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Chart of Day: How to Trade a $700 Billion Defense Bill on the Cheap

Sep 19, 2017

Shares of Kratos Defense & Security (KTOS) should be in play after the U.S. Senate approved a $700 billion defense policy bill with an 89-8 vote. Plus, with the North Korean threat, the bill will also include $8.5 billion for U.S. missile and defense systems. In all, this is $630 billion more than what President Trump had requested.

In recent months, the company was awarded an Air Force contract to develop an LCASD (Low Cost Attritable Strike unmanned aerial system Demonstration) drone capable of operating at more than 690 miles per hour. It’s been designed to conduct high-g-force maneuvers, fly 1,500 nautical miles in combat, launch and land without runways, and even carry a 500-pound weapons payload. In short, it could be one of the most advanced military drones ever built, as a fully functional combat drone.

What’s also exciting is that over the last few months it announced an order for six “High Performance Unmanned Aerial Drone System Aircraft” with the U.S. government. Then it announced it would debut its XQ-222 Valkyrie and UTAP-22 Mako combat drones, which can carry weapons and act as wingmen in airspace. Both drones, according to the company will sell for between $2 million and $3 million apiece. Better yet, it also announced that the U.S. Navy placed an order for $34.6 million worth of its BQM-177A Subsonic Aerial Target Drone Systems.

There are two ways to trade KTOS.  One is to buy the stock at current market prices. And, or two, buy to open the KTOS November 2017 12.50 calls at market prices.

Chart of Day: VNDA Returns 67% in a Month

Sep 18, 2017

It shouldn’t be this easy to make money, especially from biotech and pharmaceutical names. Just the other day, we banked a 223% win on AMGN calls. Today, we’re banking gains on Vanda Pharmaceuticals (VNDA).

On August 13, 2017, we highlighted opportunity in VNDA with the stock (at $15.75) and the VNDA October 16 calls (at $1.50), noting:

There’s some interesting activity in shares of Vanda Pharmaceuticals (VNDA), where options traders picked up an unusual number (2,529 contracts) of the VNDA October 2017 16 calls on Friday. One of the only reasons the stock slipped as much as it did in recent days was because of escalating tensions between the U.S. and North Korea. However, we are now beginning to see signs of potential upside after the stock found support around $15.25 and begun to reverse higher. Technically, it’s oversold on RSI, MACD and Williams’ %R.

At the moment, VNDA is up to $18.40 with the calls now up to $2.50. To secure some of those wins now, sell to close half of the calls here, and exit half of the stock.

Chart of Day: A Potential Double with Comcast

Sep 12, 2017

Comcast (CMCSA) took a big hit the other day after announcing it would lose up to 150,000 subscribers in its third quarter results thanks to Hurricane Harvey. But considering the company has more than 20 million subscribers in total, the latest pullback may be a buying opportunity. Even analysts at TD Securities called the sell off an overreaction, reiterating its buy rating on the stock. Others analysts believe the stock is too cheap with one analyst upgrading the stock to a buy rating with a price target of $45 a share.   Technically, it would appear CMCSA has found solid support at $37.84 with oversold RSI, MACD and Williams’ %R indicating the bottom may be in. We’d like to see a potential test of $39.50 on the stock, near-term.

There are two ways to trade the opportunity.

One, buy the stock at market prices.  And, or two buy to open the CMCSA October 2017 37.50 calls at market prices.

 

Chart of Day: How to Trade Irma Now

Sep 12, 2017

Natural disasters create interesting investment opportunities.

Look no further than Hurricane Harvey and Hurricane Irma, once a 185mph behemoth with wind gusts of 225mph.

As both storms raged, home improvement and generator stocks exploded on likely demand. Home Depot (HD) for example ran from a low of $146 to nearly $161. Lowe’s (LOW) exploded from $72 to $79 a share. Generac (GNRC) popped from $36 to $44. Each was a likely beneficiary of higher demand given the catastrophic damages likely.

The “storm premium” sent each stock higher on anticipation of explosive earnings.

On the other side of the coin, companies that could face a good amount of losses, fell.

Cruise stocks, like Carnival (CCL) fell from $79 to $65, as ships were canceled or diverted. Royal Caribbean (RCL) dropped from $125 to $116. Insurance stocks, like Allstate (ALL) plummeted from $93 to $86 on fears of intense damages.

Each fell on nothing more than fear.

However, once fear was fully baked in, we were left with severe overreactions that we could trade with ease. In fact, as the hurricanes began to weaken, we began to find unbelievable bargains based on nothing more than excessive fear and greed.

There are two ways to trade overreactions to the storm nowadays.

One, we can buy to open the RCL October 20, 2017 125 calls at market prices. And, or two we can buy to open the HD October 20, 2017 155 put at market prices, too.

Chart of Day: 223% Profit on Amgen Calls

Sep 11, 2017

Sometimes, it’s far too easy to make money on the Street.

On August 22, 2017, we recommending buying the AMGN October 170 calls at just $4.80 a contract. The underlying stock was brutally oversold after plunging from a high of just above $180 a share. As we speak, the calls were up to $15.50 for a profit of 223% in just weeks.

Look at this thing soar.

While we can always let it run higher, it’s safer to take our wins and move on. Typically, when RSI, MACD and Williams’ %R get agree in overbought territory, the stock begins to break down, erasing any gains we have.

So let’s take our wins here and go home.

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