QQQ - Nasdaq 100 ETF ETF Profile
PowerShares QQQ, formerly known as "QQQ" or the "NASDAQ 100 Index Tracking Stock", is an exchange-traded fund based on the Nasdaq-100 Index. The Fund will, under most circumstances, consist of all of stocks in the Index. The Index includes 100 of the largest domestic and international nonfinancial companies listed on the Nasdaq Stock Market based on market capitalization. The Fund and the Index are rebalanced quarterly and reconstituted annually. ETF description from Invesco.com
The Nasdaq and the Russell 2000 are the two indexes that stand to gain the most from a rebounding market. The Nasdaq rebounded from the first correction and actually made a new high before the second correction appeared. Tech stocks have been punished and thanks to problems like Facebook, they have not recovered. However, last Thursday the Nasdaq Composite closed well above resistance at 7,100 but then fell back to that level in Friday's event risk avoidance.
There are not a lot of tech stocks reporting this coming week but that will change the following week and post tax reform earnings are expected to be good.
I am recommending we add the QQQ as a "market following" position rather than try to pick a potential earnings winner just a week or two before they report.
Options are not cheap so I am recommending an offsetting put.
Buy Jan $165 call, currently $10.27, initial stop loss $153.50.
Optional: Sell short Jan $145 put, currently $5.58, initial stop loss $153.50.
Net debit $4.69.
CDNS - Cadence Design Systems Company Profile
We were stopped out of CDNS two-weeks ago thanks to the weak market. Shares have made a rounding bottom and are testing short-term resistance. If the market turns positive we should see this stock return to the highs over the next couple of months.
Original Trade Description: April 15th.
Cadence Design Systems, Inc. provides electronic design automation software, emulation and prototyping hardware, system interconnect, and analysis worldwide. It offers functional verification, including emulation and prototyping hardware. Its functional verification offering consists of JasperGold, a formal verification platform; Incisive, a functional verification platform; and Palladium, a verification computing platform. The company also provides digital integrated circuit (IC) design products, such as logic design products for chip planning, design, verification, and test technologies and services; physical implementation tools, including place and route, signal integrity, optimization, and multiple patterning preparation; and signoff products to signoff the design as ready for manufacture by a silicon foundry, as well as design for manufacturing products for use in the product development process. In addition, it offers custom IC design and verification products to create schematic and physical representations of circuits down to the transistor level for analog, mixed-signal, custom digital, memory, and RF designs; and system interconnect design products to develop printed circuit boards and IC packages. Further, the company provides design IP products consisting of pre-verified and customizable functional blocks to integrate into customer's system-on-chips; and VIP and memory models for use in system-level verification to model correct behavior of full systems interacting with their environments. Additionally, it offers services related to methodology, education, and hosted design solutions, as well as technical support and maintenance services. The company was founded in 1988 and is headquartered in San Jose, California. Company description from FinViz.com.
Cadence reported Q4 earnings of 39 cents that met estimates. Revenue of $501.7 million beat estimates for $497.9 million. Shares fell hard on the lack of an earnings beat right in the middle of the market crash.
However, the company guided for the current quarter for earnings of 36-38 cents and revenue of $400-$510 million. The better news was the full year guidance for earnings of $1.50-$1.60 per share compared to 2017 full year earnings of 73 cents. That is a 100+% improvement.
Earnings will be next Monday, April 23rd.
Cadence is right on the edge of a product breakout cycle and should recover the prior highs in short order. The stock was crushed in the market crash and is starting to rebound with resistance at $39.65 and the 200-day average. A break over that level should trigger additional buying.
They do not have LEAPS so I am going with the November $40 call, which is reasonably priced for that length of time.
Buy Nov $40 call, currently $2.35, initial stop loss $35.25.
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