Good morning and Happy Saturday! After a rollercoaster week, let’s take a step back and analyze what happened in just 5 sessions on Wall Street. After we closed the previous Friday on the lows, we gapped down on Monday, with the $SPY dropping below their 50EMA for the first time since June. Panic selling created a nice buying opportunity after the first 30-60 minutes. The tech sector, $QQQ, despite falling below the momentum moving averages (8&21EMAs) managed to regroup and had a decent session. On our daily video on Monday I kept emphasizing the idea that the market has shown us before how resilient it is, and that we are covering all our hedges as we expect a powerful rebound. What occurred in the next 4 days was even more than we anticipated. An impressive rally in the reopening/cyclical/value stocks on Tuesday, a rally in the small caps on Wednesday, followed by a rally in the tech sector on Thursday and Friday fueled by strong earnings reports from $SNAP and $TWTR. We closed the week at all time highs for the $SPY and $QQQ, which is impressive after the action on Monday. After such a strong and abrupt rally we decided to add some hedges as we look a bit extended in the indices. We chose to add some puts with expiration in August, after the FED meeting which might signal the beginning of increasing interest rates and tapering. Below we will go over our best trades of the week, with the respective charts and the explanation above it:
$AAPL has been a great focus for us this past week. After the big gap down on Monday, we re-engaged the stock once it managed to reclaim its 8EMA. A wedge type pattern emerged on the chart and we added more on Tuesday’s close. The impressive run on Thursday and Friday made this position our best winner of the week.
$FB has been a great winner for our portfolio this week. We entered on Wednesday as it managed to keep the 340 level which proved to be good support. On Thursday we added more in anticipation of $SNAP and $TWTR reporting earnings. We decided to engage this stock as a sympathy play for the social media earnings. We were rewarded on Friday as it reached a high of 375.33. Great trade, hope you followed by reading our game plan!
$PYPL reappeared on our radar on Tuesday as it managed to clear a recent downtrend. We entered the stock in anticipation of a new all time high, as this has been a leader of its sector. With the Bitcoin conference on Wednesday, we anticipated a move in this stock as it is directly linked to two of the speakers involved: Elon Musk and Jack Dorsey. On Friday, it managed to make a new all time high at 309.48. With earnings next week, and a very nice chart, similar to a cup-and-handle pattern, we decided to buy some calls in anticipation of a bigger move. Since we never take stock into earnings, buying call options was the best alternative in this case.
The re-opening stocks have been on sale in the past month after the Covid narrative changed with the emergence of new variants across the globe. With a strong rebound in these sectors on Tuesday, we decided to buy some call options for $NCLH as it was looking extremely oversold and showed good momentum. It was a profitable and calculated trade in which we are still involved, as long as the stock will hold above 24.
In anticipation of $TWTR and $SNAP reporting earnings on Thursday night, we bought some calls for $PINS as a sympathy play. We have done this in the past as well, and, yet again, it proved to be a winner. The nice gap up on Friday allowed us to transform our calls into spreads for next week when $PINS reports as well. As such, we are now long a call spread for this stock with a potential of 8x profit since we managed to buy in the hole and sell on the gap up.
The overall market in 2021 remains very narrow, with many losers and just a few big winners which keep the overall indices at their highs. One has to be quick on his feet, see where the money rotates to, which sectors are in play for the respective week and act accordingly. The best and most affordable way is to join Eclubtrading and subscribe to our Morning Game Plan and Weekly Newsletter. Also, please remember to subscribe to our daily free Youtube videos in the link below:
Have a great weekend, relax, forget about stocks and options and remember that the market will be here when we return on Monday! It is going to be an extremely busy week with all the big tech stocks reporting earnings! Get ready and join the Club!