Real Life Trading Summer Portfolio 2017: Second Edition
Hey rockstars, legends and legend-etts. How are you doing? For us traders here in the United States, Summer is quickly dissipating, the heat is calming down (at least here in Nashville, TN), some leaves are starting to change colors, festivals are popping up left and right. It’s exciting. I LOVE the Fall Season.
Both college and professional football are here. Speaking of the NFL, make sure to check out this video, If Stocks Were Quarterbacks 2017.
I’m spending some time with friends in fantasy football leagues, Real Life Trading had a successful and fun fantasy football draft earlier this week, the Real Life Futures Trading Program is going smashingly well; just success everywhere I look and I love that!
I also paid off another wager that I lost a few months back. So many good things happening.
September is already underway and I’m sitting at 1.7R on the month. Last month I ended a pretty intense uphill battle in August. I made 10R, but it sure doesn’t feel like it. Some of the gaps, moves and swing trades from last months Summer Portfolio certainly helped with those wins. Let’s go dive into some of that analysis now.
- Delta Airlines - Ticker DAL: Analysis on September 10th, 2017
Safe to say, this stock has just been bamboozling me from day one. Now, granted, no one ever knows exactly what a stock is going to do, when and for how long but Delta has figuratively punched me in the face two or three times recently.
The bull put spread we did on it was a brilliant example of timing, patience and discipline regarding the proper unravel of the spread. Hindsight being the beautiful 20/20 vixen it is, I could have held my unravel, with the 50 long put two or three more days and really killed this trade. I did end up winning on the unravel, but it was a stressful one, being that DAL was actually in my spread for almost a month. Regardless, when it comes to spreads, it’s just about losing small when a spread does go against you. The fact that I won small on this one, still makes me smile.
I also tried another swing trade on it, just days ago. I lost less than 1R on this one and ended up getting creative on the 1 hour chart to protect myself even more; buying some protective puts on it. Here’s the chart for that. There are pros and cons for being able to trade in front of the computer during the day.In case you want to see me really chat about all of that, here’s a link to the Transportation Thursday video from the 7th, where we discuss that play. Still lost on it, but lost small.
So, what’s next?
Valid question. Apparently, I’ve tried ‘calling the bottom’ on this bear move on airlines for about 2 1/2 months now and I keep being wrong. The key though, is being wrong quickly and cheaply.
I think DAL is at a bottom this time. Then again, I know the exact price I’ll be wrong at, which will be a close below this previous weeks’ low.
If you are looking at playing a bullish move on airlines (DAL, LUV, AAL) I don’t see anything super sexy short term, but long term (1-2 years minimum) there are some nice candles and patterns appearing at this level. Bottom line, I’m still keeping my eyes on DAL and the ‘better’ airlines to start bouncing down at these prices, on the longer term scale.
DAL price from the first article: Down $8.01 [14.4%]
2. Applied Optoelectronics - Ticker AAOI:Analysis on September 10th, 2017
Welcome to reason #1, why you really want to consider either A) not holding short term swings over earnings or B) simply having protective puts over earnings (especially on volatile, non blue chip stocks).
AAOI was doing it’s best impression of a hot air balloon and then, smashville, earnings came out of August 4th and wrecked the place. It was a bearish gap and go, too and we can see exactly what happened with that gap. Boy oh boy did she ‘go’. And the best news? I sent out the analysis of this gap before the market even opened. Just a quick recap:
My take, you had millions of investors quite pleased with the gains on this stock and they sold to lock in those profits. Sure, their earnings were solid, but they didn’t justify a 700% increase in stock value since December. They were good, just not that good.
Here were my thoughts a few days ago. I figured if AAOI gapped into the Mid $80 price range, the strong bullish trend would prop it up and keep it higher. And I was very confident if AAOI gapped up, traders would have certainly sold shares locking in a gain. That would have been the easiest fade in a long time.
However, AAOI is around $71 right now. Today was a bullish (white) candle, therefore, this is a gap and go. AAOI likely trades down into $65ish range”
It actually opened at $75 on 8/4 and crumbled all day into the 100 SMA into $64.40, giving bearish traders a magnificent opportunity for some bear money.
For those that were able to snag some bearish gains on this one, either as a day trade or swing trade, congrats. However, that’s in the past. What is this beauty of volatility going to do from here?
Well, it’s been right at one year since AAOI has interacted with it’s 200 SMA. Looks like that is going to be happening sooner than later. Will AAOI bounce off of that price? I’m not very sure, but I’ll be watching for that to occur. Otherwise, I’m waiting out AAOI for right now, with no real trade set up in mind, until I see a bounce off of the 200 SMA or a close above $60.
AAOI price from the first article: Down $10.54 [15.6%]
3. Momo Inc. - Ticker MOMO: Analysis on September 10th, 2017
And welcome to reason #2, why you really want to consider either A) not holding short term swings over earnings or B) simply having protective puts over earnings (especially on volatile, non blue chip stocks) if you do plan on holding your shares over earnings.
MOMO has been a fun dancing queen of volatility and proved to be no stranger to that on earnings. While overall, MOMO has great earnings, similar to AAOI, traders probably felt ‘can this continue…perhaps enough is enough’ and they sold, furiously.
On August 22nd, MOMO has just a splendid bearish gap and go. I mean, lovely! Loads of traders made new jet ski money with that gap and the best part is, we have some who even played it in the other direction. Bob L, Justin J, and Tim W scored some realized gains as MOMO bounced off of the 200 SMA with a morning star pattern.
Now, we will see MOMO is forming a pretty pennant pattern. It’s below the 100 SMA and will be battling the resistance from the gap and the moving averages on the daily.
I would be excited to see something like this play out on MOMO.
Then again, on the hourly, it looks like an IH&S pattern is trying to form.
Therefore, I’m game with however MOMO decides to move from here. The overall trend is still bullish and a buy the dip is still in play for me!
MOMO price from the first article: Down $1.56 [3.9%]
4. Sanderson Farms - Ticker SAFM: Analysis on September 10th, 2017
It’s good to finally see some green out there, huh? Now of course, the vast majority of you know our rules when it comes to earnings plays. And both MOMO and AAOI were solidly in the green before earnings. I don’t personally know nor hear of any Real Life Traders getting smoked from the above 2 gap downs and that’s great news…
But I do know a few traders who have allowed SAFM to pay them a pretty penny over the last 2 months. This stock, obviously more of a stable, longer term, buy low dividend paying type of investment.Of course, you can always consider buying puts as a protection on any stock over earnings. It will often come down to ‘how profitable you are’ ‘where your dollar cost average is’ ‘how large would the stock have to gap, in order for you to be below your DCA’ and ‘how long do you plan to be in the stock?’ Is this a bill paying type of trade? One you expect to be in for 2-3 months? Then you probably want to exit before earnings. This a 5-10 year investment? Then you’ll have to hold over a few earnings gaps - so have fun and make sure yo master those gap types!
SAFM has a decent gap up on earnings on the 24th of August. A nice bearish candle formed, pulled right into the 20 ema giving traders a wonderful ‘buy the dip’ type of play. Since that bearish earnings candle, SAFM stock price has closed above the high of that candle. Which is bullish. And now, she’s in a pennant pattern once again.
The verdict? The trend is your friend. Find a good movie, grab some brews and hang out, with your friend, the bull trend on SAFM. Granted, SAMF is softly banging it’s head against a FIB level. A break out could easily see the $157.72 price hit. From there, a slow down likely comes in give us another opportunity to be patient and buy the dip.
SAFM price from the first article: Up $34.95 [30.2%]
5. Apple Inc. - Ticker AAPL: Analysis on September 10th, 2017
Oh yeah, it’s AAPL. I’ve got some fun charts to share with you on this one. Let’s dive in.
First off, I’m really pleased about the timing of this covered call. Shaving another $1.00 off of the dollar cost average always feels good.
You’ll notice too, in the drawing above, I anticipated the wave structure of AAPL (so far). The bounce I’m looking for is off of the 50 ema. Granted, it doesn’t have to happen, but the trend on AAPL is unquestionably bullish.
The question that could arise is… “how strong is this divergence on AAPL?”
What is divergence? Well - I've got a killer video for you to check it out.
Here is some potential bearish divergence on the weekly.
We can also see some with RSI and STOCHS.
Now, the slightly concerning thing is, the last time AAPL formed this, was back in 2015. Here’s that chart.
And, we can also see some on the daily.
Am I saying that AAPL is about to crash?
No. Not yet. Divergence is simply a ‘signal’ that the momentum of the trend is weakening. Simply meaning, a bull trend can turn into a sideways trend (for a while).
Okay, my real thoughts from here. I think AAPL makes one more higher high before completing a larger pull back and really beginning to trade sideways.
This could mean AAPL is setting up for some fun, longer term bull put spreads and or covered calls / collar strategies if / when AAPL makes it’s all time high and / or trades into that $164 resistance.
AAPL price from the first article: Up $14.45 [10.2%]
As you know, AAPL is featured in every portfolio. We will certainly keep an eye on it longer term. However, I am absolutely looking to buy a recent upcoming dip and be bullish until the $170ish area. This stock will be a very interesting one to watch and I’ll be working at looking over patterns to see if I can determine, based what AAPL did in 2015, the magnitude and chance of it happening again.
Everyone, you rock! Thank you for allowing me to provide my thoughts and analysis on the markets with traders from all over the world. I appreciate you helping Real Life Trading with it’s mission To Enrich Lives!
September is Real Estate Month and there are plenty more free goodies headed your way.
And - keep an eye out for the Real Life Trading 2017 Fall Portfolio which will be hitting your shelves here in a few weeks.
I’ll ‘see ya soon’. If you have any questions or need anything else, just let me know!
~ Jerremy Alexander Newsome
CEO of Real Life Trading and avid watcher of Ancient Aliens