Weekender for 6/19
1. Market Summary
The Swiss National Bank Chop Blocks the Market
– The Swiss National Bank (SNB) chop blocks the market the day after the Federal Open Market Committee (FOMC) meeting. Indices gap lower and sell hard, with small-cap and mid-cap stocks leading the downside.
– The violence of the Thursday selloff on top of the recent sharp decline has many asking “how low can it go?” We give some answers.
– Housing starts and the Philly Fed are not good at all. Supply, particularly with food, keeps getting worse and worse.
– Internals and sentiment are atrocious, but the Chicago Board Options Exchange’s CBOE Volatility Index (VIX) is rather tame — Thursday may not have been the start of a new leg lower.
– It is a three-day weekend yet again, so perhaps there will be some short-covering after numbing selling.
We were looking for just a bit more upside after the Wednesday FOMC-day bounce. Just a bit more. Instead, stocks gapped sharply lower. Overnight, the Swiss National Bank effected a surprise 50 basis point (BP) rate hike, its first hike in 15 years. While the FOMC raised the federal funds rate by 75 basis points, which was more than originally anticipated but eventually came expected as the decision approached, the SNB hike rattled all of the world’s markets — that the SNB would issue a surprise rate hike and at 50BP versus the 25BP increments it has historically done indicated to the rest of the world that serious economic issues are the reality for every nation.
NOTE: The figures and information above are from the 6/16 report.
Watch the Investment House Videos For This Week Here!
NOTE: The videos are from the 6/15 report.
2. Targets Hit
We are taking advantage of some downside action in Investment House Daily because it is there for the taking — take what the market gives, right? We were watching the stock indices work laterally in a consolidation of the rally off of the late May lows. This was a nice relief move and a good consolidation.
But the consolidation, while looking good, just continued moving laterally, instead of making the second move higher. We noted in the nightly reports that the longer it took to make the move, the more susceptible it was to NOT making the move. Accordingly, we started looking at some downside plays.
Apple Inc. (NASDAQ: AAPL) was set up to fail if the market consolidation failed. It was working laterally along the 20-day exponential moving average (EMA), slipping below it as it worked laterally. On June 8, AAPL showed a doji just below the 20-day EMA, a signal that indicates it could be out of gas. We worked the numbers on a downside play, and they were solid. We were ready to move in the event the consolidation failed.
It did. During the next session, June 9, AAPL dropped, and we issued the alert to buy the August $145 put options for $9.65. AAPL dropped hard that session and closed at the low. AAPL gapped lower on June 10, and then next Monday as well.
That put AAPL near our initial target. On the session, AAPL managed to hold and show a doji on the candlestick chart after a drop that can signal a bounce. With a good gain in hand in short order, we issued an alert to sell the options for $16.00 and bank a 65% gain.
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In any market, you always have to be ready to adapt. When you are in a bear market, Technical Traders Alert shifts its mindset to the upside, as pulling out the win to the downside becomes the likely outcome when a move turns problematic.
With that backdrop, after Amazon.com, Inc. (NASDAQ: AMZN) rallied nicely to end May and begin June, we saw it throw out a tombstone doji that tapped the 50-day EMA on the high. A tombstone is, as it suggests, a negative indication for a move — the stone that marks the end.
Thus, we were watching for AMZN to stumble after a good move. This didn’t mean it had to; it could test and continue higher again. Given the bear market and the tombstone, however, you had to be ready to take advantage of it when it falls.
We watched as AMZN tested the near support after that tombstone. After two more lateral days, AMZN broke below the 20-day moving average (MA) and below the lows of its lateral consolidation. That was our entry signal. We issued the alert to buy August $117.50 puts (we are trading post-split, so you get some weird strike prices) at $9.00.
AMZN closed at the low that session, then gapped lower Friday and again on Monday, June 13. That gap took AMZN to the May lows. The stock showed a hammer doji on the session. This hammer looked just like the tombstone on June 6, but it was after a hard selloff. That can indicate a bounce. We decided to take part of the gain, issuing an alert to sell half of the position for $16.00 and bank a 77% gain.
During the next session, AMZN gapped lower, but held at the prior session low and the May lows, showing some stickiness there. The options had some more gain built in, so we issued an alert to sell half of the remaining half for $16.90 in order to bank an 87% gain.
On Wednesday, AMZN gapped back to where it was on Monday. It looked as if the market would try to bounce into the Federal Open Market Committee (FOMC) decision. We issued a final alert to sell the rest of the position at $15.80 and bank a 75% gain.
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There were no new trades in the Rapid Profits Stock Trader this week.
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3. Covered Call Options Play
Altisource Portfolio Solutions S.A. (NASDAQ: ASPS) — Altisource Portfolio Solutions S.A. is currently trading at $11.58. The July 15 $12.50 Calls (ASPS20220715C00012500) are trading at $0.60. That provides a return of about 15% if ASPS is above $12.50 by the expiration.
