TIB: Today I Bought (and Sold) - An Investors Journal #435 - US Pharmaceuticals, China Small Caps, Network Equipment, Cybersecurity, Food Services, Corn, US Media, US Real Estate
Markets bounce with rising oil and shake off some fear. Take a deeper look at a few more MANG stocks and emerging markets and beaten up cybersecurity stocks. Profits again in corn and first of July covered calls.
Portfolio News
Market Rally
Markets started a little nervous and then recovered prior session losses.
Disney also makes a solid jump which buoys the Dow Industrial index. Oil price jumps on tanker attacks in Straits of Hormuz and drags the markets up too.
This is all a bit strange as the tanker attacks feel like something that should scare markets a lot - well it did but energy stocks are an important part of indices.
Yield markets did show some fear with yields dropping on safe haven demand.
Rare Earths
US asks Australia to step up progressing rare earths supply
Biggest winner in my portfolios is Arafura Resources Limited (ARU.AX) up 45% on the day.
I have been holding this stock ever since a campfire meeting in Aileron, Northern Territory with a man telling me about a big secret mine development in the hills behind the town = lots of vehicles and fenced off land and lots of security. This has become a day trading delight
Bought
SPDR S&P Emerging Markets Small Cap ETF (EWX): Emerging Markets Index. Watched a trade idea on Alibaba (BABA) which talked of the trade as a way to reach a growing Chinese middle class. That got me thinking about some of the holdings I have already that touch that. This ETF invests in emerging markets small caps, including China. It also touches quite a few more growing markets. Some of these are in recovery mode, like India and Brazil. The China exposure is quite small at 11%.
I averaged down entry price and rounded up holdings to 100 shares multiple so I can write covered calls.
Next trade ideas from Rupal Bhansali of Ariel Investments who talked about MANG stocks Michelin, AmDocs, Nokia and Gilead = not the conventional stocks people think about = stocks that nobody wants to touch. I wrote about it yesterday in TIB434. See the interview here
Gilead Sciences, Inc (GILD): US Pharmaceuticals. I averaged down entry price and rounded up to multiple of 100 shares in one portfolio on the back of MANG stocks lady discussion.
Nokia Corporation (NOK): Europe Network Equipment. I added a small holding of stock to one portfolio to add to the call spread risk reversal I set up in TIB433 and TIB434
Amdocs Limited (DOX): US Media Software. I had a look at the charts and liked the fact that price has broken the downtrend and done a retest of the trend line. I bought a January 2020 62.5/67.5 bull call spread. With price around $61, this is one strike out-the-money. Net premium of $1.68 (2.8% of strike) offering maximum profit potential of 197% for an 11% move in price
Let's look at the chart which shows the bought call (62.5) and 100% profit as blue rays and the sold call (67.5) as a red ray with the expiry date the dotted green line on the right margin.
Price has to get to late 2018 highs to make the maximum but not as high as 2018 highs. What is noticeable is price is quite volatile around earnings (more often down than up). There are two earnings cycles before expiry
Symantec Corporation (SYMC): US Cybersecurity. Watched market open with CNBC team. Jim Cramer was on his hobby horse about frothy IPO markets. He says that he just does not get how a stock like Beyond Meat (BYND) goes so strongly and a stock like Symantec, that is serving a key need is doing so badly. We just had the Australian Minister of Defence talking about cyber warfare being the next frontline. I am already holding January 2020 2/33 bull call spread in one portfolio. I added a January 2021 20/25 bull call spread. With trade price at $19.58, this is one strike out-the-money. Net premium of $1.755 (8.8% of strike) offering maximum profit potential of 184% for a 27% move in price.
Let's look at the chart which shows the bought call (20) and 100% profit as pink rays and the sold call (25) as a dotted pink ray with the expiry date the dotted green line on the far right margin. I have left in the other trade I am holding.
Price was progressing on the blue arrow price scenario until the last earnings collapsed price back to the bottom (now a quadruple bottom). I have cloned the blue arrow price scenario as a pink arrow - hard to say when it will start but my sense is cybersecurity will get its day again. Just look at tanker warfare in the Straits of Hormuz (or at my own website repelling stuff all the time). A move of half that size (like any from the last 3 bottoms) will take the new trade to 100% profit at least. There may not be enough time for the older trade to win but it looks like it could make 100% before expiry (the left hand dotted green line)
The options chains show I was alone in the trade overnight but there is a lot of open interest.
Compass Group PLC (CPG.L): Europe Food Services. Added a small holding to the portfolio that will be paying beneficiaries in British Pounds to add to stock holdings in Pounds. See TIB433 for the rationale.
Sold
Corn Futures (CORN): I wrote in TIB434 yesterday:
The chart is showing signs that this time price may push above the top of the range.
I got that right. I did move one profit target above the range to $445. That target was hit for $22.60 per contract profit (5.3%). The arrow marks why I made the comment above.
I have trailed a stop loss on the remaining contract to sit just below the top of that range at $438.
Shorts
iShares U.S. Real Estate ETF (IYR): US Real Estate. Closed out June expiring strike 88 put option. This was the bought leg of a 88/81 bear put spread. Price has traded above 88 strike for a few days. Time to preserve some capital - 75% net loss since April 2019. I will let the 81 strike puts run to expiry next week. Quick update of the charts.
In TIB400, the idea was to trade back to the moving average. Price did get back to the moving average 3 times, the first time within days of setting up the trade, which gave me 3 opportunities to take some profits. The failure comes from not reading the notes again and letting trades run to expiry which is what my coach always said to do. The other problem is the trade structure was not designed to trade back to the moving average - it was designed for a bigger move
Now this trade is setting up again. I am a little less comfortable with the set up as yields have dropped dramatically which makes yield seeking a bigger game and Real Estate is one place people go in that pursuit.
Income Trades
First of the July covered calls written
Viacom Inc. (VIAB): US Media. Sold July 2019 strike 32.5 calls for 0.86% premium (0.82% to purchase price). Closing price $29.14 (higher than last trade). Price needs to move another 11.5% to reach the sold strike (tighter than last trade). Should price pass the sold strike I book a 7% capital gain. Income to date amounts to 1.7% of purchase cost.
Cryptocurency
Bitcoin (BTCUSD): Price range for the day was $286 (3.4% of the low). Price keeps tracking higher to have a go at testing the net level up at $8400
Ethereum (ETHUSD): Price range for the day was $10 (4% of the low). A quieter day with price just squeezing a little higher than the prior day and then slipping back to close near the lows for the day.
CryptoBots
Profit Trailer Bot One closed trade on ZIL after one level of DCA (2.09% profit) bringing the position on the account to 8.80% profit (was 8.76%) (not accounting for open trades).
PT Defender continues defending 12 coins.
New Trading Bot Trading out using Crypto Prophecy. No closed trades
Currency Trades
Outsourced MAM account No closed trades. Trades remain open on EURUSD, EURGBP and AUDCAD (0.11% positive).
Cautions: This is not financial advice. You need to consider your own financial position and take your own advice before you follow any of my ideas
Images: I own the rights to use and edit the Buy Sell image. News headlines come from Google Search. EWX mix image is credited below image. All other images are created using my various trading and charting platforms. They are all my own work
Straits of Hormuz image w:en:Kleptosquirrel (talk | contribs) [CC BY-SA 3.0 (https://creativecommons.org/licenses/by-sa/3.0)]
Tickers: I monitor my portfolios using Yahoo Finance. The ticker symbols used are Yahoo Finance tickers
Charts: http://mymark.mx/TradingView - this is a free charting package. I have a Pro subscription to get access to real time forex prices
Bitcoin: Get started with mining Bitcoin for as little as $25 http://mymark.mx/Galaxy
June 13, 2019
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