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Chart of Day: Dow Failing at 50-Day... How to Trade

Feb 20, 2018

We saw something disturbing on a chart of the Dow Jones and wanted to bring it to your attention. At the moment, we believe the Dow could pull back considerably.  After rebounding from a low of 23,500 to 25,187, we are beginning to see signs of failure at the 50-day moving average. If we fail to break above that average, we could retest previous lows of 23,500 again, near-term. We’re recommending that you position for potential downside with the DIA March 16, 2018 248 put options.

Chart of Day: McDonald’s Severely Oversold

Feb 19, 2018

Over the last few weeks, shares of McDonald’s (MCD) plu8nged from $178 to $157 on fears that its $1 $2 $3 Dollar menu could reduce overall sales. However, we believe the sell-off is greatly overdone. In fact, as long as it can hold its 50-day moving average, we could see a near-term retest of $178 highs. 

We can buy the stock here, and, or the MCD March 160 calls at market prices.

 

Chart of Day: IRBT Already Exploding

Feb 17, 2018

On February 13, 2018, we noted the following:

IRBT has become exceptionally oversold. When IRBT announced Q4 results the other day, it sent the stock down nearly 30%, despite strong quarterly growth and profits. Sales in the Christmas season were up 54% to $327 million, beating expectations. While its GAAP profits of 16 cents a share were down 67% year over year, it’s pro forma was twice that of expectations. Then, even though the company predicted it would see $1.05 billion to $1.08 billion in 2018 sales, and earn EPS of between $2.10 and $2.35, which will work out to 19% growth, the Street wanted to see $2.70 instead. Instead of focusing on the fact that the company will solidly grow, the Street butchered the stock on a below-consensus prediction range. We think the sell off is a bit ridiculous here. Even analysts at Raymond James think so, arguing that IRBT is oversold, and upgrading the stock to an outperform rating. We’d like to see the stock refill its bearish gap at $77.50, near-term. There are two ways to trade it here. One is to buy the stock at current market prices. The other is to buy to open the IRBT March 16, 2018 65 calls, as well.

Shortly after recommendation, the IRBT March 26, 2018 65 calls traded at $2.85.

As of now, as IRBT pushes to $66.40, the calls now trade at $4.10. If you bought in, consider selling to close half of the trade to secure the win. Hold the second half. We still believe the stock can refill its bearish gap at $79 a share.

Chart of Day: iRobot Goes on Sale

Feb 13, 2018

IRBT has become exceptionally oversold.

When IRBT announced Q4 results the other day, it sent the stock down nearly 30%, despite strong quarterly growth and profits. Sales in the Christmas season were up 54% to $327 million, beating expectations. While its GAAP profits of 16 cents a share were down 67% year over year, it’s pro forma was twice that of expectations.

Then, even though the company predicted it would see $1.05 billion to $1.08 billion in 2018 sales, and earn EPS of between $2.10 and $2.35, which will work out to 19% growth, the Street wanted to see $2.70 instead. Instead of focusing on the fact that the company will solidly grow, the Street butchered the stock on a below-consensus prediction range.

We think the sell off is a bit ridiculous here.

Even analysts at Raymond James think so, arguing that IRBT is oversold, and upgrading the stock to an outperform rating.

We’d like to see the stock refill its bearish gap at $77.50, near-term.

There are two ways to trade it here. One is to buy the stock at current market prices. The other is to buy to open the IRBT March 16, 2018 65 calls, as well.

Chart of Day: The Amazon Effect Strikes Again

Feb 12, 2018

Over the last week, we swung thousands of points.  However, it appears that the negativity is beginning to clear.  So, we’re now looking at stocks that were unfairly beaten down with the sell-off, including UPS.

I’m sure you’ve seen the news that Amazon wants to jump into the transport business that FedEx and UPS are already in.  However, “The complex global delivery networks of FedEx (and UPS) are highly difficult to replicate,” Cowen analysts noted last week, which means the sell off in UPS and FDX may have been nothing more than a short-lived overreaction. So, we’re recommending that you take advantage of the excessive fear in FDX.  

The stock is excessively oversold at its lower Bollinger Band with oversold reads on RSI, Williams’ %R and MACD.  Let’s pick up some calls here.  We’re looking for a potential bearish gap refill around $250, near-term.   We’re recommending that you buy to open the FDX March 16, 2018 240 call up to $7.

 

 

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