As I stated on our subscriber-only call last week, expect to see several trades this week. On the call I went over several trades, bullish, bearish and neutral, and I expect to add at least one of each over the next week or so.

We need to ramp up positions and now that July expiration has passed, we start selling premium going out roughly 30 to 60 days, but given the low-volatility environment that has taken over the market, I would expect to sell premium going out towards a longer duration trade. Just know that even though we place a trade going out further in duration, say 60 days, it doesn’t mean that we are going to be in a trade for that long. As we discussed on our call, our average hold time per trade duration is 20.5 days, regardless of the duration of the trade at the point of entry.

Not too much to report this week as we simply allow our August positions to erode in value, which as options premium sellers is a good thing. We enter earnings season this week, so I fully expect to add several positions to the portfolio over the coming weeks. We currently have six open position with the intent of getting up between eight and 10.

It’s been just over a week since the big banks announced earnings and during that time we’ve been fortunate to make an 8.0% return in JPM, and more recently, 6.4% in IBM using the Earnings Trader strategy.

Earnings announcements really ramp up this week with a long list of well-known blue-chip stocks due to announce. As I stated on our call last Friday, I hope to make at least two to three trades this week. During each earnings cycle we aim to make somewhere between 8 to 12 trades and given the opportunities ahead I don’t see any reason why we wouldn’t fall within our typical range.

Sector and index rotation was the name of the game last week as money raced out of tech to end the week and into sectors that had not been participating in the market’s advance recently. That being said, this is not necessarily a bad sign as the S&P 500 gained 0.7%, the Dow rallied 2.08% and the Nasdaq lost 0.6%.

Sector and index rotation was the name of the game last week as money raced out of tech to end the week and into sectors that had not been participating in the market’s advance recently. That being said, this is not necessarily a bad sign as the S&P 500 gained 0.7%, the Dow rallied 2.08% and the Nasdaq lost 0.6%.

In the July Issue of Cabot Early Opportunities, we take a quick look at earnings expectations for each of our positions. And we dig into five opportunities spanning AI, HVAC services, retail, real estate and quantum computing.

This may just be our most diverse group of stocks ever.

Enjoy!

Ahead of the long holiday weekend the market had yet another good week. The S&P 500 gained 1.75%, the Dow rallied 1.5%, and the Nasdaq rose another 1.9%.

This week in an attempt to diversify the portfolio we are adding an energy play.

There’s no doubt the market continues to keep investors on their toes, and some further discomfort in the short term is certainly possible after the recent run. It’s also a decent bet that earnings season, which is now ramping up, will present a few potholes. But those are the trees—if you look at the forest, all of the bullish factors are still in place, whether it’s the uptrend in the major indexes, the solid action among most leading stocks, the sluggishness of defensive stocks and, more recently, the strength of the broad market (including five straight days of 2-to-1 NYSE breadth). We remain bullish and expect higher prices—we’ll leave our Market Monitor at a level 8.

This week’s list has a very broad mix of names, including everything from giant blue chips to more speculative small caps. Our Top Pick is in the right area (big-cap growth) and is trying to emerge from a tight consolidation. Earnings are out in a couple of weeks, so start small and build if the breakout works.

The new bull market went into hyperdrive last week, fueled by lower-than-expected inflation and an encouraging start to earnings season. With another interest rate hike and weak Q2 earnings expectations looming in the back half of this month and beyond, there could be some speed bumps ahead. But for now, the good times are rolling, and that means taking more big swings. This week, we do so in a small-cap, Canada-based rare earths producer that is a brand new recommendation from Cabot Explorer Chief Analyst Carl Delfeld.

We enter the week with several trading opportunities on the horizon. My plan is to add two trades this week, an iron condor and the potential for another bear call spread.

Implied volatility ranks, otherwise known as IV ranks, are low across the board. IV rank is where the current implied volatility (IV) sits in comparison to the last 12 months of readings. This makes sense given the recent surge in the market, right? And while macro conditions seem to be improving, with more indicators showing a bullish bias and numerous other bullish signals, we have to remember, we place trades going out 45 to 60 days in Quant Trader with the average trade lasting 20.5 days.

Not too much to report this week as we simply allow our August positions to erode in value, which as options premium sellers is a good thing. We enter earnings season this week, so I fully expect to add several positions to the portfolio over the coming weeks. We currently have six open position with the intent of getting up between eight and 10.

Fortunately, the start of earnings season started off on the right foot. On Thursday, we placed our first trade of the season in JPMorgan Chase (JPM), our standard, outside-of-the-expected-move, iron condor. On Friday, JPM opened up slightly, well within our chosen range and as a result, all uncertainty around the announcement diminished, volatility was immediately crushed, and we were given the opportunity to take off the trade for a profit. Shortly after the opening bell we locked in a quick one-day gain of 8.0%.

A rough second quarter came to an end last week. I would call this a “Nickels and Dimes” market; you make a nickel when the market goes up, and before you know it, you have lost dimes since the market goes down so fast. But that doesn’t mean you have to give up on your opportunity to profit.

The ProShares Short Bitcoin ETF (BITI) launched on Tuesday, June 21. This is the first ETF of its kind launched in U.S. markets, catering to investors (and bears) who are looking to hedge their cryptocurrency holdings. As active investors here at Cabot, we believe the launch of this product to be a compelling way for our readers to profit from short-term declines in cryptocurrency markets and offers a new way to hedge our long portfolio.

Weakness persists in most metals—and commodities in general—as investors continue to worry about the heightened risk of another recession. Despite the bad news, however, there are some promising areas of strength which we’ll discuss here.

Before we do, let’s start with the areas we’ve been avoiding. Industrial metals like copper, steel and aluminum just made fresh lows last week, with the former hitting its lowest level since 2020. “Dr. Copper,” the metal with a PhD. in economics, is especially worthy of mention.

This week’s Friday Update includes a summary of the recent Cabot Turnaround Letter and comments on earnings from Walgreens Boots Alliance (WBA). There were no ratings changes. We also summarize the podcast and include The Catalyst Report.

There are a lot of negatives out there these days. The AAII Sentiment Survey shows optimism is in the tank while pessimism is through the roof.

Explorer stocks held their ground this week as we move two positions to a hold. Don’t be too discouraged. S&P 500 stocks struggled in the first half of this year, roughly equal to that of 1970. That year the S&P 500 fell 21% in the first half and then gained 27% in the second half. Let’s hope 2022 follows a similar pattern.

This market has recovered nicely after plunging into bear market territory and beyond the week before last. Unfortunately, the good times probably won’t last.
All year long the market has bounced to some sort of recovery after plunging to new lows. But stocks can’t seem to muster any lasting traction with rising interest rates, high inflation, and a souring economy. Those things are simply too much of a bummer to whistle past.

The market remains in a bearish posture, with a number of technical signals suggesting the move downward isn’t done yet. Greentech is below its 20-day and 40-day moving averages, which are downtrending, meeting our definition of bearish and there remains a well-defined downtrend line in the broad market and Greentech. That said, we’re above the lows of May, which in itself is a sign the market may be working its way toward a turnaround.

The stock market is resuming its downward slump, creating a drag on investor enthusiasm for buying shares. In many ways, this effect is no different from how consumers approach the purchase of any other item – if you are reasonably confident that the truck/house/trinket/whatever you are wanting to buy will be cheaper in a few weeks, you will wait to make your purchase.

The market rallied strongly off the lows last week, moving 6% higher on the week.
Is the bottom in?


I doubt it. The market has behaved this way all year. There has typically been a rally after intense selling and a new low. But stocks have difficulty generating any lasting upside traction in the face of high inflation, an aggressive Fed, and a slowing economy.

There was little news this week, but I wanted to highlight two things that are on my mind.
First, small and micro-cap stocks look incredibly cheap.

I am making one change to the four-ETF Undiscovered model. I am selling the Direxion Daily S&P 500 Bear 1X Shares (SPDN), a 20% position, and replacing it with the ALPS Medical Breakthroughs ETF (SBIO) in the 20% portfolio slot.

This Real Estate Investment Trust ETF began trading last September. It’s top five holdings include: Medical Properties Trust, Inc. (MPW, 1.66% of assets); Omega Healthcare Investors, Inc. (OHI, 1.59%); Spirit Realty Capital, Inc. (SRC, 1.57%); Vornado Realty Trust (VNO, 1.54%); and Equity Residential (EQR, 1.54%).

Today, we’re buying a Florida utility, and selling two previous ideas.

Onsemi (ON) closed beneath 60 yesterday. That triggers our tiered sell-stop for the position, of sell half ‘near 60.’

A couple of quick notes are in order. We exited our trading position in U.S. Steel (X) today after our stop-loss at 23.50 was violated on an intraday basis.

This gold miner is expected to grow earnings by more than 37% this year.

As we continue to balance the pursuit of opportunities with the desire to preserve capital/current gains we’re intently focused on stocks that are breaking down to new lows. Today we’ll take partial profits on another name and step completely away from one stock.

This company has had its issues, but analysts and insiders are betting on a turnaround. Earnings will be announced February 1, and the stock is trading at a P/E of just 9.15. The shares offer a current annual dividend yield of 4.80%, paid quarterly.

Both Sprout Social (SPT) and Kornit Digital (KRNT) have made fresh lows today so we’re going to take partial profits by selling one quarter of each position.

In the past 30 days, four analysts have raised their EPS estimates for this Real Estate Investment Trust. The shares have a current annual dividend yield of 2.72%, paid quarterly.

In a recent update, I used the phrase, “It’s always darkest before the dawn,” as I reasoned that the marijuana sector’s dreadful performance in 2021 was likely the prelude to a well-deserved rebound in 2022. And the news is still pretty dark.

This eco-friendly water management company is expected to post annual earnings growth of 49.5% over the next five years.

Analysts expect this money remittance company to grow earnings by more than 20% next year.

A few Cabot Options Trader subscribers have asked me about ways to protect gains in their portfolios, so I thought I would write to everyone with a couple of strategies using options to hedge your portfolio.

A subscriber recently asked me if I keep a journal of my trades. Many traders keep journals so they can look back at their trades and evaluate what they did right and what they did wrong.

Want to know how the big institutional investors use options? Here is an example of how one trader spent $132 million on three technology stocks.

Options trading has its own vernacular. To know how to do it, you need to know what every options term means. Here are some of the basics.

Our Cabot Top Ten Trader’s market timing system consists of two parts—one based on the action of three select, growth-oriented market indexes, and the other based on the action of the fast-moving stocks Cabot Top Ten features.