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Option Addict

The first hit is always on the house.

IN STOCKS, I GIVE THANKS

I’ve made my bets this morning for this seasonally bullish week. I sold some $AAPL calls and picked up $YY, $DATA and $TSLA calls. Really tempted to take $ACIA as well.

For the week, I figure we’ll meet today and tomorrow for After Hours with Option Addict. After that, let’s celebrate market greatness by leaving each other alone for the remainder of the week.

Anyone take on any positions here this week?

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JOIN ME FOR IBC’s 2016 END OF YEAR BOOT CAMP

The Final Boot Camp of 2016 has been launched.

Save the date; Monday December 12th-Friday December 16th, 7PM ET.

If you’ve yet to attend a Boot Camp, this is a great time to insert yourself into a great line-up of content. As usual, we’ll spread this out over a week’s time. We’ll meet once a week for 60-90 minutes with a firm agenda for each day. Each session will be recorded and sent to you, including slides, in a downloadable format.

These Boot Camp’s have been a great opportunity for readers to get solid investing themes throughout the year. Here are the highlights of 2016:

  • Q1 Theme: GLOBAL PANIC: From the February lows I discussed buying a select List of High Yield Value Stocks ($NOBL) and utilizing covered calls ($BXM). The $NOBL went to ATH’s in March, months before the $SPX.
  • Q2 Theme: My Guide to Picking Stocks: Since my 2016 call was for the market to trend against the popular opinion, I laid out all the analysis necessary (market/sector/stock/sentiment/risk) to pick stocks in a trending market. Those methods worked fantastic this year.
  • Q3 Theme: August – Short Gold against an oil long, short Bonds, and gave out a solid list of Trump stocks including infrastructure and biotech.
  • Q4 Theme and Outline:

Session 1: A Review of My 2016 Themes and How They’ve Come to Fruition

Session 2: A Trumped Up Market- An Overview of Which Stocks Will Flourish in 2017

Session 3: A Crowded Trade Unwinding: A look at Rates, Safety and Yield.

Session 4: The 2017 Pain Trade: Inflation

Session 5: My 2017 Outlook and Predictions

We’ll also highlight dollar strength, bond market collapse, gold collapse, strength in the banks, the yield curve blowing out to 121bps, up from 70bps (unbearish), a market without crude, sectors that might benefit from Trump and sectors to buy next year that have sold off.
Click here to sign up for camp. Hope to see you there.

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OA BUY: TWLO

Per our discussion last night in After Hours with Option Addict, here’s the set-up I laid out for a day trade.

A few months ago, this stock went on a string of 7 or 8 consecutive Friday rallies. It would show strength early, give it all back on a move to days lows, then rally all the way back and take out days highs into the close.

Here’s the charts on a lower time frame.

2016-11-18_8-34-37 2016-11-18_8-35-20

This is my third trade in this stock this week. I bought December calls right at the open on Tuesday, then I bought calls expiring next week near the low yesterday. Caught a nice gap up and a fade to take out days lows – in which I put on this day trade.

Let’s see if I’m right about a rally from here.

OA

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#TBT

My Throwback Thursday shoutout goes to Keith Parker of Barclays.

The S&P 500 could potentially fall 11 to 13 percent if Trump wins the election, Keith Parker, global equity strategist, said in a Nov. 1 note. If Clinton wins, the index could rise 2 to 3 percent.

“Stocks will crash 11-13% on a Trump election.”

Lol. Up.

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FIRST SOLAR SINKING MY IRA

I’ve been laid up in this stock since fall of 2013. Three buys at $36, $38 and $43. I reduced the position earlier this year, but still remains a +10% position in my LT account.

I Couldn’t find one person yesterday that was bullish heading into that call, and looks like they were right. $FSLR was a beast at the start of the year, one of few stocks trading to 52 week highs while the market traded to 52 week lows. On analyst day earlier this year, CEO wouldn’t offer guidance due to too many variables. Naturally, the stock has been in a tailspin since. Guidance is the main concern, and the near term has looked cloudy for solar. This is why I’ve told folks to wait on any buys down under $35.

I wasn’t sure how people would react to this news. Couldn’t predict whether or not you’d see buyers that believe in a 2 year story. I love the stock fundamentally, but the thought of waiting for 2 more years for a stock to produce seems daunting. Normalized earnings for $FSLR in 2019 will be $3-$4 and they have $20 per share in the bank. However, this move today represents a crossroads. You’ll likely have to endure a couple ugly quarters in the near term, but this stock still remains a valuable long term prospect to me.

I’ve rode the stock from $40’s to $70’s many times over, but am more interested in cheaper energy as a long term theme. With that said, I am buying some $FSLR here and am sticking to my LT script.

While I caught some comments in other blogs yesterday pertaining to my misfortune, this is a good opportunity to remind you all that I’m simply stating my actions and opinion. For all you know, I could be dry humping a solar panel over here in my $FSLR t-shirt. I would hope that at some point you’ve done some degree of due diligence in the process.

That said, I am only a crazy asshole you read and pester on the internet. We might not both speak in a solar tongue, so please consult your best judgement, your spouse, God, or Mark Whidmar himself before taking risk in this stock.

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DALIO SPEAKS OUT ON BOND BULLS GETTING HARAMBE’D

Ray Dalio thinks bond markets are on the brink of a significant shake-up.

Dalio, the billionaire investor who created Bridgewater Associates, wrote in a Linkedin.com post on Tuesday that “there’s a significant likelihood that we have made the 30-year top in bond prices.” When these extreme moves happen, some investors will be shaken out of their positions, “making the move self-reinforcing” for a while, he wrote.

I’ve been saying some very similar things over the last year. Bonds embarked on a multi-year trend that took prices as far removed from their longer term trend as they tend to get. Last I spoke about this, I referenced my 1998 analogue, and a similar trend structure. Here’s a recap of those charts:

2016-09-16_14-20-52-768x58025 Year Chart of 30 year Treasury Index

2016-09-16_14-27-26-768x5723 Year Chart $USB: 1996-99 Momentum Trend Reversed

2016-09-16_14-33-37-768x582 3 Year Chart $USB: 2013-2016 Momentum Trend Top

As I’ve said most of the year, this is the most crowded long I’ve ever seen. As it should be. It’s a 30 year trend. However, this year, I’m curious as to exactly how popular this ticker symbol became to the unwashed. It reminds me of my first ever $GLD trade. I bought $GLD for $62.50 in 2006 in my long term account, and added multiple times on the way up. At the time, I had a significant audience via my blog, podcast, and through work at Investools/thinkorswim. The concept of trading Gold was so foreign to retail traders back then, but 5 years later, I couldn’t go a day without being asked about it. Same seems to be the case with $TLT over the years.

Here’s the updated chart of the last 3 years:

2016-11-16_10-26-14

Perhaps this is the spot for a technical bounce, but with this trend getting faster the lower it gets, I’d rather watch others play with fire here. The unwinding of these trends gets very messy, but they unwind nonetheless.

The most important element I discussed in this topic was not bonds themselves, but how stocks reacted after these selloffs. This was another staple to my bullish argument over the longer term.

Thoughts?

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