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Zumiez, Inc. (ZUMZ)

Jun 16, 2015

I was going to post this Wednesday morning, but the opportunity is too good to wait.  Enjoy.

About 450 sheep jumped to their death in 2005, as reported by USA Today.

One sheep jumped to its death.

Then shepherds watched as 1,500 others followed…

They all jumped off that very cliff to sudden death. The ones that survived were lucky. They landed on pillows of dead sheep.

It’s okay to laugh.

But what’s sad is this same situation unfolds on Wall Street every day. We – as sheep-like traders and investors – follow what every one else is doing.

If a stock is plummeting, and every one is losing their minds, we lose our minds, too… and sell. But we never stop to ask what happened. We just react, and overreact.

Look at Zumiez (ZUMZ), for example.

After positing poor guidance, anticipating a 3% to 5% drop in sales, the stock was pummeled, falling $6 a share. That’s a severe overreaction… at least to me. The stock is now a steal at less than sales, trading well into oversold territory, as Money Flow, MACD, and RSI begin to reverse. Williams % Range is just beginning to gain traction, too.

I’m willing to bet we see an eventual bearish gap refill at $30 with patience here. Historically, all bearish gaps have been refilled on this stock if we examine a five-year chart.

Consider buying to open the ZUMZ stock up to $25, as well as the ZUMZ August 2015 25 calls up to $1.50.

 

FedEx Corporation (FDX)

Jun 16, 2015

Atop all time highs, FDX is wildly overbought.

There’s little to get excited about even as the company attempts to stabilize with a 25% dividend increase.

Earnings are tomorrow... and may have been priced in.   

A simple look at the pivoting moves on RSI and oversold indications on MACD tell me the stock is desperate need of a near-term correction.

And what concerns me is that the Dow Jones Transportation Index (DJTA) is in correction moving down 10% from all time highs. We also have to consider the Postal Service is taking away business from FDX by delivering for Amazon.

While I’d like to buy a put option here to profit from a sudden move lower, we can’t. I’m not a big fan of placing bets ahead of earnings. Let’s wait until after the report Wednesday morning to revisit.

 

 

Netflix, Inc. (NFLX)

Jun 15, 2015

At all-time highs, the beloved NFLX stock may face selling pressure on news that Alibaba has plans to start a video subscription service of its own. It’s hoping to launch that within the next two months. The two are battling over the $5.9 billion Internet video market in China.

While NFLX – one of the S&P 500’s top performers – is technically oversold with a new competitive threat, there’s still a great deal of excitement about an upcoming stock split. I’ve heard we could see a 5:1 or even a 10:1, which would bring the stock price down significantly making it accessible to a greater number of interested investors.

Just keep NFLX on radar for the moment.

 

Dow Jones Industrial Average (DJIA)

Jun 11, 2015

“The Dow tried to break well above 18,250 but failed at top of channel,” I noted on May 26, 2015. “Unless we see a strong, sustainable break above 18,200, which I didn’t think was likely, we could dive about 300 points lower, testing prior triple bottom support around 17,750.”

Weeks later, we hit a low of 17,714 after that call above. The poor bulls continued to chase the markets higher not realizing what our technical pivot points were telling us.

Am I telling you this to show off?

Well… maybe a little.

But I’m updating this call because I recommended a buy on the Pro Shares Ultra Short Dow 30 (DXD) up to $21 and/or the DXD October 2015 21 call up to $1.50.

The DXD ran from about $20 to $21.

The DXD October 21 calls ran from a low of about $1.15 to a high of $1.55 in no time at all.

If you were in and out of this trade – featured here absolutely free – congratulations on that.

Is the latest move off 17,750 lows sustainable? Perhaps… But just for the immediate-term on some of the oversold technical indicators on this chart.

The underlying economy is still very weak. There’s really nothing to get excited about… well, expect for these last few trades.

 

 

 

Microsoft Update (MSFT)

Jun 10, 2015

On May 14, Microsoft was upgraded to a buy with a $55 price target.

Only problem was the stock was challenging heavy double top resistance and a challenging PC market.

It’s why I recommended a buy on the MSFT July 2015 48 put, as it traded around $1.40. As expected, the stock did slip shortly after, sending our put to $2.25. I’m now recommending that you sell to close the position to secure the gain.

I’m beginning to see signs of reversal off recent lows at the moment. But I’d like to see confirmation of trend change before recommending a call option. Stay tuned for that.

 

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