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Chart of Day: General Dynamics (GD) above $200

Aug 06, 2017

Well, that was easy.

Days after highlighting opportunity in the GD stock and the GD September 2017 200 call, the stock has already run from $197.49 to $200 a share. At the time of recommendation, the call options priced at $2.50. It’s now up to $3.55 in days.

We have a target price of $206 on the underlying stock.

That’s pretty good leverage there. The stock moved up 1%. Meanwhile, the call option gained 42% in no time. That’s why we use options.

Chart of Day: How to Trade the Over-Extension in Gold

Aug 04, 2017

We believe gold may be greatly over-extended at this point, based on two things.

One, headlines have become aggressive bullish.

When it comes to gold, the press is typically late to the game.

In late May 2017, for example, after gold had already run from $1,215 to $1,296, the press became ultra-bullish, calling for further upside. They became incredibly bullish again in late July 2017 after a big run from $1,205 to $1,279.

When that happens, be aware of it.

It can be a contrarian sign that it’s time to move in the other direction. That’s what we’re seeing a lot of right now.

The second reason to get bearish on gold, at least for the short-term is based on technical over-extensions. Take a look at what happens to the price of gold each time the upper Bollinger Band (2,20) is challenged. It begins to pull back, as it has historically done at that point.

To confirm such a technical over-extension, we also want to be aware of other confirming technical tools. For example, each time RSI moves to or above its 70-line, we have an overbought situation based on momentum. At the same time, as Williams’ %R begins to move to or above its 20-line, we have an overbought situation.

Each tool confirms what we’re seeing at the upper Bollinger Band.

Interesting to note, we can use the same tools in reverse to call bottoms, too. When the lower Band is touched or penetrated, confirmed with RSI at 30, and Williams’ at 80, gold has a tendency to revere and trek higher.

For gold prices to accelerate higher from this point, we would need to see a break above prior resistance at $1,300. I don’t believe that’ll happen, near-term though.

Now the question is how can we trade such an opportunity.

There are two ways. One, we can also trade over-extended gold stocks that run with gold prices, such as Randgold Resources (GOLD). GOLD is exceptionally overbought at $95.70 and could easily pull back to $90 a share in our opinion. We can also see that RSI and Williams’ are a bit frothy here, as well.  Two ways to consider trading GOLD is by buying to open the GOLD September 15, 2017 95 put and, or the GOLD September 15, 2017 92.50 put.

Chart of Day: Home Depot (HD) Already Recovering as Hoped

Aug 02, 2017

Just the other day, we highlighted an opportunity in Home Depot. (HD).

The stock had just been clobbered on news Amazon.com was putting together a deal to sell Sears’ appliances. There was no real threat to HD, though. Plus, HD has an economic moat that can’t really be touched.

Plus, as we noted it was oversold on all momentum indicators, including its lower Bollinger Band (2,20), MACD, RSI, Money Flow and Williams’ %R.

In our opinion, it’s only a matter of time before HD bounces back.

We said that on July 25, 2017 when the stock traded at $146. It’s now beginning to recover, last trading at $150.18 a share. We’d like to see a move back to $160.

 

Chart of Day: General Dynamics Setting up to Rocket Higher

Jul 31, 2017

Just the other day, General Dynamics (GD) pulled back under its 50-day moving average on earnings.  However, the slump appears overdone, given oversold reads on RSI, MACD, and Williams’ %R, which tells us the stock could easily reverse higher from this point.  Over the last year, each time W%R has gotten this oversold, we typically see a higher move in the stock. It’s also challenging that lower Bollinger Band, which it should bounce off of.  At market open, buy to open the GD September 2017 200 call options at market.

Chart of Day: A Second Way to Trade an Amazon Threat

Jul 25, 2017

Just yesterday, we highlighted the opportunity in LOW. Shortly after, the stock was running higher. Today, we’re seeing that same opportunity in Home Depot (HD) after watching it catch and hold support just under $147 a share.

The “Amazon threat” is getting out of hand with HD, too.

But again, all Amazon is doing is making a deal with Sears Holdings – a company near death with heavy debt load.  For Amazon to even enter a deal with a company like Sears is laughable. In our opinion, LOW and HD are both Amazon-proof and among some of the biggest players in the space with nothing to worry about, especially with regards to a deal with Sears. A rebound in LOW and HD is very likely.

We’d like to see a near-term bearish gap refill on HD at $152, which is doable.

There’s far too much fear in HD to ignore this. Plus, as you can see in the chart, it’s oversold on all momentum indicators, including its lower Bollinger Band (2,20), MACD, RSI, Money Flow and Williams’ %R.

In our opinion, it’s only a matter of time before HD bounces back.


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