Real Life Trading Winter Portfolio 2017: First Edition
I saw snow a few days back, here in Nashville, TN. You know what that means. “Brace yourselves, winter is coming.” As long as we don’t have undead ice zombies attacking us, this winter here in the Northern Hemisphere of the world will likely transpire to be just like the others. Slightly cold, but an exceptional time to enjoy some holidays with friends and family, get some traveling in, open gifts and remember how truly blessed we are.
Just the fact that you are reading this means you either have internet or cell phone service, both things which seem a distant dream to a large portion of this gorgeous planet.
January is Extra Income Month at Real Life Trading and we have so much going on. We've got a RLT meet up in Honolulu on Jan 7th, a big webinar on Jan 19th, and a live event on Jan 21st in Nashville, plus the highly anticipated open house on the 2nd week of January. Take that, mix it with the new year, new president and add in a release of Real Life Futures Trading and you got a winning combination!
Every season we at Real Life Trading create a new portfolio, which we follow and share with the world to enrich lives. We set up various trades, both long term and short term. The trades might be directional option trades, like long calls or put trades, perhaps some credit spreads, usually a covered call or two, or potentially nothing. Each month, though, you can rest assured that you will receive your fair share of delicious brain food. As usual, if you have any questions, please feel free to let me know. I’m always happy, excited and eager to trade with each and every one of you!
My thoughts on the broader markets likely resonate with what you are also thinking.
We’ve gotten into all time high territory on the Nasdaq, Russell, Dow and S&P. Usually the market sees some slight selling after the Christmas holidays into January, where February and March are oftentimes a pretty strong two months for the bulls. I’m going to do something a little different in this portfolio. I’m going to track a market index and a stock from different sectors! This is going to be fun! Let’s get started!
- SPDR S&P 500 ETF: SPY - Analysis on 12/28/16
As I am quite sure you are aware, unless I am banned from technology of all kinds - I look at the SPY every day. It’s literally one of the most liquid instruments in the equity markets on planet earth! And with great volume, comes great trading opportunities! This is a stellar ETF to own for long-term accounts like IRA’s, 401k, RRSP and it’s also incredible fun even for aggressive short-term day traders focusing on options.
SPY gives you a plethora of strategies to choose from and I love dabbling in many of them. I love owning it long term, medium term, or short term. Options or shares, this is a fun ride and a barometer if you will, of the US Economy.
Let’s look at the longer-term picture on the SPY. You’ll likely notice above that beautiful wave rotation when the SPY broke out of its all time high, past the $213 level, traded up into almost $220 and then retested that old resistance as new support, through the ‘bearish’ season of the markets - that’s September - October time frame. This was highly expected and very healthy for the SPY to do in my opinion.
Here were my previous two ‘medium term’ analyses on SPY:
2. The bearish wager I lost on SPY (by 1 day)
All right Newsome…so you’re good…what’s next then, dude with the giant head?
Well I’m glad you asked (even though it was me who actually did the asking, but you get what I’m saying).
I’m assuming something very similar is going to happen again. The $219.55 price, which was once an old resistance, will likely act as a new support. I’m really anticipating something like this.
With the inauguration of the president, I’m expecting the January time to get a little testy, but once people see that the United States of America will still be in existence after Trump takes office I’m expecting a collective “Phew, okay, this doesn’t seem all that bad” kind of a rally.
Personally, I plan on selling puts around the $205 area for February. Why? I really wouldn’t mind owning shares down there. I mean, heck, that’s almost a 10% drop in less than two months? Sounds like a discount to me!
What about shorter term? Below is my daily chart. I’ll just anticipate some light selling and when it comes in, take advantage with some day trading or shorter term put options. If I owned over 100 shares up here, I would sell some $230 January covered calls, bringing in a measly $0.32 per 100 shares.
My Q2 target on SPY is $233.72.
We will see how she plays out. My final thoughts? I’m bullish long term, looking for a quick bearish move on the short term, more bullish to neutral on the intermediate level.
2. APPLE INC: AAPL - Analysis on 12/28/16
It wouldn’t be a Real Life Portfolio with this champion of the fruits. Wow this stock is fun! It’s still getting its haters saying ‘AAPL is now too big and too blue chip to be innovative.’ My thoughts are ‘yes, it’s not going to be as insanely creative as it once was by itself’, but I could easily see AAPL buying out 4-6 smaller companies in the next 2-3 years to help them with their innovation, all while they continue to amass enough cash to build a slip-n-slide to the moon.
Below is my weekly chart on AAPL. Many Real Life Traders are shareholders of this stock and have been for a while. Not too long ago I mentioned it likely would be a decent idea to sell some January week 1 covered calls. I don’t know if these will expire worthless, but with only six trading days left it’s looking pretty good.
My idea is that AAPL is in a wave four here. Likely AAPL continues to trade sideways and chops around a bit, then spring boards into late January. (That’s what I’m planning for anyway). Therefore, keep an eye on AAPL down into that $113 area if it makes it down there, as I’ll be looking to go long with all sorts of strategies. Longer-term calls, put sales, spreads, shares…I’m so pumped!
I don’t really have anything glorious on the shorter-term level. I will note that if AAPL doesn’t move bearish, but keeps trading sideways for 1-2 weeks and then breaks out and closes above $118, hold onto your horses, because this Issac Newton motivator will be defying gravity for a bit.
3. TESLA Motors: - Analysis on 12/28/16
Speaking of innovation, is anyone else astounded by how incredible and revolutionary Elon Musk is? I mean, Space X, Solar City, PayPal AND TSLA? All within a couple of decades? That kind of performance is truly incredible!
My analysis will be a smidgen shorter, only because I wrote a pretty epic and timely piece on TSLA very recently for another company. Here’s that article.
We’ve been watching this $181 level for quite some time. This put sale back in Oct expired nicely. And since then TSLA was doing it’s best to bounce off of the $181.75 price and it finally did.
TSLA has formed a beautiful double bottom here on the daily chart. My only real question on TSLA is, ‘how far will it pull back before it starts to bounce?’
As depicted above my friends, that is what I will be watching and waiting on. We will see! :-) Until then, keep an eye out for the bullish trade and know that TSLA can get extended. Feel free to review the March 2015 - July 2015 trend and the February 2016 - April 2016 just to see how quickly and fiercely this little beast can move!
4. Duke Energy Corporation: DUK - Analysis on 12/28/16
Well, if you are a fan of buy and hold, blue chip, dividend paying energy stocks, DUK is hard to beat; a pure staple in the industry that’s been around longer than I.
I actually know a few traders, one a really good friend of mine in North Carolina, who own shares of DUK for the long term; a very ‘core position’ stock. When you get into this kind of realm in the equities markets, you rarely do any short-term trades. It can be done of course, but if you notice the weekly chart, it appears DUK trends higher over time, but it moves in a pretty choppy fashion.
You’ll visually interpret DUK having it’s strong bullish runs, then a slow methodical retracement and eventually a bounce and continuation higher, eventually. On the bigger picture, it does kind of seem the three most recent key price levels are the $67, $75 and $86.50 price ranges. DUK had just sold off from its $86 highs with a nice and healthy 11% pull back into a good support.
Seems to me this energy stock is in a larger term distribution, AKA channel. A great candidate for the buy low, sell high set up.
Selling puts on this champion definitely will not make you rich quick. The only way to do that in the stock market is to count your blessings.
However, for anyone comfortable owning shares for the long term, the $72.50 put sale does pay $0.25 in premium for January and the February is a much better return. With $0.80 worth of premium, that’s the possibility of getting paid 1% return of the stock value, just to be patient. Would owning at $72.50 be the exact bottom of this stock? Likely not, but it does appear as a nice price level to buy into.
On a shorter-term note, I can see a pretty ugly double bottom of sorts. Based on the nature of its previous moves I could see some kind of wave rotation happening on this stock as it’s pictured below.
If you do own shares, I would wait on selling any covered calls, at least for right now. DUK appears more in the buy low stage of this channel. Let’s keep an eye on it and see what it does!
5. CostCo Wholesale Corporation: COST - Analysis on 12/28/16
Yep, I’m sure you see this one, too. It’s in a nice distribution phase with some really obvious support levels at the $126 and $144 range. Many Real Life Traders like Stan, Adrian, Niels and others were selling puts while COST was down into that $144 range.
You’ll kind of notice on the weekly chart a faint whispering of a potential evening star reversal pattern. It’s not flawless, nor very strong, but it does give indications that COST could have a nice pull back and dip.
You can see that sentiment really clearly on the daily as you have a beautiful retest gap and what looks like an inverted head and shoulders.
And here on the hourly (our first hourly chart of the portfolio) I’m going to watch COST for a bearish play pretty soon into these levels. The daily candle on 12/19 had a really strong gap out of a pennant pattern and with that candle breaking down, I feel like some traders could be trapped. Therefore, this is of course room for the bears to play in COST. Excited to watch this one unfold.
All right, boys and girls, I’ve kept you long enough! Thank you for allowing me to share my analysis with you AND most importantly, I truly appreciate your support for Real Life Trading. This company is doing an amazing job of Enriching Lives from all across the world. I get at least one email a day that someone is finding mental and financial break thoughts and small accomplishments like growing their account, becoming more patient, paying off that pesky credit card and slowly becoming a better person - and thusly a better trader!
You TOTALLY ROCK! I AM SO JAZZED and eager to just crush 2017 with all of you! ~ Until then my friends, remember, Love Life, Live Life and Trade it!
Jerremy Alexander Newsome and slowest runner at Real Life Trading