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.
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.
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.
We have high expectations for oil, materials, and biotech investments this month. Take a look at the charts below.
With oil bottoming out here, we see HAL as a strong pick to capitalize on the upcoming 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).
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.
- The Minotaur Team