Weekly Update (8/28/2017)

 

Short Term

Summer is over. The moon has passed over the sun, everyone is coming back from their vacations, and the market is beginning to pick up speed again.

We finally had a little bit of consistency in the market, and a few of the short-term moves that we put on are beginning to work for us. The theme of our positions this past week was playing bounces with stocks at the bottom of their ranges. CMG held the 300 level, and this position looks great ahead of this week if it can maintain its bounce-back. SHAK held its support and is beginning a climb higher.

We even had a nice earnings bump in our MRVL position, and we continue to love semiconductors, which all look poised for a breakout. We want to maintain exposure to this sector so we can catch this move, and we want you to do the same. Others we like are CY and SWKS, and we recommend staying away from the crowded AMD trade unless the set-up becomes more favorable.

The most beautiful thing in the trading world is a stock that is trending, and we have just that in FCX and X. We've been in a steady climb off of May and June lows for many material stocks, and we continue to love these here. The reason we look for these types of stocks is that they are very manageable and its easy to put money into them and ignore them for weeks at a time. A volatile position will have you questioning yourself and this can force you to make mistakes when it comes to position management. We'll get into this more below.

 X is consistently maintaining this trend, and until it breaks down, we are happy to sit and watch our position grow. These dips at the bottom end of the range are perfect buying / adding opportunities.

X is consistently maintaining this trend, and until it breaks down, we are happy to sit and watch our position grow. These dips at the bottom end of the range are perfect buying / adding opportunities.

 

Investment Lesson: Position Management

Last week we talked about position sizing, which is important if you want to ensure that you are not risking too much of your account on any one trade. Smaller position sizes allow you to take on more risk, as it prevents you from taking yourself out of the game too early and allows you to put on more positions, which should increase your odds of being profitable.

But what about managing the positions you do have? While for options trades you should size your positions to risk 100% of the capital invested, you don't have to take this 100% loss on each trade. Our strategy has been to actively manage these positions throughout their shelf life, and in doing so limit your small ass losses and maximize your big ass gains. We call it the SAL-BAW strategy for short. Let's take a look at our most recent BAC trade as an example.

 By buying at support on a trend line, we were able to enter a high-probability trade with the ability to kick out of it for a minimal loss should the stock indicate that it was headed lower.

By buying at support on a trend line, we were able to enter a high-probability trade with the ability to kick out of it for a minimal loss should the stock indicate that it was headed lower.

 

The Trade:

We initiated a position on BAC right as it touched the trendline at the bottom of its range. We anticipated a bounce off of this line, as it was also a point of major short-term resistance, and the stock has been trending up since last November. With all of these positives lining up at the same time, we took the trade with a short-term expiry so we could play the bounce to the top of the range.

The best aspect of this trade, however, was not necessarily just the potential for big gains, but more the ability to sell out of it quickly an ensure that we only lost a small percentage of the premium. As soon as the stock pushed under the trendline and resistance, it confirmed that it was going to move lower, and we were able to quickly sell out of it to ensure a small loss. While it rebounded slightly off of the lows, the premium decay would have ensured even deeper losses had we held on.

The lesson here is quite simple; take trades at support lines where you can quickly see potential breakdowns and manage your positions accordingly. While you shouldn't consistently be selling options after a day, there are many set ups where you can ensure a smaller-than-expected loss if the stock doesn't move the way you expect it to. This SAL will ensure you are able to take many more trades, and you can't win if you don't have horses in the race.

 

Happy Trading

- The Minotaur Team

Weekly Update (8/21/2017)

 

Short Term

We seem to be at a bit of a crossroads in the market. This week we saw another aggressive attempt at a shakeout, with a news-based selloff taking the market down 1.5% back to levels we hadn't seen since June. A lot of the set ups we had been eyeing all week were quickly destroyed in the aftermath following Charlottesville protests, and while the firing of Bannon should lead to a more business-based agenda in the White House, there are clearly some more tumultuous times ahead.

That being said, we're only slightly under our highs, and it's not like there's no opportunity in the market. Steel continues on its powerful uptrend, and materials continue to be a Minotaur favorite. While many gas companies we've traded in the past like COP, HAL, and CHK have taken a bit of a fall recently, we can't imagine these stocks will be trading at these levels in a year or two. 

At the end of the week, we initiated positions in SHAK, BAC, and SQ, all for three different reasons. SHAK is sitting right at the low end of its range, and should bounce here off of support. We're playing for the bounce, and should it fall lower, we'll be able to exit without a significant loss of premium.  BAC is a play on the trend line that the stock has adhered to recently, and a break lower from these levels will signal that this trade will not work, and we can salvage premium there as well. SQ is a textbook wedge set up, and a bounce in tech should send this stock back to previous highs. We have less of a leash on this position, and we sized it accordingly.

In times of market uncertainty, there is no reason to take trades unless you have an exit strategy, or size your positions appropriately to handle risk.  We'll talk more about this below.

 SHAK looks set up for another bounce here. If it trades in the range, we win, and if it breaks out of the range, we win big.

SHAK looks set up for another bounce here. If it trades in the range, we win, and if it breaks out of the range, we win big.

 

Investment Lesson: Position Sizing

One of the first lessons we like to instill in all premium members is the importance of sizing your positions effectively. Human tendency is to bet big on your "best ideas," because those are most likely to make you the most money. However, even your best idea is likely far from a sure thing, and you could stand to lose more than you should based on inefficient position sizing.

At Minotaur, we stress the importance of 1-2% of your entire account as the maximum you should put towards each option trade, and 5-10% as the maximum size for any common stock position. This not only encourages diversity in your account / trades, but also ensures that even a streak of losses will not blow up your entire account. You can't make any money if you run your account into bankruptcy, and by taking a more conservative position on aggressive options, you can stand to win big and lose small. 

 

The Trade:

You might think this goes without saying. No one goes all in on their first few hands, right? You'd be surprised at what people do when they get a hot tip or think an idea is too good to be true.

We've had a lot of people see the numbers we put up, and consider that to be a green light to put all of their money on the next idea. We trade a very aggressive, but informed style, and we are always managing our positions. When emotions get involved and your money is at stake, it is difficult to ensure that you make stoic decisions based on strategy, and not react based on how you are feeling or what you hope to accomplish.

It's always so interesting to me to hear people talk about how $100 worth of bitcoin bought 10 years ago would be worth millions today. I've seen the amount of anxiety that people get when that $100 option turns into $500. You don't know what your emotions will force you to do in any moment, so the best option is to take emotions out of the equation by sizing your positions small enough to where if you lose, you can still lay your head down at night comfortably.

 

Happy Trading

- The Minotaur Team

Weekly Update (8/14/2017)

 

Short Term

This week, we saw another "Trump Shakeout" as many of the market's weak hands sold off for almost 6 straight hours. We were patiently waiting for a bottom to form and were able to deploy some cash into stock positions.We continue to stay light on option positions as we wait for better opportunities to arise in our favorite names. 

We opened up positions in W, UEC, TWLO, and SOHU.

U.S. and Chinese technology companies continue to outperform the market as banks and consumer staples underperform. Techs are the clear crowd favorite, which creates both an opportunity for hopping on a trend and also a possible bull trap scenario with such a crowded trade. Many investors in these names aren't pros and are easily scared, as we witnessed last week.

We've written before about the benefits of "Buying into Blood" which is hard to do emotionally but even harder to do logistically when you don't have any cash on the sidelines. We'll talk about that in the next section.

 The NASDAQ shed weeks of gains in a matter of hours, as political tensions with North Korea shook the bull market.

The NASDAQ shed weeks of gains in a matter of hours, as political tensions with North Korea shook the bull market.

 

Investment Lesson: Cash Management

Managing your individual stock positions while ensuring that you have enough cash in the bank for new opportunities might be one of the toughest aspects of investing. This week, as we saw the market take a meaningful dip, we were very eager to jump into positions that we had been waiting to buy. While we managed to deploy our cash, some of our colleagues weren't able to "buy the dip" because they didn't have any cash (or margin) left to purchase shares. 

Over-investing in certain positions can happen to anyone. It's very easy to get excited about an opportunity that looks like sure thing, but it's very tough to manage the size of the position you take. Diversifying investments is important, but leaving room for new, lucrative trades that come across your desk is even more important. You don't want to be the straggler that can't invest because you've used up all of your cash resources.

 

The Trade:

Create a plan and stick to it. Write down your rules for what you will do to open a new position if you have no cash. Will you go on margin or will you sell other positions to make room? Which positions will you sell? 

Constantly audit yourself and determine the value of your current portfolio and when to cut losses in favor of something better.

If you were hoping for a stock to make a move and that move never happened, lighten yourself in that stock; don't just hope that you will eventually be right. This goes back to what we usually say about having an exit plan before you enter a position.

Humans are predisposed to not wanting to book a loss. It hurts our ego, plain and simple. If you are auditing your portfolio and find yourself "hoping" for a stock to rally back, cut your loss. There are always better places to put your capital rather than letting it sit in a losing position.

 

Happy Trading

- The Minotaur Team

Weekly Update (8/7)

 

Short Term

Every summer, there comes a time when the market doesn't do much, and there doesn't appear to be many favorable set ups presenting themselves. For much of this week, the market did just that, with light see-sawing action that didn't see many gains or losses either way. For an account heavily invested in options, this premium burn can be frustrating, but the end of the week saw some favorable moves that we think can really push us forward in the coming weeks.

We took some COST at the end of the week, as we believe that the run has only begun in that stock. The recent retest after a breakout is a textbook time to buy, so we took our swing. We also picked up some more UEC, as that stock has traded very favorably around this region. We plan to buy lower if it continues to drop, and uranium in general continues to set up beautifully for a multi-year run. We expect to be there when it starts.

China action also continues to be favorable, with BIDU continuing its monstrous run. We expect MOMO and SINA to follow suit, as they are both pushing for a breakout, and a positive earnings report from SINA could send the stock into a full-blown breakout. We'll be following these names very closely this week.

 COST looks fantastic here when you zoom out on the chart. Look at how nicely it's bounced off this trend line over the past several years. How can you not like what you see? 

COST looks fantastic here when you zoom out on the chart. Look at how nicely it's bounced off this trend line over the past several years. How can you not like what you see? 

 

Investment Lesson: Managing Fear

The market moves every single day. Stocks have roared higher for hundreds of years. A lot of investors are currently sitting with their cash on the sidelines, waiting for a pullback so they can enter in. With all of the discussions in the media, you'd think the market was going to crash tomorrow. The only thing is, the pundits have been calling for a crash for the past several years, and if you sold back in last November, you'd have missed out on an intense 20% rally.

The other issue with waiting for a pullback is that when it finally happens, many investors will be too afraid of the panicked selling to enter into the market. Think about how many times you've sold stocks after they've gotten crushed on an earnings report or received bad news. Imagine the entire market taking a 5% hit. You wouldn't want to touch a market like that with our trading account, let alone your own money.

An important part of being a successful investor is understanding yourself and investigating how this fear impacts your decision making process. Why wouldn't you see these dips as opportunities? If you look at the day the market dipped 2% this year, in the grander scheme of things, it would only appear as a small blip on the market's path higher, but millions of shares were sold that day due to fear. If the market starts to slip again, you'll see more panicked selling, and that needs to be the time that you buy.

 

The Trade:

Our advice is that you should never initiate a position on a stock you just learned about, no matter what. You need to study its movement, learn the range it trades in, and understand its momentum. You could never effectively jump into a new game without learning its unique set of rules and principles. At the time you initiate a position, everyone else that is playing in that particular stock has been playing longer than you have, and you stand to lose if you aren't prepared for the way it can move or don't understand the underlying fundamentals of the company.

Stalk your prey like a lion, and only initiate when you have a combination of the following: 

  1. The stock is sitting at support or on a trend line.
  2. The stock is trending upward, or you can see a clear sign of a reversal.
  3. The stock has multiple positive catalysts in its near-term future.
  4. The stock has strong fundamentals and a lot of volume underneath its current position.
  5. There are gaps or volume pockets that can potentially be filled.

If you begin to identify these characteristics in your positions and create strategies based off of them, you will no doubt become a more successful investor, and you will pick better individual stocks as a result.

 

Happy Trading

- The Minotaur Team

Weekly Update (7/31/2017)

 

Short Term

If you're beginning to get frustrated by the back and forth nature of the market this summer, you're not alone. Many of our members are expressing feelings of being fed up with this movement the past couple months. Options accounts are going from lows to highs back to lows, and it feels like volatility is the highest it's been during any summer in recent memory. This is also happening at the same time that the VIX (Volatility Index) is hitting all time lows. The reason for this is due to the decreased correlation between the major indices and individual stocks. There are huge moves being made in certain tickers, while the indices experience relatively little movement.

We saw the steel companies we've been touting (X, AKS, and CLF) report stellar numbers, and each stock we had recommended rose over 10% on the day they reported. Shortly after, AKS caught a downgrade, and every steel name, aside from X, plunged past their weekly low, giving up the entire gain and then some. With AKS and CLF sitting close to support, we expect a bounce in the near term.

We saw biotech rise quickly at the start of the week, and then take a sharp turn south. GBT is retesting the low end of its range for what feels like the tenth time, so we added a little more and expect this one to go soon.  

We continue to like China, which seems resilient to the volatility plaguing the market right now. With a bigger pullback, we like JD, BIDU, and SINA to continue to run higher. A little while back, we charted out a multi-year breakout for BIDU, which seemed to have happened this week after a stellar earnings report. We hope you're in it, though there might be one last retest from these levels.

 

Dealing with Volatility

For options traders, volatility can either be massively rewarding or devastating on an account. Your portfolio could be up 10% on one day, and down 10% the next.  Weeks worth of gains can be erased in a few sell-offs -- the famous phrase is "stocks take the stairs up, and the elevator down."  You need to be prepared for this kind of market action, because if you are not careful with your positions, you could suffer a lot of pain.

The entire trick with option trading is predicting where a stock price is going to be after a certain period of time. If you choose too short of a time period for your option, the stock move might not happen in time and you end up losing money. If you buy too much time on your option, you could be spending money that you don't need to be spending. In markets that have the type of swings that we are seeing, it's much better to buy longer-dated options to ensure that, even if the stock gets beat down, it will have time to rally back to your predicted price. This seems obvious, but it turns out that buying more time can just increase your losses if the stock never makes a move. 

Premium burn (also known as time decay or theta decay) happens when you expect a stock to move a certain amount in a given period of time, but it ends up moving too slowly or not at all. You can be right about the direction of the price movement, but wrong about the speed (volatility) of the move and still end up losing money from theta decay. We will talk about some ways to manage this volatility below. 

 

The Trade:

Picking your entry is more important during a volatile market than any other time. Stalk the entry you want, be patient, and execute your strategy with discipline. Knowing the range a stock is trading in is important, and chasing up a volatile stock can be dangerous when it plunges after a big gain.  

Because of this, we also stress going more conservative during these times, and focusing more on common stock positions and longer-dated options. Short-dated options can get crushed if you time your entry poorly, and unless you are dead-right on a position, it's easy to lose money trading this way. In markets like these, the risk of time decay is worth the protection that you have against volatile movements.

 

Long Term: FND

Floor and Decor is a specialty retailer for hard surface floors that has enormous potential for growth and is an industry that has little exposure to the retail beast that is Amazon. Last week, they reported record revenues and increased guidance for future earnings reports. The market responded with a selloff that provides a unique entry point for those interested in the stock.

FND has three major things going for it:

  • Fully verticalized supply chain for brand products
    • FND controls the entire manufacturing, sales, and installation process for their own products, which gives them much wider margins and greater earnings potential than competitors like Home Depot.
  • Growth potential 
    • FND has only 72 stores operating in 17 states currently, with plans to expand across the US. For reference, Home Depot has around 2,200 stores in North America
  • No (current) competition with Amazon
    • FND’s main customers are contractors and renovators; people who need to evaluate their materials in person before making a purchase. For more novice customers, FND provides the in-store expertise and in-home installation that Amazon won’t be able to match for years to come.

 

The trade:

Buy and hold this one for 5+ years, pretty simple.

Side Note: This ticker is actually a fantastic play for a pairs trade like the one we mentioned last week. If you want to hold short positions against underperforming retailers, FND would be a great long-term pick to even out that trade. 

 

Happy Trading

- The Minotaur Team

Weekly Update (7/24/2017)

Last week we were hit by some unexpected burrito news, which hurt our small weekly CMG position. Thankfully, we were able to book big wins in YY (+507%), CLF (+110%), GILD (+100%), and UEC (+21% common stock) to make up for that.

Not much to say about the market here besides the usual; we're in trend mode. Let's dive right in.

 Despite numerous dips, the market has continued an upward trajectory each time it has dropped. We see this continuing for the rest of the year.

Despite numerous dips, the market has continued an upward trajectory each time it has dropped. We see this continuing for the rest of the year.

 

Short Term

This week, we expect a lot of the sectors that broke out last week to continue their run. In materials, X finally broke out of the range it had been trading in the past couple weeks, and we like it, AKS, and FCX most in this industry.  With earnings coming up, we don't plan on adding to our positions here, but we will hold our options through the report.

Biotech also continues to be a big winner for us, with massive wins in ONCE, GILD, and more.  Although the threat of more healthcare related news could throw these stocks off their recent gains, we continue to love this sector. GBT broke out on Friday, and the gains there could be huge if the stock can keep its run going. Our platinum members got in before the breakout. 

We're really watching earnings this week and seeing how stocks react. We want to buy some weakness in strong names, and we think this earnings season will definitely present us with some fantastic long-term options. We're looking at AMD, CRM, and DATA, and might initiate some positions this week. We also are thinking about possibly jumping back into DDD for the first time since our last successful trade with that company.

 

Strategy: Buying with the Trend

When you trade stocks, your goal isn't just to be right about a certain company; Your goal is to make money, simple as that. When the goal is to make money, you should be doing everything in your power to maximize the success of each trade, and one of the best ways to do that is to trade within the trend.  

It's faster and easier to get somewhere going downhill than it is going uphill because you have momentum behind you instead of resistance. Think of stocks the same way. In general, if a stock is headed up, it's far more likely to continue to doing so than suddenly reverse downward. If a stock is getting pounded, it's unlikely that that trend will reverse until there is some sort of news or earnings report that triggers a reversal.  

Because of this momentum, you should seek to get into favorable long-term positions based on momentum. For example, think of the momentum behind the large tech stocks the past 5 years. While there were certainly periods where they didn't go up, they generally have been roaring steadily higher throughout this time. It's a lot easier to make money following trends than seeking to fight them; imagine the millions of dollars that have been lost from people trying to short TSLA.

Don't confuse trend-following with buying elevated positions, however. Chasing a FANG (Facebook, Amazon, Netflix, or Google) stock after a big run is recipe for disaster. Stocks are like athletes; if they sprint on a certain day, they typically need a little time to rest before continuing their run. You should almost never initiate a position when the stock is up 3-4% in a day. We will teach you more how to trade using this strategy below.

 

The Trade:

What we're looking at here is the opportunity to buy stocks with strong long-term momentum in times of weakness. The commonly used phrase is "buy the dip."  If you look at the market as a whole, it has steadily been going up since the beginning of time. Sure, there were months, even years, where stocks declined, but if you held throughout it all you'd see that you are better off today than you were when you started. The market making all-time highs certainly generates a lot of fear that it will come back down, but how many "all-time highs" have been recorded throughout history, and continue to do so?

A large 2-5% pullback (if it does occur like many are predicting) will be the time to buy your favorite stocks on sale. Buying stocks during market corrections is one of the hardest things to do from an emotional standpoint, but usually pays off the most. 

Happy Trading

- The Minotaur Team

Weekly Update (7/17/2017)

Moment of Truth

 The NASDAQ 100 rallied all week and broke out of the range that it's been forming for the last few months.

The NASDAQ 100 rallied all week and broke out of the range that it's been forming for the last few months.

 

The market made a pretty decisive move this week, rallying almost every day, and finally breaking through a recently formed range. If this breakout holds, we could see a return to the previous NASDAQ upward trend and hit new all time highs. 

This market continues to be impervious to political turmoil. As Donald Trump Jr. tweeted out possibly incriminating emails, markets dipped around half a percent before roaring back upward. Obviously something much larger politically could rock these markets, but for now they're doing their own thing. The fact of the matter is that unless hard evidence comes out against the current administration, the market will continue to hold its strength.

This week, we booked profits in ATVI, JD, and an epic YY trade. Members really got a chance to see the potential gains they could lock in with us.  

Like we mentioned last week, earnings season is upon us. Please be aware of any earnings on companies that you have investments with. If you have been waiting to take some profits, consider that a large move in either direction could be in your future and plan accordingly. Earnings moves can also break trends in both the market and specific stocks, allowing for fantastic entry points into some of your favorite tickers.

 

Short Term

We picked up some short-term CMG at the end of the day on Friday. The stock is sitting at support at the bottom of the range it's been trading in, and we think that we can get a nice rally this week above $400. We don't love the stock long-term, but you show us a set up like that, it's worth a look. Hopefully you'll be able to buy a burrito or two after the closing bell.

Oil has continued its rally back. We hate chasing, but a year from now, we can't imagine stocks like CHK, OII, or SN will be trading at the same levels they are now. The catalysts are there, the companies are performing well even in this choppy, volatile oil market, and the stocks are trading at relatively cheap valuations.  

The same could be said about the steel stocks. We're still sitting on healthy positions in X and AKS, and if they can hold onto the gains they made this week, we're in for quite a ride higher. We're eyeing this sector very closely.

In healthcare, we like our positions in XON and GILD a lot for this week. Biotech really lagged behind in the recent rally, and the set ups look promising for both these companies.  XON is a short-term hold, but we like GILD long-term.

We almost hate to say it, but even some select retail names look decent for short term pops. We'll get more into our strategy going into something like this below.

 X is at the top of its range here, and if it can break and hold above $24, we see a move to $28 as the next stop.

X is at the top of its range here, and if it can break and hold above $24, we see a move to $28 as the next stop.

Strategy: Buying When They Hate

There's always a sector that is garnering media attention for being on death's doorstep. Retail is the most recent victim, with headlines about store closures and the burgeoning power of Amazon looming large over a lot of these companies.

Don't get us wrong, retail underperforms in a general sense. The brick and mortar is feeling real, crushing pain from the growth of internet sales. A lot of companies that have relied on this business model are beginning to see their growth slow, and are forced to change their strategies or face extinction.

But is this really a case of bad apples across the board, or are we only cherrypicking the worst scenarios and trading based off of them? GES recently saw an earnings beat that sent the stock roaring, and NKE has been on an absolute tear lately.

Usually, when the entire market beats up on a sector, it is the signal to go in and buy the best companies in that sector. All of the negativity is built into the stock price, and all of the weak hands have exited their positions, and both of these instances can carve out a nice, strong bottom that can keep the share price steady.  

The problem comes with timing the bottom. There have been numerous failed rallies in retail because there fails to be a cohesive narrative tying these companies together under a winning story. However, the companies that are adapting their business strategies to accommodate an online marketplace are the ones you want to keep an eye on. The set ups couldn't be prettier, and the companies with the most fundamental strength will reward those daring enough to invest in them.  

The negativity is baked in and the downside risk is minimal. Yes, there will still be a plethora of companies going out of business and the sector won't stop sucking for a long time, but the pop, when it happens, will be an incredible opportunity to generate significant profits.

The Trade:

What we're looking at here is the opportunity for some strong pairs trades. Pairs trading means going long one stock and short another stock in the same sector. For example, if you think that Costco is going to outperform Sprouts in the near term, then you could buy calls on COST and puts on SFM. Pairs trading allows you to be market-neutral but still bet on a sector bounce. It's a little more fundamental in analysis than what we normally do, but if you feel strongly about a certain retail company, this would be the way to go about trading it.

Happy Trading

- The Minotaur Team

Weekly Update (7/10/2017)

The Sentiment Rollercoaster

 The NASDAQ took this week to shake out any lose hands and to draw in the "dumb" money only to lose it the next day.

The NASDAQ took this week to shake out any lose hands and to draw in the "dumb" money only to lose it the next day.

The uncertainty within the markets prevailed last week, as every day seemed to bring a new .5-1% swing in the major indices. Big down days were followed by big up days, and vice versa. 

This kind of movement is typical of uncertain markets and markets that are actively trying to shake out the "dumber" money usually associated with retail investors. Investors who "buy the dip" end of up getting rewarded, only to lose it all the next day. This is meant to frustrate traders to the point of capitulation. Capitulation by retail investors usually means that a rally is just around the corner. The idea is that the moment investors throw their hands up in the air saying "I can't trade in this market, I'm out" is the exact moment that the market decides to take off without them. They are then forced to buy back into the market at higher prices. 

Even some of our more seasoned members felt the need to sell it all and start fresh towards the end of last week. Don't feel alone in this emotion; this type of market action is exhausting

As an aside, we're continuing to notice a strong dissociation between the markets and any political news that's been rolling in. It seems that these daily swings in the indices are fueled purely on internal market conditions rather than external factors. 

Last week, we took some short-term losses being a little too early to the AMZN trade but made up for it by booking some solid gains in other positions. We sold the second half of our BAC calls and the AA calls that we had from a few weeks back, locking in 400% and 72% gains respectively.  

We initiated positions in ATVI and SBUX, both of which have strong upside potential with very limited downside. Our ATVI calls that we bought on Thursday are up 50% already on a multi-month expiry. As always, our Platinum members get trade alerts the moment we initiate or close out these positions.

Short Term

Last week, we cautioned against entering positions unless some strong bull trends surfaced. This strategy ended up paying off, as trading last week was about as ugly as it gets. Sometimes it's important to be reminded that cash is a position.

We want to reiterate the importance of patience in a market that churns and burns investors who hop in too quickly. The NASDAQ held some pretty important technical positions last week which is bullish in general. Were it to break these levels in the coming weeks, we would start looking for some insurance in the form of puts.  Either way, we want you to watch where this one is headed before diving into a position.

Q2 is over and earnings will be rolling in from some important players in this market. Events like earnings can be catalysts that turn uncertain markets into certain ones, in either direction.

We tend to not play earnings unless we find irresistible setups that seem to have nothing but upside. Instead, we'll watch how the market reacts to this round of earnings. The bar is set high, and earnings beats could sent us up to new all time highs. 

Some notable earnings to watch would be the big banks, who report Friday morning (JPM, C, WFC). Banks have been breaking out recently and earnings could just add more fuel to this fire. It's also worth noting that if banks show signs of weakness, they could easily bring down other shaky sectors like tech with them.  We wouldn't buy here, but these earnings reports will tell us quickly which way we're headed.

Oil and materials also held technically key areas, and we expect to see them make some headway towards their highs from last week.  We picked up CHK common, just to ensure that when this move higher occurs, we have exposure to it.  We also wouldn't mind adding a little more X here at the lower end of its range. There will probably be room to make some quick trades in these areas if you're ready this morning.  

 CHK held its low from last week, and we expect a bounce higher in the short term here.

CHK held its low from last week, and we expect a bounce higher in the short term here.

Happy Trading

- The Minotaur Team

Weekly Update (7/3/2017)

Summer Slowdown?

The market loves to surprise you.

Just when you think the market is about to grind to a halt for the summer, it wakes you up with back to back 1% moves, and the single-highest increase in volatility in the entire month of June. Volatility correlates with fear in the marketplace, and a lot of pundits are saying that a 5% correction is around the corner. Caution is needed when the volatility begins to spike during typically slow months. There are a lot of weak hands out there, and fear is never good when it comes to the market.

We love our recent common stock position in UEC, which is up over 10% since we began trading it. We expect one more push higher before it begins heading back towards the middle of the range. If it fails to break out, we will exit our position with an eye for re-initiation a bit lower.

Another position we really love this week is BAC. After last week's stress test, there aren't many headwinds for this stock. If we can stay above $24 this week, we're extremely bullish. We've got a tight leash, however, as a move under $24 might signal a return to $23 or lower.  

We picked up AMZN calls right at the close, as we're predicting big things during this week's trading, however short it might be. Some big buying back into the tech space could get this one right back over $1,000 again soon enough. 

We also grabbed some longer term MU calls on Friday that give us some reasonable exposure to semiconductors should they continue to rally into the fall. With stocks like MU, sometimes you just have to buy the quick dip if you want a chance at the large returns it's been experiencing. 

 BAC broke above it's trading range, and if it can stay above this level and turn that resistance into support, we like where this one is headed.

BAC broke above it's trading range, and if it can stay above this level and turn that resistance into support, we like where this one is headed.

Short Term

We really want to advise on caution here; keep your cards close to your chest. Be prepared to initiate positions, but don't feel forced to jump in. Last week's volatility was violent, and being on the wrong side of one of those 2% moves can be damaging to your portfolio. Don't get discouraged if you don't find any set ups you love this week. We'll show you what we're looking at below.

Materials had a huge run this past week, and we want to see where this one goes from here. We're holding large positions, and likely won't add to steel, but we really like the way MOS and CF are setting up, and think those might go next in pursuit of other materials.  

Tech took a pounding this past week, with the Nasdaq dropping 2% on two separate days. A lot of these stocks are sitting at support, so if you see it hold the line on Monday, it might be time to take a quick ride. Some of the names we like are AAPL, YY, and QCOM.

Longer term positions could be initiated here for TRIP, JNPR, and PYPL as well. These positions might be slower at first, but could pay off years down the road.

This week we are generally keeping an eye on the "market darling" stocks that usually garner a lot of attention. If these stocks manage to hold their support levels, then we could have a ripper of a rally on our hands in the near future.

Happy Trading

- The Minotaur Team

Weekly Update (6/26/2017)

Update: We Still Got It

Wow.  What a week.

We've been saying it for weeks now.  Materials and biotechs.  It got to the point where our hands were on autopilot, pounding the table endlessly until it was drilled into everyone's heads.  We hope you boarded the ship before takeoff, because this week we saw one of the best moves for biotech in months.  Friday could very well have marked a steel breakout, and if you took trades in GILD, CLF, or MYGN, you should be happy. 

We initiated short-term positions in BOFI and started a small, long term position in TGT, as discussed in last week's email.  We also closed some of the trades that we had going, such as GOOS and BAC, because we think the majority of the move here is done.  We're excited for the movement this week, and hope that it gets off to a start that rivals how we ended last week.

 GILD finally broke out this week, and what a beautiful sight that was.  The best part is, the long-term prospects of this stock look very enticing. This move might just be getting started.

GILD finally broke out this week, and what a beautiful sight that was.  The best part is, the long-term prospects of this stock look very enticing. This move might just be getting started.

Short Term

We've got money waiting on the sidelines, but we plan on spending a lot of the beginning of this week watching and reacting based on how the market moves.  We saw a potential breakout in X, AKS, and CLF on Friday, and a continued move higher could signal a longer-term uptrend in the stock.  If it rejects this move higher, we could be headed back to sub-$20 for X, which as we've stated plenty, is a great place to purchase this stock.  We plan to add if it returns to this level it's been bouncing off of for awhile now.

Biotech is still one of our main focal points here, and we want to buy any weakness in the sector.  This group is starting to awaken, and any stocks in the industry that haven't yet made their move are big targets for us.  Keep an eye on CELG, OPK, and ONCE.

We also want to advise caution against jumping into an oil position without doing proper research.  The entire oil industry hangs in the balance, and our eyes are going to be glued to our screens all week to see which way this one goes.  If a bottom is established, look to our personal favorites COP and CHK.  There might be more pain to come for these guys, though, so proceed with caution, and set your stop losses.

Strategy

 

When To Exit a Position: MYGN Case Study

In the past few weeks, we've mentioned a trade in which the stock MYGN would make a move from $20 to $30 through a volume pocket that we had identified. The stock is more than halfway through the move; we bought out of the money calls that are up more than 1500% to date, and closed a shorter-term position earlier this week for 450%+. We ended up exiting one of the positions earlier than we thought due to specific, and frankly worrisome stock price movement.

Here are two charts that demonstrate the indicators for when to exit a position:

 Steady growth slowed after a large price gap formed, which is usually followed by a consolidation period. 

Steady growth slowed after a large price gap formed, which is usually followed by a consolidation period. 

 A zoomed in look at the short-term top in MYGN

A zoomed in look at the short-term top in MYGN

The most obvious evidence for this short-term top came from three distinct movements toward the $26.90 price that were clearly rejected. Two of the three movements are closely bundled in the second peak and are separated by an hour or two. The top is shown by a solid red line in either graph.

While we originally wanted a movement to $30, this price action was hard to ignore. When a stock rejects multiple moves to a certain price, it means there is a strong seller located at that position that is preventing further upward movement. All three of these moves were within cents of one another, indicating a large limit sell order at that price by a significant shareholder.

While we did sell one position in the ticker to lock in profit, we held our other because we believe a move to the $28-$30 range is still possible. In fact, the stock behavior after these rejected moves is very healthy considering the drastic price change in the last few weeks. A much scarier scenario would have been a rejection of the $26.90 price followed by a steep decline and loss of previous gains. This "bouncy" consolidation is expected and allows the stock to accept the current price before beginning another march up to (hopefully) our price target.

TL;DR:

While you can try to chart out stock movements, you need to be flexible and adjust your plan based on how the market acts. Don't be stubborn about making as much profit as possible, sometimes it's better to be safe than sorry.

Happy Trading

- The Minotaur Team

Weekly Update (6/19/2017)

Uncertainty

This is what an uncertain market looks like.


This week we witnessed every end of the sentiment spectrum from market opens to market closes. Large gap downs on some mornings led to dip buys, only to be followed by a slow grind down. Gaps up were sold off aggressively, and multi-day swing trading proved to be more frustrating than ever. Some of our favorite weekly picks like BIDU and NFLX fell below important support levels, and most of the juicy setups that we've been seeing for the past few months have vanished in the last two weeks. 

We played it light, entering a few unfruitful short-term positions, but putting on longer term plays that could be huge wins if this market continues its rotation into biotech and materials. We’ve got plenty of cash on the books and are looking to deploy more capital as this market becomes more certain in the direction it wants to head. 

Our two main biotechs, MYGN and ALXN continue to outperform the market, with each stock up around 9% last week. The yolo calls that we bought in MYGN (Jul 21 $25) are up more than 350% and aren’t showing much sign of stopping on their way to our 50x return dream goal. ALXN does seem to be coming down to fill the gap it created last week, but our $130 price target stands for the next few months.
 

Tl;Dr 

This market needs to get certain. That might mean either more short term drops or some consolidation at these levels. The S&P hasn’t seen a 5% correction in over 150 days, the third longest streak since 2009. While this doesn’t really mean anything, it puts things into perspective about the insane bull run that the market has had and that a pause at these levels wouldn't be out of the question. We’re still confident in our long term investments, but expect some short term pain either in sideways or downward movement. 

 

Short Term

We’re not eager on throwing money towards the market right now, but we’re getting our shopping list ready if more blood comes.

Amazon announced that it was buying Whole Foods on Friday, which sent many retailers into a nosedive. We really like WMT and TGT both fundamentally and technically and will be looking to initiate possibly a multi-month position in either or both of these two.

Banks continue to be market outperformers but, in a market like this, it's hard to get really excited unless they return to the previous upward trend. We'll keep you posted on this.

 

Long Term

General Electric (GE)


Your father probably invested in it, and his father before him probably did the same.  This is one of those blue chip stocks that people have held onto for 30 years through the peaks and valleys of the stock price.

GE has been trading at a range around $30 for quite some time now, and recently dipped as low as $27.36 last month.  A recent shift in the CEO sent the stock back into $29 this week against a tough market environment.  We love where this stock is positioned, even after the recent monster move, and we think the technical set up and the fundamentals supporting the company make this an excellent long-term stock for your portfolio.

 GE has been trading in this range for months and is sitting right at the middle at $29 today.  

GE has been trading in this range for months and is sitting right at the middle at $29 today.  

The Set Up


Ideally, you want to buy a stock at the lower end of its range at a level of support, because this maximizes your potential gain while limiting downside loss.  However, the more conservative among you who are less inclined to sit on a losing trade until it begins to work for you might want some confirmation that the stock is headed up before jumping into a position.

GE is in this exact sweet spot.  It is still on the lower end of the range, but it has had a big move up towards the upper end of the range, which demonstrates positive momentum in the stock. Even if GE stays within this range, you have the opportunity to capture $3 / share when it bounces off of $32.  We think that with the new CEO, and the recent spinoffs, sales and deals coming down the pipeline, this stock is sure to beat $32 and outperform the market over the next several years.  A negative earnings report could send it lower, but we are very confident in this one long-term.

Happy Trading,

- The Minotaur Team

Weekly Update (6/12/2017)

This week brought our Minotaur portfolio to all-time highs, despite one of the worst weeks of 2017 from the NASDAQ.

We booked profits in BLUE (+616%), AMD (200%), YY (350%),  and BZUN (+120%). We are also up significantly in other positions, such as our BAC and ELF July calls. Our members with access to trade alerts hear about these positions first.

Let's dive right in.

"Gotta Get Down on Friday"

 The NASDAQ experienced a major sell-off on Friday, leading to concerns about another 2000-ish tech bubble.

The NASDAQ experienced a major sell-off on Friday, leading to concerns about another 2000-ish tech bubble.

After a flat week for the markets, the NASDAQ decided to shake things up Friday afternoon with the largest selloff of 2017 (so far). Tech darlings like AAPL, TSLA, AMZN, and NVDA took the brunt of the selling, dropping anywhere from 3-8%. Our portfolio had very minimal exposure to tech at the time, and more exposure to financials, biotech, and energy, which were rallying throughout this tech drop.

Let's examine why selloffs like these happen: Many people say that equities "take the stairs up, and the elevator down," meaning that they drop much faster than they rise. The NASDAQ, for example, lost more than 2 weeks of returns in a single day on Friday. When stocks like AMZN and NVDA experience such large price increases like in the last few weeks, they create a positive feedback loop of investors over-crowding into the stock because it is heading up, which makes it rise even more. There is a stark difference between investors that buy a stock because they have valued the company at that price, and investors that buy a stock because it is going up; the latter are much more susceptible to fear and emotion and sell the stock at any negative news.

When one investor starts selling, all of the weaker investors think that the free-ride is over and sell as well, causing a domino effect, or "shakeout" of weak investors in a short period of time. At a certain point, the other type of investors (the ones that buy stock based on valuation) jump in and buy at the price they have specified, causing the stock to stop falling. 

The problem is that it's impossible to predict the selloffs (tops) and when the stronger investors will step in (bottoms). For that reason, we try to put ourselves in positions that have low downside, and strong upside potential.

We mentioned in the last few weeks a rotation from the tech FANG stocks (FB, AMZN, NFLX, GOOGL) into other sectors, and this seems to be an indicator of that. For this reason, we had positioned ourselves towards much shorter term positions in these stocks, and longer, multi-month positions in "Trump-trade" names. This looks like a rotation, rather than money actually leaving the markets, because of how many other sectors were up during this dip; The financial sector was up 3.54% for the week, and the energy sector was up 2.36%.

 

Short Term

We're going to observe any follow-through of this downside move on Friday and possibly initiate some tech positions if things are able to level out. What we want to avoid here is speed in either direction, which is indicative of a top. It's possible that we engage in puts on the over-crowded tech names (NVDA and SQ look good) if this downward trend continues. 

One metric that caught our eye was the amount of call-buying activity on NVDA during the selloff, which is a clear indicator of a short-term top. If you remember from previous emails, put-buying on a dip is a bullish indicator, while call buying is a bad sign.

Do I need to say it again? We love financials here

We also have positions in biotechs (MYGN, ALXN) and are watching some others; additionally looking to initiate positions in BIDU, CMG, X which have decent setups.

 

Long Term

Semiconductors:


The semiconductors took a significant hit on Friday, with some dropping over 4% in a single day of trading.  While the rotation out of tech into other sectors is sure to cause some short-term pain in the sector, this sell-off says nothing about the specific companies that are being hit.  

We think that there is a buying opportunity here once the dust settles and the industry sees some consolidation in pricing.  With smart cities and smart phones growing at an exponential rate, these companies are sure to keep putting out good numbers, and the buyers will be there to send them higher.

For those of you who let fundamentals guide your investments, the sector is trading at 16x forward earnings, which is lower than the 17x the S&P 500 is trading at.  Consider how many people you know that have a smart home or utilize Alexa.  That number is expected to grow astronomically over the next 5 years, and you'll want to have exposure to that growth. We like CY, SWKS, and AVGO on a deeper pullback.  

 CY is gearing up for a move here, one way or another.

CY is gearing up for a move here, one way or another.

 

Materials / Agriculture:


We're almost tired of saying it, but if you don't have any exposure to steel right now, you might be missing one of the last opportunities to buy at these levels. There is going to be a time where you'll look back on how X sat oscillating between $20 and $22 for weeks.

Steel's not the only party we're looking to jump in on.  We really like MOS, CF, and other farm-related companies for a long-term turnaround after months of pain.  We think this is the sector that large funds are rotating into, and we like the fundamentals of the sector enough to toss our hat in the ring.  This is a "close-your-eyes" and wake up in 6-8 months kind of trade.

 MOS is likely set to retest this breakout, at which point it could start its upward trend.

MOS is likely set to retest this breakout, at which point it could start its upward trend.

Happy Trading,

- The Minotaur Team

Weekly Update (6/5/2017)

Memorial Week Surprise

The week started out with a bleak, slow grind downward in all the indices. This is pretty typical during the week of Memorial Day, as many market participants are out of the office and not deploying capital. During the dip, we noticed spikes in put option buying (people buying insurance for their portfolio), which is a key indicator that the market has more room to run up. Market tops tend to happen when investors get over-eager to buy these dips, not buy insurance; put-buying is actually an indicator of a market bottom. On Wednesday, all the big players came back from vacation just in time to send us to new highs.

This market action is in line with what we have been saying about the market moving higher, despite record outflows of funds. All the major economic news outlets are telling investors to move money from the U.S. to Europe and emerging markets when all the real action is happening here in the homeland. 

Enjoy the ride for now, but be wary of when this institutional money comes flowing back into the market with a serious case of FOMO. We'll keep you posted when we see any important metrics spike.

It's also worth noting how recent news regarding the Trump administration and various terror threats around the world have failed to shake up market sentiment significantly. Don't let click-baity media companies steal your focus from the data.

Short Term

With current market conditions, our focus is to identify trending stocks, and jump on when there is a quick dip or pause in the trend. These kind of bull markets have a hard time stopping for anyone, so we're here to help guide you through the noise.

What to Watch: 


In the last week, we've initiated some short term trades in CMG, AAPL, BZUN, GPRO, AMD, and ELF. 

 We picked up AAPL during this breakout and see potential for it to trade up to new highs from here.

We picked up AAPL during this breakout and see potential for it to trade up to new highs from here.

 CMG showing signs of a potential breakout in the next week.

CMG showing signs of a potential breakout in the next week.

Long Term

Energy:


We've talked about this before, but it's worth reiterating. Every energy chart that we look at is undeniable: oil as a long term investment is a win right now.

We like CHK as a play, but you can't go wrong buying an index like XLE.

 CHK is trading at the bottom of a range in a huge consolidation pattern over the last year.

CHK is trading at the bottom of a range in a huge consolidation pattern over the last year.

Industrials:


Industrials continue to coil up and get more and more appetizing every week. Commodities like copper and steel are close to bottoming; we see very little downside and possibly explosive upside in this sector.

Additionally, any new import taxes or trade embargoes imposed by the Trump administration could help this sector reach new highs.

Some of the classics here are AKS, X, FCX, and CLF.

 FCX is sitting at support levels near a multi-year low. Hard to not add this to your portfolio for the long term.

FCX is sitting at support levels near a multi-year low. Hard to not add this to your portfolio for the long term.

Happy Trading,

- The Minotaur Team

Weekly Update (5/30/2017)

Here Come Summer

The market continued its march back to previous highs this week, all while experiencing a continued outflow of money from mutual and hedge funds. In other words, hedge funds are beginning to pull all of their money out of the market, raise cash, and leave stocks behind. You might be wondering why this could be viewed as a good thing; if hedge funds are pulling their money out, shouldn't you?

The fact of the matter is, the market doesn't have any reason to slow down, nor is it showing any signs of doing so. The economy is strong, with bullish housing numbers and employment levels.  The Fed is noting real, organic growth in the economy, and the numbers being reported each quarter don't lie - companies are improving.  

Even more importantly, all of this selling that the bigger institutions are executing doesn't seem to be taking the market any lower.  When it comes time for the supposed drawdown, who's left to sell?  There will be much less money invested, and therefore any drawdown will be much less severe. This money will have to, sooner or later, reenter the market. When it does, it should send the indexes up to new highs.

We're still prepared for a small short-term correction, as the one we saw two weeks ago is usually followed by a similar, smaller dip.  We are prepared to buy into more weakness here, as always, but with the tortoise-like summer market movement approaching, we're seeking to add more long-term options and don't want to initiate too many new positions.

Takeaway: Everyone wants the market to go lower, but it doesn't seem to want to. Usually when everyone is screaming "Top!" it means that there isn't one coming in the near term. Market tops happen when people are throwing their money at the market, not taking their money out of it.


This Week

Market Sentiment: 

As we predicted last week, GOOGL and AMZN rallied to new highs, pushing towards the $1,000 mark and lifting the other FANG stocks with them.

We expect this to be the week that GOOGL and AMZN break the $1,000 mark together and expect the rest of the FANG group to rally alongside their ascension; though we don't anticipate much of a rise from the group over the duration of the summer. You should begin to look at sectors that have been beat up over the last several months and are lagging behind the rest of the market, as those are where the most lucrative opportunities lie.

Energy:

We are coming into very volatile times in energy, with stocks bouncing up and down based on the shaky price of oil.  While long-term we are still believers in this group, we want you to be careful on picking an entry point here.

Watchlist:

Financials are going to make this list a lot this summer.  The setups are too nice, and the fundamentals backing the large banks is too good to pass up.  We like BAC and GS most, but have our eyes on MS, which is more volatile, but potentially more rewarding.

BOFI is also an interesting financials play, with about 40% of the shares sold short. If the sector rallies, we could see panic buying in this stock as shorts race to cover their positions. 

Industrials have been coiling up for awhile now, and can't seem to break the overhead resistance.  We don't see them going much lower, especially given the slow summer months.  If there's another dip in the share prices, we're looking to add to CLF.


Long Term: We'll Try Anything ONCE

Spark Therapeutics Inc (ONCE) is a biotech company involved with gene therapy, and it's interesting to us on both a fundamental and technical level. Check out the chart below, and try to refrain from shamelessly salivating.

 ONCE bounced nicely off of the lower end of its range, and has been consolidating in this wedge pattern since early 2016. 

ONCE bounced nicely off of the lower end of its range, and has been consolidating in this wedge pattern since early 2016. 

Not only is ONCE in a great spot for a move higher on a technical level, but they recently completed their FDA application for a gene therapy candidate to repair vision loss. If approved, this company would be responsible for the first gene therapy in the United States for a genetic disease. 

As with all biotechs, this is a riskier investment; any FDA-related news could swing the share price up or down.  That being said, there are clear catalysts in the near future, and as this is trading near the bottom of its range, ONCE is poised to perform well over the next several months.

If you want to trade how we do and when we do, we are now offering text alerts to all of our Platinum Members.  

Happy Trading

- The Minotaur Team

Weekly Update (5/15/2017)

Hey Team,

Every Monday, we analyze trades from the previous week, go over some setups for next week, and provide guidance on long-term investments.

We had a record-breaking week, folks, booking 1780% gains in weekly BIDU calls and many more wins, all while the S&P dropped 0.21% (lol). Job well done.

Let's dive right in.


DDDeep In The Money

We really hope some you jumped in on this trade when we mentioned it on Monday. As you can see, DDD didn't have a down day all week and melted up 29% in 5 days....epic. 

The trend we continued this week was buying into weakness.  BITA and YY pulled the same move as DDD, dropping like a bag of rocks after reporting earnings. Instead of staying down, all three companies bounced sharply off the session lows, and the rally that followed each of them put them past their previous highs from the day before.

These are trending stocks with plenty of eyes on them waiting to “buy the dip.”  Buyers believe that over time the stock will end up higher than where it drops to, so any short-term negative news falls by the wayside. We see clear skies to $22 for DDD, but we are prepared to trim our position if there’s any profit taking.  We’re sitting at over 500% in options gains since we recommended last week, and we love where this is headed.

Takeaway: Buy the dip -- don't purchase your watchlist stocks at recent hights.  Wait for short-term disappointment to cause a steep sell-off, and grab the stocks on your watchlist during the subsequent fire sale.


This Week

MARKET SENTIMENT - THE FANG GROUP:

We grabbed FB and GOOGL weekly options going into the close on Friday.  We played the NFLX and AMZN rally last week (+250% returns), and are waiting on FB and GOOGL to play catchup.

 FB showing healthy consolidation at these levels, possibly prepping for a gap higher.

FB showing healthy consolidation at these levels, possibly prepping for a gap higher.

As we’ve said many times before, the FANG group loves to trade in pairs.  There’s a lot of coverage lately on which stock is going to reach $1,000 first, Amazon or Google, and we see Google taking the lead back away this week.  We bought weekly call options on Friday should the market rip this morning, but we are prepared to average down our position and buy into any weakness here. 

 

WATCHLIST:

Last week, we mentioned oil (USO), materials, and biotech as trades that we were eyeing. USO managed to rally 3% and pique our interests, while materials continued to search for a bottom (still considering a trade here). EDIT stood out to us the most out of our biotech watchlist, running up 3.8% last week.

 

CYBR:

Following the trend in tech, we are looking at CyberArk (CYBR) the most this week.  The recent global cyber-attack has thrown cyber-security to the forefront of the media’s attention.  Dollars are flowing into the sector, and cyber-security will increasingly become a point of focus as retail companies move away from brick-and-mortar and more towards e-commerce.

The stock experienced a 12.4% decline on Friday after an earnings beat, and the stock is nearing a strong support level.  With a trade like this, you have a trend behind you supporting the upside, and the downside is pretty suppressed.  Everyone loves a good comeback story. 

Takeaway: Last week was one of our best weeks to date, with our BIDU calls gaining more than 1780%, DDD screaming higher, and BITA offering us a generous dip-buying opportunity. We're looking eagerly toward the future, but will pick up these new positions on our own terms, and no earlier. Our Platinum Members hear about our trades first, so if you are at all worried about missing a great buy, we highly recommend putting yourself on the waitlist.

 

Happy Trading

- The Minotaur Team

3D Up-DDD-ate

A look at the chart says it all.  Since recommending DDD during our weekly update on Sunday, the stock is up more than 23%.  For those keeping score, that's 13% higher than the annual return of the S&P 500.

We had originally set a price target for the stock at around $18, because that is where we saw there had been previous resistance.  However, the stock hit our price target so quickly, we decided to re-evaluate at that position.  The stock has barely paused in its ascent higher, and it appears this growth can continue.  We have placed a new target at $22, and plan to hold into another move higher, with the ability to lock in a monstrous win should the growth slow.  There is a risk of a small pullback here, but we are willing to take that chance in order to let this winner continue to win.

LET YOUR WINNERS WIN 

When you take a position and it works immediately, it is difficult to refrain from selling the gain.  Most people anticipate that their wins are temporary, and don't trust themselves to let the trade work over time.  Selling too early can prevent you from realizing big gains, and substantially limit your upside.

Think of it like this.  A baseball player that only steps up to the plate to try and hit singles is going to have a much harder time scoring than the guy who swings for the fences.  Stocks are the same way.  If you let your winners run, and limit your downside with positions that don't go your way, you are setting yourself up for maximum gains. 

Weekly Recap (5/8/2017)

Hey Team,

Every Monday, we analyze trades from the previous week, go over some setups for next week, and provide guidance on long-term investments.

Let's dive right in.

 The NFLX gods smiled upon us once again with another beast move  Monday morning .

The NFLX gods smiled upon us once again with another beast move Monday morning.

NFLX Call  Bought: 1.05 Sold: 2.60 (148% Gain)

As you know, we've been watching NFLX like a hawk since it started trending in mid-April. The Friday before this move had an eerie amount of low volume for such a popular stock, meaning that any big moves (either way) were bound to get buyers and sellers involved again. The quick gap down on Monday, followed by a reversal, started an epic chase to around to $157.50 for the stock. We managed to hop on within the first few ticks, buying weekly calls and selling them hours later for a 148% gain. 

Takeaway: Big moves happen when "crowd-favorite" stocks get quiet. Look for low volume on popular stocks, followed by large gaps up or down.

DDD - Buy the D-D-Dip

The chart says it all. DDD was trending up for weeks before reporting less-than-optimal earnings for Q1. Panicked shareholders started selling, and sure enough, the stock found big buyers at the $15 support level, giving us an opportunity to hop back on the trend. The stock is up more than 10% since the gap down, and we are planning on selling our position around $18.


Market Sentiment:

The rally in recent weeks has forced a lot of buyers back into this market for what could be an epic bull trap. We believe that this could result in a low single-digit correction in the coming weeks, followed by a return to the upward trend. 

That being said, the correlation between market movements and individual stock movements is at record lows, and the trades that we are looking at still have strong upside potential.

Watchlist: 

We have high expectations for oil, materials, and biotech investments this month. Take a look at the charts below.

 Oil (USO) found its bottom early Friday and is set up for a nice little rally in the coming weeks.

Oil (USO) found its bottom early Friday and is set up for a nice little rally in the coming weeks.

With oil bottoming out here, we see HAL as a strong pick to capitalize on the upcoming rally. 

 The Biotech Sector (XBI) bounced off trend support recently and looks primed for a rally.

The Biotech Sector (XBI) bounced off trend support recently and looks primed for a rally.

Some biotech stocks that we are watching include BLUE, GWPH, GILD, and EDIT

Long Term Investment: Ford

Many investors are looking at the auto industry lately by way of Tesla, which is widely believed to be the next powerhouse to dominate the sector. This has led to decreased popularity in traditional auto sector companies, driving down prices to record lows. 

Ford stock has recently fallen 15% from $13 in January to just over $11 today; a level that it hasn't traded at since 2012.  The stock has been showing strong support at $11 as well as typical bottoming signs, such as a multi-year low in the ATR(14) metric. We use the ATR(14) metric to measure volatility over long periods of time and big things tend to happen when this metric reaches lows (more on that in an upcoming blog post). 

THE TRADE:

We suggest buying common stock and enjoying the move up in the coming years, along with a nice, safe 4.8% dividend.

Alternatively, you can buy longer dated options if you would rather test-drive this smooth ride. Buying options dating Jan 2018 or later will get you a great return without tying up as much capital as common stock might.

Happy Trading

- The Minotaur Team