Sunday, February 26, 2017

My Market Outlook


Market continues to show momentum and I still maintain my bullish bias.  In the last 3 weeks, the 3 major indexes that I monitor daily are still trending along the   20 day sma (simple moving average)  and they have advanced:

  1.  $SPY   +2.85%
  2.  $DJI     +3.73%
  3.  $QQQ  +3.83%

$XLK (Technology)  is  +4.73%  in the last 3 weeks and continues to be the leading sector.  Last week we noticed that the market was consolidating with all 3 indexes as well as the Technology Sector trading tightly and orderly.  I find that comforting.  This behaviour allows the   50 day sma   to catch up with the   20 day sma.   Institutions are taking a breather right  now before they start making new committments in the weeks ahead.   


Low Risk Trade


Most of the stocks that I brought to my readers attention in the last couple of weeks are extended beyond their ideal buy points at the moment.  Most growth stocks will advance  +10%  to  +20%   before they begin to retrace.  Sound portfolio management requires one to have an appropriate trailing stop for stocks that have advanced in such a manner so as to lock in the profits and take the risk off the table.

Last week I had mentioned that I will highlight an   Option Spread Trade  that was done as a Low Risk Trade.  Here are the details of that trade:

$CMA - January 27th the stock was in the leading Financial Sector and it met all my minimum criteria of   IBD (Investors Business Daily)   style stock selection to be on My Watch List.  The stock had already advanced  +32%   since the   'follow thru'   day on November 9th and was consolidating for 6 weeks after attaining this gain.  It bounced off the   50 day sma   on January 17th with trade volume of over   +50%   above average normal daily volume.  This indicated conviction from the institutions.  Instead of purchasing a stock,  I chose to initiate the bullish Debit Call Spread.  

Trade:  $CMA Bullish Debit Call spread Buy March 70 call and sell Mar 75 call for a debit of $1.10 for 9 contracts   ($990 Debit)   on January 27th.  Trade closed out 12 days later on Feb 14th for a credit of $1.60 for 9 contracts   ($1440 Credit)   That was a gain of  +45% with less than $1,000 at risk.   The stock only moved less than   +5%  for this trade to become profitable.  Soon after closing out the trade, stock began to retrace and currently is below its support price of   $71.30


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Amin





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