Editors Note:

Since the prior Thursday's dip to 23,531 the Dow has gained 1,208 points. That is significantly different than the prior two weeks where the markets drifted steadily lower. The various indexes are breaking through resistance and on the surface it looks like we have shifted to rally mode.

Economics have been weak and the expectations for Fed rate hikes are slowly eroding. Earnings are rising and are now up 25% for Q1. The tariff headlines have faded and Trump's follow through on his campaign promise on Iran was met with nationalism rather than dread. The public actually liked the tough talk.

Investor sentiment is suddenly soaring along with the indexes. The S&P broke through resistance at 2,675 and the 100-day at 2,706. The index closed at a two-month high with a strong gain.


The Dow is positive with the 1,208-point gain but it is actually lagging the other indexes. The 100-day at 24,849 is the next hurdle then 25,000 and 25,250 before it can catch up with the Russell and Nasdaq.


The Nasdaq has rallied to critical resistance at 7,421 and is the second strongest index. A push over that level could energize the tech sector BUT it has already been energized for a week and it may be time for some profit taking.


The Russell is the strongest index since most small cap stocks are not at risk for tariff problems. Plus, there are a lot of chip stocks and energy stocks in the Russell and both sectors are rebounding. One more good day and the Russell could hit a new high.


I would not be surprised to see some weekend event risk selling given the growing tiff between Israel and Iran. They could exchange fire again over the weekend. If Iran tries to escalate, Israel is going to escalate as well. It could get messy with Russia backing Iran.

I am cancelling the stop loss adjustment plan because of the uncertainty and variation in option prices. If we had launched a new short on the NVDA call stop the premium was only 10 cents at the time. I will adjust if needed on the evening of the stop.

Next week I am going to launch some one-sided spreads. The prior two weeks we were getting hit on the upside and downside because of the volatility. If the market remains directional that will give us the opportunity to trail some put spreads on a short term basis.

Enter passively, exit aggressively!

Jim Brown

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NEW NON-DIRECTIONAL PLAY

BA - Boeing - Company Profile

Boeing is the largest plan builder on the planet with more than $1 trillion in backorders. The reinstatement of sanctions on Iran could cancel a $20 billion sale already in progress. Those headlines should keep a lid on the upside. Boeing has been trading in a narrow range for the last two months on the tariff headlines.

Sell short June $375 call, currently $1.27, stop loss $365.
Buy long June $400 call, currently $0.27, no stop loss.
Sell short June $310 put, currently $1.79, stop loss $329.25.
Buy long June $285 put, currently $0.74, no stop loss.
Net credit $2.05.



GOOGL - Alphabet - Company Profile

Alphabet Inc., provides online advertising services in the United States and internationally. The company offers performance and brand advertising services. It operates through Google and Other Bets segments. The Google segment includes principal Internet products, such as Ads, Android, Chrome, Commerce, Google Cloud, Google Maps, Google Play, Hardware, Search, and YouTube, as well as technical infrastructure and newer efforts, including Virtual Reality.

I am going to try a weekly position using the May options with only 6 days until expiration. If we can enter the position on Friday in a positive market, we should see premiums collapse on Monday only 4 days from expiration. After a $100 point rally over the last six days, we should see a pause for some profit taking. It may be brief and limited but it should help to deflate the premiums.

Sell short May $1160 call, currently $0.95, stop loss $1137.50.
Buy long May $1185 call, currently $0.55, no stop loss.
Sell short May $1050 put, currently $1.00, stop loss $1078.50.
Buy long May $1025 put, currently $0.50, no stop loss.
Net credit 90 cents.




Current Portfolio


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.




Play Updates

ADBE - Adobe Systems - Company Profile

Comments:

Adobe broke out of its range last week and we were stopped on the short $245 call for a gain before the stock accelerated higher. All the existing options will expire worthless next week unless somebody sets off a nuke somewhere in the world.

Original Trade Description: April 22nd

Adobe Systems Incorporated operates as a diversified software company worldwide. Its Digital Media segment provides tools and solutions that enable individuals, small and medium businesses, and enterprises to create, publish, promote, and monetize their digital content. Company description from FinViz.com

Adobe spiked higher on great earnings and ran into resistance at $230. The choppy market has prevented the stock from moving higher over the last month. With the focus on other tech earnings this week, Adobe could be forgotten and left to wander between $230-$215.

Earnings June 14th.

Position 4/23/18:
Short May $245 Call @ $1.55.
Long May $265 Call @ $0.68.
Short May $200 Put @ $1.06.
Long May $180 Put @ $0.23.
Net credit $1.60.

Position 4/24/18:
Short May $200 Put @ $1.06, exit $1.90, -.84 loss.
Short May $190 Put @ $.95.

Closed 5/9: Short May $245 call, entry 1.45, exit .68. +.77 gain.


NFLX - Netflix - Company Profile

Comments:

Netflix is testing the top of its range. We closed the remaining short call last Friday at 5 cents to avoid it regaining value. If it were not for that one intraday dip below $300 on the 25th, this could have been a great position.

Original Trade Description: April 22nd

Netflix, Inc., an Internet television network, engages in the Internet delivery of television (TV) shows and movies on various Internet-connected screens. It operates in three segments: Domestic Streaming, International Streaming, and Domestic DVD. The company offers TV shows and movies, including original series, documentaries, and feature films. Company description from FinViz.com

Netflix spiked on earnings to a new high but it was only $5 over the old high. Shares seem to have stalled at those levels. While I do not expect Netflix to collapse, I doubt it is moving significantly higher without a bullish market.

Earnings July 16th.

Update 4/27: The Wednesday market crash knocked us out of the initial May $285 short put and we adjusted down to the May $275 put. The stock continued to decline and the new put was also stopped out. When the stock drops $36 in three days, we would have been stopped out regardless of the position. We no longer have as short put on NFLX.

Position 4/23/18:
Short May $375 Call @ $1.38. Closed 5/4 @ .05, +1.33 gain.
Long May $395 Call @ $0.41.
Short May $285 Put @ $1.54.
Long May $265 Put @ $0.55.
Net credit $1.96.

Position 4/24/18:
Short May $285 Put @ $1.54, exit $3.26, -1.72 loss.
Short May $275 Put @ $1.92, exit $3,25, -1.33 loss.
We no longer have a short put on Netflix.


NVDA - Nvidia - Company Profile

Comments:

We closed the short sides at the close on Wednesday to avoid any major move after earnings on Thursday evening. The stock dropped $8 on a minor disappointment. I am recommending we close the long call at the open on Friday. The value will decline sharply at the open but maybe we can get lucky and retain some of the inflated premium.

Original Trade Description: April 22nd

NVIDIA Corporation operates as a visual computing company worldwide. It operates through two segments, GPU and Tegra Processor. The GPU segment offers processors, which include GeForce for PC gaming and mainstream PCs; GeForce NOW for cloud-based game-streaming service; Quadro for design professionals working in computer-aided design, video editing, special effects, and other creative applications; Tesla for AI utilizing deep learning, accelerated computing, and general purpose computing; GRID provides power of NVIDIA graphics through the cloud and datacenters; DGX for AI scientists, researchers, and developers; and cryptocurrency-specific graphics processing units. The Tegra Processor segment provides processors designed to enable branded platforms - DRIVE and SHIELD; DRIVE automotive computers and software stacks, which offer self-driving capabilities; SHIELD devices and services designed for mobile-cloud in home entertainment, AI, and gaming applications; and Jetson TX 2, an AI computing platform for embedded use. Company description from FinViz.com

Shares have been moving sideways in a wide range. Multiple headlines negative to the chip sector have weighed on the stock. Resistance at $250 is strong as is support at $217.

Earnings May 10th before expiration.

Nvidia was another casualty of the Wednesday market crash. We were stopped on the initial $190 put and we added a $180 put and lowered the stop loss by $7. Shares are back in the middle of their range and we are relatively safe unless the market crashes again.

Position 4/23/18:
Short May $260 Call @ $2.55, Closed 5/7 @ 3.35, -.80 loss.
Long May $280 Call @ $0.66.
Short May $190 Put @ $1.60. Closed.
Long May $170 Put @ $0.54.
Net credit $2.95.

Position 4/25/18:
Closed Short May $190 Put, exit $4.10, -2.50 loss.
Added Short May $180 Put @ $2.56, closed 5/9 @.03, +2.53 gain.


STMP - Stamps.com - Company Profile

Comments:

The post earnings rally stopped us out on the short call for a minor loss of 27 cents. The long call is profitable and the puts will expire worthless. I am recommending we close the long call at the open on Friday because it is still way OTM by $30 and the premium will collapse next week.

Original Trade Description: April 22nd

Stamps.com Inc. provides Internet-based mailing and shipping solutions in the United States. The company offers mailing and shipping solutions to mail and ship various mail pieces and packages through the United States Postal Service (USPS) under the Stamps.com and Endicia brands. Its solutions support various USPS mail classes, including First Class Mail, Priority Mail, Priority Mail Express, Media Mail, Parcel Select, and others. Company description from FinViz.com

Shares dropped on the 13th on news the Post Office was going to investigate discounted postage rates. The target was Amazon but Stamps.com also has a sweet deal and any investigation could suggest reducing their discount. Shares have rebounded but are approaching resistance at $230.

Earnings May 23rd.

Update 5/3: The earnings date changed for STMP and they reported after the close today. The stock spiked $7 in afterhours but that was well off the highs. Recently, a lot of stocks have crashed after earnings and there is always the chance that will happen here as well. Otherwise we have a good chance of being stopped out if the gains hold. The stock declined from resistance today and without any earnings expectancy to lift it higher we could see it fade back to neutral territory.

Position 4/23/18:
Short May $260 Call @ $1.85, exit 5/7 @ $2.12, -.27 loss.
Long May $280 Call @ $0.35.
Short May $175 Put @ $2.18.
Long May $155 Put @ $.35.
Net credit $2.89.




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