Real Life Trading Winter Portfolio 2018: Second Edition
WOW! Traders from around the world, what a glorious, wild, insane, crazy, fun, profitable, intense, scary and much needed move the markets had since our last write up!
January ended REAL strong. The S&P had another solid bullish month, ending up over 5%. Below are some stats you might find interesting.
…12 out of 12 times in the past if the S&P500 has a 5% or greater move in January, the rest of the year has ended positive, even if the markets has some wild intra-year pull backs.
Let’s take it back to our last portfolio. I stated pretty early on “At some point, it would make logistical sense for 2018 to have a 3-5% pull back potentially, but I feel like that would be a very reasonable and easy dip to buy.” Well, it seems we had more than a 5% pull back.
As of February 8th, 2018 it was the first time in history the S&P 500 went from a new all-time high to 10% correction in 9 days or less.
If this correction felt vicious, it was...it was the fastest 10% correction (meaning during a bull market) since 1928, which makes sense, as this was the most bullish market of all time. Remember the S&P500 closed higher at the end of the month 13 consecutive months in a row. Which had never happened before. As we are smack in the middle of February, I doubt we make a brand new high on the S&P500 for February, ending that streak, but I am optimistic for the rest of the year, especially for stocks that actually had a nice and healthy pull back.
And, one more thing to keep in mind is how the markets might react to a new chair of the federal reserve. Here are some stats on that.
Bottom line, it should be interesting! Volatility is certainly here which will make it an exceptional time for option sellers and day traders. My swing traders, you likely are going to get whipsawed around, A LOT. So be quick. Look to make fast cash, pop in and if you see a profit, pop out.
My long term investors, look to find value out there in the markets. All stats show to a higher 2018. This appears to be a healthy, needed and very much expected pull back. I’m glad we got it. From here, let’s move forward, trade our plans and protect that capital.
1. Knoll, Inc. - Ticker: KNL Analysis on February 11th, 2018
In our last write up I was looking for a retest of the gap on KNL from back on 12/16. This was the retest I wanted.
This is the retest we got. The low of the 1/10 candle was the one I was hoping to get filled on. The low was only 22.54, which means I missed the fill by .24. Drat!
The common theme for a lot of this portfolio and write up will be ‘wow, look how far this thing has pulled back and how quickly it did it. I wonder if it’s now at a good buying spot?!’
Because that’s kind of what I see of KNL. This was a stock some traders sold a February $20.00 put sale on. That will expire this upcoming Friday and we will see if any traders will get put the stock over 15% cheaper than it was last last week!
I would be shocked if that head and shoulders pattern actually plays out. If it does, it could take a full year, maybe more. But the 100 SMA on the monthly chart will prove to be a good support at 18.44. I still think KNL is in a nice buy low level and I’ll keep my eyes pealed for any traders who might get put shares of this dividend stock, from that Feb $20 put sale. If you don’t get put shares, you could easily consider selling some more, this time for March at either $20 or lower.
KNL price from the first article: Down $2.00 (12.7%)
2. MKS Instruments, Inc. - Ticker: MKSI Analysis on February 11th, 2018
Wow! Talk about one volatile cookie. This stock has been all over the place, yet, has offered some really fun and wild trading opportunities!
Look at those two fantastic bullish gap and go’s, back to back like that.
The best part is, the one in blue, triggered this swing trade we had set up on MKSI.
This was one we set up in the afternoon swing trading room. I can even give you the recording it was on. Here, click here to watch the whole recording and see me set this trade up. :)
Anyway, that was a fun trade. We scored over 2R on that one.
Here’s the big challenge on MKSI. As bullish as I am on the markets, you do have some solid bearish signals out there that could be brewing. MKSI on a weekly chart looks, well, weakly.
If we zoom into the daily chart, we will notice a pretty good hammer type of candle on the 100 SMA.
The trend should stay intact for a while, but a close below $93.75 wouldn’t be exceptionally bullish by any means. However, since earnings have passed, the 200 SMA could hold up MKSI pretty well. Since volatility is high in the markets right now, one could consider a 85/80 March bull put spread. Just make sure to check if you can find good premium.
Otherwise, it appears as if MKSI has entered a distribution phase of sorts, where we will see mostly sideways to bullish ‘chopcity' for the next few months.
Based on the hourly chart, I’ll be looking for a play like this.That shooting star candle that ended the day on Friday is pretty nice. Right now, as I’m writing this futures are pretty flat. I don’t expect any weird or wild gaps. I do believe the ‘base’ or ‘bottom’ of this healthy correction has been put in. From here, I’m expecting only higher moves. But of course, that can change on certain stocks if we have any nice gap downs!
MKSI price from the first article: Down $1.55 (1.5%)
3. National Grid plc. - Ticker: NGG Analysis on February 11th, 2018
‘Golly Gee Whilackers’ Look at NGG folks.This was my swing trade set up from our last portfolio. Safe to say, it didn’t trigger. Phew. Good. HAHA.
Because NGG did it’s best impression of a 10 year old on a slip-n-slide at Disney World.
The very next day after the write up, NGG had a bearish gap down on January 16th and then some buyers stepped up and bought with volume and then were trapped, big time on 2/2/18.
It’s below the 200/100 SMA on the monthly, it’s below a major support line, it does not look bullish going forward. The good news is, we all know how to short stocks. ;-)
Wait and pan for some kind of retest and then look to see if you are going to play a roll over. Since the stock pays dividends, just remember if you are short a dividend paying stock, you do have to pay the dividends. Therefore, if you want to short the stock, just keep that in mind. You could also buy puts OR you could simply do nothing. And then if NGG ever makes it down to $40, look for value down there and find out if we get a chance to snag some and of course, buy low sell high.
NGG price from the first article: Down $6.40 (10.8%)
4. SMART Global Holdings, Inc- Ticker: SGH Analysis on February 11th, 2018
This was a good stock to watch over the past few weeks. I think the analysis will be pretty clean on this one. SGH had a bearish gap and go on January 30th (which also completed a double top). And the candle on January 31st was the retest of that double top neck line.
You would have had only about 3-4 days to take advantage of that swing trade, as SGH traded right into the 100 SMA pretty quickly. Alright, now what?
Well, I think this one is straight forward. We are here hanging out at the 100 SMA on the daily chart. Friday was a nice high wave, indecisive candle. This looks ripe for a possible double bottom to form.
Therefore,if SGH closes above the high of Friday, one could go bullish with shares. Target one would be $36.94.
In this market, speed is paramount. So, if you see some profits after 4-5 days, take it, run, protect it and begin to hunt for the next quick move. :-)
SGH price from the first article: Down $4.29 (11.7%)
5. Apple, Inc- Ticker: AAPL Analysis on February 11th, 2018
And here we have another company, that’s very tied to the overall movements of the market and the S&P that just got shredded during the previous onslaught. AAPL once again completely wrecked earnings, giving just ridiculous numbers. 88 billion dollars in the 4th quarter of 2017.
But that wasn’t good enough. AAPL was actually up post market to $175, but fro about 7:00 pm that night (on 2/1/18) it sold off until the open of 2/2 causing it to open lower and create this nice gap and go.
That could have been a fun ride for a few trades, especially if you are well versed in put buying.
We can also see how strong this $155 price is going to be on AAPL. This was the previous old resistance from June of 2017 and is now becoming new support. We also have the 200 SMA here on the daily and as an added bonus, the 50 ema on the weekly. Which means, yes, this is a strong support here on AAPL. That’s why I got into this bull put spread at these levels. Safe to say, this one is nicely under water right now.
Obviously I’m hoping and planning for abounce. But I do have an unravel plan. If AAPL closes below this next support, I’ll wait for it to close and then I’ll unravel my spread on a pull back or retest into $152 - $153 as AAPL will likely retest that old support as new resistance.
Based on Friday’s candle and that gorgeous lower wick, I’m planing and expecting something much more like this.
Feel free to take advantage of AAPL down here at these wonderful levels. If AAPL truly does break $155 and then $150, there’s nothing really stopping it until $134. However, that would likely require a secondary market thrust lower for that to occur. At this point, we are already looking at almost a 20% pull back on AAPL from it’s high on January 18th to it’s low on Friday.
The good news is, this collar really helped out with the pull back on AAPL! Phew. The covered call expires this Friday and from here, be looking for some bulls to start picking up steam on AAPL in the next few weeks. A revisit of the $151 area, without a close below that massive support and I’ll plan on getting into some calls!
AAPL price from the first article: Down $17.94 (10.28%)
My friends from around the world, thank you for reading this write up! I hope you found it educational and enriching! It has been an incredible time in the markets and what I can assure you is ~ this will not be the last time something like this occurs again. I truly think this is / was the pull back that “everyone” has been waiting and hoping for. The question is simply, who will take advantage of it and who will be too afraid?
Not us! Not Real Life Traders! We know how to manage risk, we know how to trade in any type of market and we are sensationally excited about what the future brings!
Thank you for everything and until next time, remember, LOVE Life, LIVE Life and Trade it!
~ Jerremy Alexander Newsome