Rocket Equities & Options Report 07-26-21
Monday Report - July 26th, 2021
The market is making all time highs across the board yet again as we come into a big week of mega-cap tech earnings. 165 of the S&P500 companies report this week, including TSLA, MSFT, AAPL, GOOG, FB, and AMZN. We also get a Fed meeting starting tomorrow with an announcement and press conference to follow Wednesday afternoon.
We had a nice short in the market last week, and thankfully we took our profits and stuck to our plan, which was just looking for a pull back to the lower boundary line of the upward channel the SPY has been in. As the market was cascading lower last Monday, and the SPY had fallen from about $434 when we placed our short to $422, it seemed like the S&P would have a hard time finding a bid anytime soon, but that was obviously not the case and this market proved itself yet again as investors and traders bought the dip all the way to record prices. The mental aspect of trading is one of the most important. Part of me wanted to stick with the trade and try to maximize our profit without leaving anything on the table.
Here's a quick glimpse of the conversation I was having in my head as I was considering closing out our profitable put spread on Monday afternoon:
"How can you sell now (speaking to myself), you pegged a sell-off correctly and now is the time to let it ride as this market gives back some of the non-stop gains it has had over the last 15 months."
Greed is a powerful emotion that we all deal with in some fashion. It is important to stick with your plan. We didn't make this trade to predict a sell-off. We made this trade on the probability that the market could just pull back a bit, after having only 3 red SPY bars on a daily basis from June 18th to July 13th. We were paying premium to buy volatility with a bearish bias coming into 2 big weeks of earnings. The SPY traded all the way to a low of $421.97 last week, and we max out our put spread profit if it expires anywhere below $428 as of this Friday. It was tempting to try and ride out the 2 weeks with some room to the upside for a max profit. The greed aspect of things was trying to get me to risk the $6.50 for that extra $2.50 of profit potential if we held our position. Last Monday, no one was predicting that the market would make new all-time highs by the week's end, yet that's where we ended up.
It's always nice to be reminded to stick to your original plan without paying a price. We closed our bearish position last Monday while more than doubling our investment, and we moved on to the next trade as we had originally planned. It wasn't easy to close out a bearish trade as the market was falling apart and every report was negative, but that was the plan so we stuck with it. You're never gonna buy at the exact low or sell at the exact high, it sounds simple but the human mind can always make you want more, but as trader's we must stick to our plan. If you never close out winning trades then you'll never book profits, and the person who always tries to sell at the high probably costs themselves in the long run.
The easiest way for me to convince myself of the correct trade is to always ask yourself if you'd initiate any trade you're currently holding. Trading costs are so low that it's almost commission and fee free to buy or sell a position, so there should be no rating as 'hold'. If you're holding a position then you're essentially 'buying that position' every morning that you choose to continue holding it. I never would have paid $6.50 for a $437-$428 put spread in the SPY going into the 2 biggest weeks of earnings season with only $2.50 of potential profits and only a few bucks out-of-the-money. Once I thought about the trade in that way, it was an easy decision to close things out and to take our profits and move on.
I had turned into the one selling out-of-the-money premium with a bearish trade as we were at the bottom of the channel line coming to a huge 2 weeks of earnings - that was not the plan at all when we initiated this trade so we closed our trade. It doesn't always mean you'll make the right call, but in the long run you can better analyze trades if you are constantly evaluating positions instead of allowing your mind to rationalize something you might never do otherwise.
We had a nice short in the market last week, and thankfully we took our profits and stuck to our plan, which was just looking for a pull back to the lower boundary line of the upward channel the SPY has been in. As the market was cascading lower last Monday, and the SPY had fallen from about $434 when we placed our short to $422, it seemed like the S&P would have a hard time finding a bid anytime soon, but that was obviously not the case and this market proved itself yet again as investors and traders bought the dip all the way to record prices. The mental aspect of trading is one of the most important. Part of me wanted to stick with the trade and try to maximize our profit without leaving anything on the table.
Here's a quick glimpse of the conversation I was having in my head as I was considering closing out our profitable put spread on Monday afternoon:
"How can you sell now (speaking to myself), you pegged a sell-off correctly and now is the time to let it ride as this market gives back some of the non-stop gains it has had over the last 15 months."
Greed is a powerful emotion that we all deal with in some fashion. It is important to stick with your plan. We didn't make this trade to predict a sell-off. We made this trade on the probability that the market could just pull back a bit, after having only 3 red SPY bars on a daily basis from June 18th to July 13th. We were paying premium to buy volatility with a bearish bias coming into 2 big weeks of earnings. The SPY traded all the way to a low of $421.97 last week, and we max out our put spread profit if it expires anywhere below $428 as of this Friday. It was tempting to try and ride out the 2 weeks with some room to the upside for a max profit. The greed aspect of things was trying to get me to risk the $6.50 for that extra $2.50 of profit potential if we held our position. Last Monday, no one was predicting that the market would make new all-time highs by the week's end, yet that's where we ended up.
It's always nice to be reminded to stick to your original plan without paying a price. We closed our bearish position last Monday while more than doubling our investment, and we moved on to the next trade as we had originally planned. It wasn't easy to close out a bearish trade as the market was falling apart and every report was negative, but that was the plan so we stuck with it. You're never gonna buy at the exact low or sell at the exact high, it sounds simple but the human mind can always make you want more, but as trader's we must stick to our plan. If you never close out winning trades then you'll never book profits, and the person who always tries to sell at the high probably costs themselves in the long run.
The easiest way for me to convince myself of the correct trade is to always ask yourself if you'd initiate any trade you're currently holding. Trading costs are so low that it's almost commission and fee free to buy or sell a position, so there should be no rating as 'hold'. If you're holding a position then you're essentially 'buying that position' every morning that you choose to continue holding it. I never would have paid $6.50 for a $437-$428 put spread in the SPY going into the 2 biggest weeks of earnings season with only $2.50 of potential profits and only a few bucks out-of-the-money. Once I thought about the trade in that way, it was an easy decision to close things out and to take our profits and move on.
I had turned into the one selling out-of-the-money premium with a bearish trade as we were at the bottom of the channel line coming to a huge 2 weeks of earnings - that was not the plan at all when we initiated this trade so we closed our trade. It doesn't always mean you'll make the right call, but in the long run you can better analyze trades if you are constantly evaluating positions instead of allowing your mind to rationalize something you might never do otherwise.
ES Daily
VIX
We got a higher high in the VIX last Monday for the first time in a long time. VIX still above 18 as markets are at all-time highs across the board
10-Year Note Weekly
When factoring in the inflation numbers, you get a record low real yield of about -1.12%.
Gold Daily
BTC
Amazon hiring a “Digital Currency and Blockchain Product Lead" as the market speculates, maybe rightfully so, that they'll eventually accept crypto as payment.
DIS is trading at $177.60. We bought DIS at $118.63. Disney continues to hold well above the $170 area, which correlates to a .382 retracement from its all-time highs. The COVID rise in Florida could impact their Orlando operations, not necessarily through lockdowns but just the impact of Florida being a hotbed for new COVID cases right now and families factoring that into their vacation/summer plans. The market is forward looking and hopefully this is just a small setback, yet it's something the chart is showing and we may have to build some cause here until we have more clarity regarding the 3rd wave of COVID and how it could impact Disney in CA and FL, as well as movie theaters nationwide. Disney reports numbers August 12th.
DIS Daily
UBER is trading at $45.25. Uber continues to find strenght at the area of confluence at $45, and bounced nicely off that area last week. This also correlates to the high from the weekly bar from November 2nd.
UBER Daily
UBER Weekly
WMT is trading at $142.50. We bought WMT at $140.91. WMT continues to trade higher from its recent lows and is looking to trade through the gap left open from their earnings in February. WMT has been struggling to get above the $145 area, which correlates to the gap left open from their earnings in February. WMT also has a dividend yield of 1.54% as of Friday's close.
WMT Daily
MCD is trading at $243.91. We bought MCD at $216.91. MCD again traded to new all-time highs last week. MCD is in an ABC up formation, which will take it up to $255.76. MCD passed its B point the week of April 5th with 14+ million shares traded on a weekly basis vs. 10.5M and 9.5M at its B point back in October of last year. MCD has a dividend yield of about 2.13% as of Friday's close.
MCD Daily
CRM is trading at $247.37. We bought CRM at $215.35. CRM traded higher last week with volume as they announced that their $27.7 billion acquisition of Slack. CRM has just pulled back to the .382 of the recent run it had higher. CRM was stuck in a downtrend channel line from the highs of $284.50 last September, and it broke out of that channel on May 28th, and came back and tested the channel line on June 3rd before trading higher. Look for CRM to continue the run to the upside as it goes for its all time high of $284.50.
CRM Daily
Earnings on our radar this week:
Monday after the close: Tesla (TSLA)
Tuesday before the open: UPS (UPS), 3M (MMM), SiriusXM Holdings (SIRI), Sherwin-Williams (SHW), General Electric (GE), Stanley Black & Decker (SWK), Polaris (PII), Waste Management Inc (WM), Boston Scientific Corp (BSX), JetBlue (JBLU), Fiserv (FISV), Raytheon Technologies (RTX), Invesco (IVZ)
Tuesday after the close: Apple (AAPL), Starbucks (SBUX), Advanced Micro Devices (AMD), Alphabet (GOOG), Visa (V), Microsoft (MSFT), The Cheesecake Factory (CAKE)
Wednesday before the open: Pfizer (PFE), McDonald's (MCD), Six Flags Entertainment (SIX), Boeing (BA)
Wednesday after the close: Facebook (FB), Ford (F), Xilinx (XLNX), PayPal (PYPL), Lam Research Corp (LRCX),
Thursday before the open: Merck (MRK), Comcast Corp (CMCSA), Spirit Airlines (SAVE), Valero Energy (VLO), Hilton Worldwide Holdings (HLT), Mastercard (MA), Molson Coors Beverage Co (TAP), Keurig Dr. Pepper (KDP), Yum! Brands (YUM), PG&E (PCG)
Thursday after the close: Amazon (AMZN), Overstock.com (OSTK), Albertsons Co (ACI), Altria Group (MO), T-Mobile (TMUS), World Wrestling Entertainment (WWE), Twilio (TWLO), Pinterest (PINS), Skyworks Solutions (SWKS), US Steel (X), Gilead Sciences (GILD),
Friday before the open: Caterpillar (CAT), Exxon Mobil Corp (XOM), Chevron Corp (CVX), Procter & Gamble (PG), Charter Communications (CHTR)
Options Trades:
We bought a SPY $437 - $428 Put spread for $2.91, and sold it last week for $6.50 for a $3.59 or 123% profit.
Short Term portfolio:
None active
Long Term portfolio:
Long half position in WMT at $140.91. WMT is trading at $142.48. Stop is $125.31.
We are effectively long CRM at $215.35. CRM is trading at $247.45. Stop is $193.64.
Long half position in DIS at $118.63. Disney is trading at $177.16. Stop is $98.45.
Long half position in UBER at $31.50. Uber is trading at $46.75. Stop is $26.24.
Long half position in MCD at $216.91. MCD is trading at $243.87. Stop is $189.50.
Monday after the close: Tesla (TSLA)
Tuesday before the open: UPS (UPS), 3M (MMM), SiriusXM Holdings (SIRI), Sherwin-Williams (SHW), General Electric (GE), Stanley Black & Decker (SWK), Polaris (PII), Waste Management Inc (WM), Boston Scientific Corp (BSX), JetBlue (JBLU), Fiserv (FISV), Raytheon Technologies (RTX), Invesco (IVZ)
Tuesday after the close: Apple (AAPL), Starbucks (SBUX), Advanced Micro Devices (AMD), Alphabet (GOOG), Visa (V), Microsoft (MSFT), The Cheesecake Factory (CAKE)
Wednesday before the open: Pfizer (PFE), McDonald's (MCD), Six Flags Entertainment (SIX), Boeing (BA)
Wednesday after the close: Facebook (FB), Ford (F), Xilinx (XLNX), PayPal (PYPL), Lam Research Corp (LRCX),
Thursday before the open: Merck (MRK), Comcast Corp (CMCSA), Spirit Airlines (SAVE), Valero Energy (VLO), Hilton Worldwide Holdings (HLT), Mastercard (MA), Molson Coors Beverage Co (TAP), Keurig Dr. Pepper (KDP), Yum! Brands (YUM), PG&E (PCG)
Thursday after the close: Amazon (AMZN), Overstock.com (OSTK), Albertsons Co (ACI), Altria Group (MO), T-Mobile (TMUS), World Wrestling Entertainment (WWE), Twilio (TWLO), Pinterest (PINS), Skyworks Solutions (SWKS), US Steel (X), Gilead Sciences (GILD),
Friday before the open: Caterpillar (CAT), Exxon Mobil Corp (XOM), Chevron Corp (CVX), Procter & Gamble (PG), Charter Communications (CHTR)
Options Trades:
We bought a SPY $437 - $428 Put spread for $2.91, and sold it last week for $6.50 for a $3.59 or 123% profit.
Short Term portfolio:
None active
Long Term portfolio:
Long half position in WMT at $140.91. WMT is trading at $142.48. Stop is $125.31.
We are effectively long CRM at $215.35. CRM is trading at $247.45. Stop is $193.64.
Long half position in DIS at $118.63. Disney is trading at $177.16. Stop is $98.45.
Long half position in UBER at $31.50. Uber is trading at $46.75. Stop is $26.24.
Long half position in MCD at $216.91. MCD is trading at $243.87. Stop is $189.50.
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