$92 price range, making it semi-tough for day traders and a bore for swing traders.
Many of the Real Life Traders out there who own shares of AAPL have simply been writing covered calls on it. Stan J, who I'll be visiting in Denver, CO in late April, has the $105 covered call expiring next Friday. Niels C had had $100 expire last Friday. Those are just two off the top of my head.
Anyway, what now? Well, on the daily chart, AAPL is currently forming a bearish engulfing pattern. The 2/18/16 candle is engulfing the 2/17/16 candle. What I find interesting is that the daily chart also looks like a hideous double bottom and today could be a retest of the neckline. Therefore, the next two to three days will be crucial on AAPL.
A strong bounce and I'll be slightly bullish. A move lower and I won't be bullish. It will be a challenge to find an amazing bearish trade due to the risk:reward. Maybe a $105/$110 March bear call spread, but there's not tons of money up there. If you're a more aggressive and active spread trader, you could consider $103/$104 March week 2.
Traders definitely went bullish on the 2/17/16 candle. If those bulls become trapped and AAPL rolls down hard, breaking lower than $94.50 and potentially lower than the $91.89 support, AAPL could see mid $70's this year. Great time to buy some protection down here for those in shares.
AAPL price from the first article: Down $3.7 [3.7%]
#2 BP - analysis on 2/18/16
Let me start off on BP by saying I have a pretty ridiculous wager on this stock. I'll either be called a 'profit' or a 'crazy person'. HAHA! I am fine with either. History doesn't take kindly to the quiet, normal ones.
So, the wager? Below is the daily chart. My prognosis is BP will reach $20 in price before 9/1/16. Why do I think that? Because energy is so bearish right now. Copious amounts of traders are trying to pick the bottom on energy/oil. Meaning, the bottom likely isn't here. Bottoms usually only form when people think you're truly insane for buying. When your CPA asks 'Is oil a good buy right now?â€ the bottom probably isn't here. But beyond that, the US dollar is growing in strength, causing oil and other commodities to decline.
The stakes on my analysis is simple. If I'm wrong, I'll pay one of my traders at random $100 AND… I have to do a slip-n-slide covered in motor oil. That's the ridiculous part. I'll have to find an environmentally friendly way to do that. Dean, one of our active real life traders, is the one who made this additional side bet. If I'm right at least I'll get something out of it other than the money I'll make on a bearish trade and just the fact that I was 'right'. Whoopdie-do. Being right means absolutely zero in the markets. The market is always right. We're often wrong! We simply have to be wrong quickly and when we are finally right, stay that way.
But I digress.
The $26.87 support price, which BP heroically bounced off of on 2/11/16, is the 2010 BP oil spill low. If BP finds a way to break that I do think it goes lower. However, since BP could be in the midst of a bounce, the lower trend line drawn on the daily chart shows a nice target. I have no idea if BP breaks that trend line. I doubt it and I will look to short up there and continually follow the bearish primary trend that started in May/June of last year.
BP price from the first article: Up $1.13 [3.9%]
#3 DIS - analysis on 1/12/16
I've got a lot of magical analysis on DIS. First, feel free to check out this video on the analysis I performed on DIS just a few days ago.
We currently are in a bearish trade on DIS from that analysis. Here are the specs below:
As you can see, right now we're losing on this trade. And we probably will lose on it. I can say as a 50/50 trader, you've got to be very comfortable being wrong!
In my last write up I mentioned the strong support at $94.23. If you got a chance to buy there, you are up and did have a chance to make some 'okay' money on a small bounce. Earnings came out and DIS gapped down trapping a lot of folks. DIS is currently making lower lows and lower highs since November. And it hasn't beat it's high yet from August 2015. This means that DIS is likely in a large distribution.
If we look at the above DIS weekly chart we see what appears to be a massive double top and we also see a large morning star reversal pattern. Which sentiment will win out. I do not know. DIS has already pulled back some $30 from November. I do believe DIS will either continue lower, or stay in this giant range bound formation for quite sometime. Only time will tell.
DIS price from the first article: Down $6.29 [6.19%]
#4 BABA - analysis on 2/18/16
Wow! What a volatile little beast this stock has been. Most Chinese stocks are, to tell you the truth. Recently, we have made some nice coinage on BABA. Jason M ,Peju O and a few others got a chance to hop into some quick bearish plays. After the earnings candle on 1/28/16, one could feel the bearish sentiment. It was a strong bullish gap, it simply did not gap up high enough to clear any pivots. So, the 20 EMA punched BABA right in the face and it fell some 15%
What are we to do now? Our last analysis was 'In the next three to four days, I could see being slightly bullish on BABA. Then one could look to short this retest.â€ That worked like a charm. Almost as if we do this for a living, right? Great analysis team!
From here, I anticipate BABA will have a serious battle with the 50 EMA. The gap on 2/16/16 was quite bullish and trapped some of the lingering bears on BABA. This gap was from the news that BABA was putting in millions of dollars into Groupon. Why? No clue. I'm not the CEO of BABA. I would have done something drastically different. Regardless, here's my current analysis and plan on BABA.
If BABA does make it into the 50 EMA soon, this should be a good short. As I mentioned last time, a buy around the $58 range makes a lot of sense. This is why I went with the $57.50 put sale expiring in March. Owning BABA down there wouldn't be scary. Plus, it's decent premium, too. $57.50 would make a nice stop for anyone looking to be bullish on BABA in and around the $60-58 range.
BABA price from the first article: Down $6.16 [8.47%]
#5 FB - analysis on 2/18/16
Dang, I love this stock. Shout outs to Justin L. who has recently been playing FB like Charlie Daniels plays the fiddle.
From the last article, I did get the wave 4 analysis correct. FB did trade down some and bounce to make a higher high on earnings. Since then, we have had some fun trades on FB including another ridiculous wager, which saw my first naked put sale of earnings in a long time. Click that link and scroll down to see the wager and award winning analysis.
Honestly, just a few days ago, this was my analysis on FB. From that analysis, many are in some credit spreads on FB. If you are not in that spread you could still give it some serious thought - the $109/$110 bear call spread expiring very soon.
If my wave count is correct, which so far seems to be the case, FB should be in a B wave, meaning a C should follow.
I'm not intensely bearish on FB, but a lower low just makes sense. Volume is currently declining and volume increased on the bearish move. That's why I'm going with the spread.
FB price from the first article: Up $4.10 [4.1%]
*Just a reminder, these seasonal articles I do are for analysis and specific trades and set ups on individual stocks. I'm not saying "blindly buy these to make money." I could create that kind of portfolio, but where's the fun in that? ;)*
You rock! Thanks for reading. Until next time, Traders! Remember,
Love life, live life and trade it!