The markets are higher this morning, having finished its first week of April in the red. Seasonality is typically strongest in the months leading into Spring, so we are anticipating this week could be a reverse of last weeks performance.
Summary
Any directional index options plays will be based on the SOTEMA being greater than 30 – 45°. If we see this prerequisite, look for continuation that could last the whole day.
The watch list has candidates from the IBD50 that look ready to launch higher. All we need is for the indices to continue higher this morning.
Notes are in the comments section. BIVV is a spinoff from parent Biogen (BIIB), as such this candidate is a scalp only, with potential as a swing as more time passes. A close at the high of the day would also enable a swing. There are a lot of eyes on this stock, so there is huge potential upside, despite the recent action.
The same goes for QRVO, where we are looking for a potential pullback inside Friday price action. If this setup occurs, we will then apply the TD setup (5min 9ma) as a strategy for entry. Its equally possible this stock just takes off this morning. Use the Opening Range as a decision mechanism and consider a trigger if it flags and takes out the first pivot high on this time frame.
Technically speaking, price is above the 9/20ema with a bullish SOTEMA beginning to show. RSI is strong, yet Bollinger Bands have yet to open, which could signal follow through. Volume tells me institutions are present.MACD and stochastic ares supportive. Since we are at 52 week highs, there is no overhead supply in the way of weak bag holders looking to “just break even.” I like this one.
Income Trades
Chemours Co. (CC) is also a weekly options candidate. You should read the Saturday Post if you haven’t already done so, as we talk about “weeklies” in CC and TECK for their quick income generation possibilities.
This company produces a variety of chemicals from beauty to gold mining applications. I thought that was interesting.
Support is just below price action, with a close above the 9ema. I’d look for a strong day, as one necessity, as MACD and STO would then reflect a more optimal entry. Therefore, first confirm a positive day is in order, then consider weeklies or monthlies. Read on for additional possibilities.
If you are somewhat bullish the stock, you could generate $950 by trading a covered calls. We are considering the purchase of 500 shares and immediately selling 5 contracts of CC 2017 19-MAY 39.00 CALL. If assigned, we will make a profit of $1,580. This trade will also get you 5.0% worth of downside protection for your stock, though we have added insurance with VBP support just below.
- Premium received: $950
- Potential Profit if Above Strike: $1,580
- Downside Protection: 5.0%
- This last number is your break even – sell here and you losing nothing but time.
On the other hand, if you are neutral, you could generate $1,175 by trading a covered calls. Assuming the purchase of 500 shares, we could sell 5 contracts of CC 2017 19-MAY 38.00 CALL. If assigned, we could make a profit of $1,305. This trade provides 6.2% worth of downside protection for our position.
- Premium received: $1,175
- Potential Profit if Above Strike: $1,305
- Downside Protection: 6.2%
- This last number is your break even – sell here and you losing nothing but time.
SPY NDX and IWM thoughts…..
As we mentioned in the Weekend Video News Letter to members, we will once again look to Junk and High Yield debt assets (JNK/HYG) for directional confirmation and crude to assist in our way finding, should the morning strength in all three persist after the Opening Bell.
Watch for a potential scalp on CHK this AM.
If you haven’t watched the video and only want to view the watch list candidates, you should check my comments on each, before the Opening Bell.
Happy Monday
Vinny
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