Market Summary (continued)
Friday the stock indices tried to make it four straight sessions upside, starting weaker but then powering higher into midmorning. This action occurred more than once on the week, and low to high action is typically good action.
Of course, it IS necessary to hold the moves. Thursday the indices rallied nicely, but they also gave up a good amount of the gains into the closing bell. Friday they took it a step - or two or three - farther. Decent enough low to high gains as the Administration postponed auto tariffs for six months, but they could not hold up in the withering fire of late session when trade news hit again, this time not so friendly. Reports from CNBC and others indicated that no talks were ongoing between the US and China, at least regarding trade. Not all that surprising given China's 'outrage' at the US blacklisting Huawei and several related entities as security risks. There are so many episodes of companies finding security backdoors in products sold by Huawei that it is no secret. China just doesn't like the fact that a major China company was caught stealing. It is very hard to do business with that mindset.
It might be hard on China as well. Looking at the Shanghai chart pattern and there is a very definite head and shoulders that Friday looked as if it was rolling over from the right shoulder. Better get the PBOC and everyone else working on more stimulus right now.
That said, the US stock indices were not exactly looking rosy Friday. Of course, the US stock indices are trading just off all-time highs versus almost 50% off the 2018 highs. Nonetheless, there are some serious pattern issues for US stocks after the indices stalled at the prior highs three weeks ago.
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It was an up week with downside bookends Monday and Friday. That led to some upside gains and some downside gains, and it looks as if there will be more downside gains ahead.
ZS (Zscaler, Inc.)
Entered ZS on 4/25 as it moved up from a 50 day EMA test. Picked up the stock for $67.24 and some July $65.00 strike call options for $6.40. It was somewhat bumpy, but ZS managed to trend higher and thus we were able to let it work without too much anxiety in a market already filled with anxiety. It did make an intraday test of the 50 day EMA in early May, but that same day it reversed upside so letting a good play have a bit of leeway worked out. It really took off this past week, hitting the target on Thursday. We banked half the stock for $78.65, gaining almost 17%. We banked half the options for $16.50, a 155+% gain.
TGT (Target Corporation)
Moved in on the downside 5/1 as TGT made a big break lower from the 200 day MA. It gapped below it three sessions earlier, and we were ready when it turned down again, continuing the gap through support. We picked up some June $77.50 strike put options for $4.25. TGT then proceeded to work lower below the 10 day EMA for 8 sessions. Monday TGT gapped lower and sold hard. Tuesday it gapped again, sold, but started to hold at some support. That was our cue to take the gain. We sold the options for $7.60, banking over 75%.
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Here's a leader play and our current analysis.
STATUS: Cup w/handle. PTCT continues working on its pattern, breaking higher then testing last week. Same cup with handle from September 2018 we discussed before when we were looking to play PTCT, but now it is trading post-earnings. Earnings saw it gap and drop, but then immediately rebounded to just over the top of the handle. Faded to test in last week's weakness, holding over the 20 day EMA, testing on lighter volume. We want to play a new break higher for a run at the September highs. That move gains 17% on the stock, 85% on the options.
Volume: 670.877K Avg Volume: 784.565K
BUY POINT: $40.88 Volume=775K Target=$47.94 Stop=$38.55
POSITION: PTCT SEP 20 2019 40.00C - (50 delta) &/or Stock
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BBY (Best Buy--$68.93; +0.19; optionable)
STATUS: A short double top in April and early May, then a precipitous drop through Monday of last week. On that Monday drop BBY fell through the 200 day SMA and matched the early March low hit as BBY tested the upside earnings gap. Bounced up off that test through Friday, but looks to be stalling at the 200 day SMA. Earnings are Thursday before the open, and while BBY could break upside again on its results, it is a prime setup to gap back down from here. We like it enough to make that play and are looking to enter as BBY breaks lower off this bear flag. A move to the target gains 55%ish on the put options.
Volume: 2.439M Avg Volume: 2.602M
BUY POINT: $67.92 Volume=3M Target=$61.42 Stop=$70.03
POSITION: BBY JUL 19 2019 67.50P - (-40 delta)
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--by the MarketFN STG Team
PEP (PepsiCo, Inc.)
Our Success Trading Group opened a position in PepsiCo, Inc. (Ticker: PEP) on Wednesday. We will be watching closely for an exit on PEP and for new entry points on some of our favorite stocks.
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AMAT - Applied Materials Inc. is currently trading at $42.70. The July $42.00 Calls (AMAT20190720C00042000) are trading at $2.60. That provides a return of about 5% if AMAT is above $42.00 on expiration Friday in July.
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| The foregoing is commentary for informational purposes only. All statements and expressions are the opinions of Online Investment Services, LP., or Split Ventures, Ltd. This information is not meant to be a solicitation or recommendation to buy, sell, or hold securities. We are not licensed or registered in the securities industry. The information presented herein and on the related web site has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. The security portfolios of writers for this issue may, in some instances, include securities mentioned herein and on the related web site. Estimates, assumptions and other forward-looking information are subject to the limits of forecasting. Actual future developments may differ materially due to many factors. No one associated herewith receives compensation in any manner from any of the companies that are discussed in this newsletter or on the related websites.|
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