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Chart of Day: Caterpillar (CAT) could Run to $165

May 22, 2018

On May 16, 2018, a filing with the SEC revealed that Director David L. Calhoun bought 5,000 shares of Caterpillar at a cost of $155.37 a share for $776,850. 

While the stock pulled back from highs of $170, there is certainly a lot to like here.

Not only did it beat estimates with its latest earnings report, it raised guidance.  

For one, the company posted EPS of $2.82 share – 120% growth year over year, which also beat estimates for $2.08 to $2.10 a share. Revenue was up 31% to $12.86 billion, beating estimates of $11.98 billion. Sales around the world were just as strong. IN the Asia-Pacific region, sales were up 44%.

In North America, sales were up 33%. In Europe-Africa-Middle East market, sales were up 25%. In Latin America, sales were up 24%. And then the company raised estimates for the full year based on strong quarterly results and higher demand. Previous earnings guidance of $8.25 to $9.25 was raised to $10.25 to $11.25.  

Even more interesting, the stock appears cheap with a PEG ratio of 0.58.

Another positive for a stock like Caterpillar is the fact that the trade war fears have now cooled between the U.S. and China. “With tensions between China and the US now in at least temporary abeyance, markets should react positively to a situation which had threatened to derail the synchronized global economic recovery,” said Interactive Investor, as quoted by Fortune. 

There are two ways to trade CAT.

One is to buy the stock at market. The other is to buy to open the CAT July 20, 2018 165 calls at market. These calls may be out of the money here, but we believe they’ll pay off well.

Chart of Day: Applied Materials (AMAT) Offers Opportunity

May 21, 2018

Just last week, shares of Applied Materials (AMAT) beat on the top and bottom line, but slipped on a weaker than expected sales outlook.  But what’s interesting to note is that every time this stock gaps lower, as it has many times, it doesn’t take long for the stock to rebound and refill its bearish gap, as it’s again trying to do now.  After finding double bottom support around $48 a share, we believe AMAT can refill its gap at $54 shortly.

 

 

 

Chart of Day: Estee Lauder Refills its Gap

May 16, 2018

On May 7, 2018, we noted we were looking for a near-term gap refill on Estee Lauder (EL), which we just got. We would recommend the EL July 20 2018 135 calls, as they traded at $4.85, which we exited half of on May 13, 2018.

Now, as EL recovers to $144 a share, the calls are up to $10.90.

Take the win and book another double.

Chart of Day: AMD Exploded, Handing us a Double

May 15, 2018

On April 18, 2018, we noted:

AMD one of the most intriguing tech stocks after being beaten to excessively oversold prices.  The stock is just now reversing well off lows of $9. And we believe it could rally back to test $12.50, near-term.  One of the biggest reasons the stock is down is because it was caught up in a sector-wide selloff. It's now far too oversold.  Plus, the company's new lines should drive growth this year, too.  In fact, both Ryzen CPUs and its data center chips could allow it to challenge Intel. Buying and holding AMD here for the long-term is not a bad idea at all. Buy the AMD stock and/or the AMD June 15, 2018 10 calls.

At the time, the stock traded at $10.47. It’s now up to $12.25.

The calls at that time traded at just $1.15. They’re now up to $2.32. Sell to close the calls, but hold the stock for a bit longer. We have no interest in giving back any options gains to near-term time decay.

Chart of Day: Estee Lauder (EL) Pays out 66% in Days

May 13, 2018

On May 7, 2018, we noted:

After poor earnings, the stock gapped lower from $145.85 to $132.50.  However, it looks as if most of the negativity has been priced into the stock, as it catches support.  Several analysts appear to agree that it's now oversold.  Its Outperform rating was just reiterated at Barclays, Credit Suisse and Morgan Stanley.  Deutsche Bank even raised its rating from a hold to a buy.  From its current price of $132.50, we'd like to see a bearish gap refill, near-term. Buy to open the EL July 20, 2018 135 calls at market prices.

At the time, the EL July 20, 2018 135 calls traded at just $4.85. With EL now at $140.19, the calls are at $8.03. Sell to close half for a very quick win of 66% in days. All we had to do was trade when RSI fell under its 30-line, as MACD fell to a historic low, as Williams’ %R fell under 80, and as the stock challenged its lower Bollinger Band (2,20). Easy.

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