Before we dive into this week’s idea, I wanted to clean up our SHLS and ASO positions from last Friday’s January expiration.

This year was always going to be better than last year. And it’s off to a great start. But it is unlikely that stocks muster a sustained rally out of this bear market until there is more clarity on the extent and timing of an economic bottom.

That said, the current market still offers opportunities. Cyclical stocks have rallied and, for the first time in a long time, there is an opportunity to sell a covered call on one of the portfolio’s cyclical stocks. In this issue, I highlight a covered call opportunity in Visa (V) after the stock has rallied.

I also highlight a fantastic income stock that has likely already made its own low even if the market turns south again. It sells at a dirt-cheap valuation with a high and safe dividend and has recently added momentum to the mix.

It was a down-and-up week for the market, with a round of selling hitting the major indexes and many stocks as they approached their December highs, but then a solid-looking snapback on Friday and today. Moreover, most of the nascent positives that we’ve written about are still in place, with the broad market in solid shape and the 2-to-1 Blastoff Indicator still in effect; now we want to see the intermediate-term trend kick into gear and some breakouts occur. We’re encouraged, though we still think going slow makes sense. We’ll leave our Market Monitor at a level 5.


This week’s list is again heavy on the cyclical- and turnaround-type names, and our Top Pick is a commodity name that’s near the top of an eight-month structure.

The market has been resilient through the first few weeks of 2023, giving hope that a much better year lies ahead for investors. Potential potholes abound (earnings season is underway, another Fed rate hike next week, a possible recession looming, etc.), but for now, there’s reason for optimism. With that in mind, we take another big swing today by adding a mid-cap technology stock that was just recommended by Cabot Early Opportunities Chief Analyst Tyler Laundon.

We currently have two open positions and, thankfully, both currently have a high probability of success. My hope is that we can start to look at taking off both trades for profits towards the latter part of the week, but we need a bit of cooperation from Mr. Market.

My goal this week is to start adding positions for the March expiration cycle. As always, I want to add, at minimum, a bear call, bull put and iron condor. If I can get all three off this week, I would be incredibly pleased, but, as always, I’m not going to force it.

The week I will add new trades in both BITO and KO.

We locked in some nice gains on both trades last week which brought our total premium return to 49.75%. My hope is that we are able to add several short-term trades to the mix, in addition to the new trades in BITO and KO.

Last week was a bit of a dud for earnings announcements.


While numerous companies announced earnings, only a few companies met our guideline of having high levels of options liquidity. But that all changes this week.



This week could be the busiest of the earnings season with upwards of seven potential trades. My guess is that we will make anywhere from 3 to 5 trades with most of the trading activity occurring during the latter half of the week.

It was hardly smooth sailing for traders last week, as the indexes got hit hard on Wednesday and Thursday, and then roared back to life on Friday.

It was hardly smooth sailing for traders last week, as the indexes got hit hard on Wednesday and Thursday, and then roared back to life on Friday.

Very impressively, the rally that started late in 2022 continued last week, as the S&P 500 gained 2.7%, the Dow rose 1.8%, and the Nasdaq tacked on another 4.5% of gains.

In the January issue of Cabot Early Opportunities, we take heed of the improving market breadth and dig into five companies from different industries that look compelling now.

Our top pick this month is a small-cap oil and gas equipment company that’s a leader in the offshore market. I also feature an online retailer specializing in the luxury market, an emerging MedTech name, a customer experience specialist and an online learning marketplace that’s poised to recover nicely.

As always, there should be something for everyone in this month’s issue!

The broad market began to show strength in late December, and last week we saw further progress, with new lows continuing to shrink to very bullish levels while a granddaddy blastoff measure (the 2-to-1 Blastoff Indicator) turned green. It’s all very encouraging, but now we need to see more “primary” evidence turn positive, including the trends of the major indexes and many more “real” breakouts from high relative strength stocks. We’re optimistic, but are in a trust-but-verify mode; for now we’ll move our Market Monitor to a level 5.

This week’s list is heavy on many themes that are working, including solar, metals, infrastructure, China and travel. Our Top Pick is from the latter area and has turned the corner in a decisive manner.

U.S. crude oil hit a seven-year high as stocks, especially tech stocks, face headwinds. Today I am moving dominator Taiwan Semiconductor (TSM) to a Sell as Taiwan, America, China and Japan play a dangerous game. China sent 52 warplanes into the islands air buffer zone after the U.S. and allies held exercises nearby.

So far, October has been volatile. There have been strong rallies that quickly become undone in the following days. The market is still even for the month, but it looks very unsteady.

Last week, I made the case that we may be amid a commodity bull market and that it makes sense to have a percentage of your portfolio allocated to commodity companies. Many commodities are breaking out to the upside, yet many commodity companies continue to trade incredibly cheaply.

September lived up to its bad reputation. The S&P 500 fell 4.8% for the month. But September is over. Now it’s October, which is historically only the second-worst month of the year. What now?

This week’s note includes The Catalyst Report. We encourage you to take a look at this – it is popular among many of our subscribers and unique on Wall Street.

We’re sticking with a cautious stance—selling stocks that crack, holding plenty of cash and focusing more on capital preservation until the buyers reappear.

After a delayed rection to last week’s Fed commentary Treasury yields have shot up (though they are still very low). To put it in mortgage rate terms a 30-yr. refi has gone from around 2.875% to 3.0% over the last week.

It’s been a volatile week so far, with Monday an excellent day for risk stocks and yesterday a tough day for tech as inflation fears circulated in the market.

The market had its worse day since March yesterday. The worry de jour was the debt limit. I believe the issue will be resolved long before a default occurs one way or another.

Across almost the entire length of the yield curve, interest rates are ticking up. The benchmark 10-year Treasury yield reached 1.53% and may be headed back toward its December 2019 rate of about 1.90%. In an economy that is showing rapid growth, with inflation well above the Fed’s 2% target and likely at 6% or more if housing prices were properly factored in, a sub-2% 10-year Treasury yield doesn’t seem to make sense.

There’s a case to be made that we are in the early innings of a commodity bull market. I’m starting to see lots of articles about a looming energy shortage which will hit this winter.

The five largest holdings in this ETF are: Cisco Systems Inc (CSCO, 3.57% of assets), Proofpoint Inc (PFPT, 3.16%), Fortinet Inc (FTNT, 2.93%), NortonLifeLock Inc (NLOK, 2.93%), and Cloudflare Inc (NET, 2.77%).

Following testimony from the Federal Reserve Chairmen on Wednesday there has been wild rotation in the markets, which has impacted some of our positions expiring today.

In the past 30 days, five analysts have raised their EPS analysts for this gold producer. The shares have a current annual dividend yield of 3.15%, paid quarterly.

Gold futures prices were down around 5% on Thursday afternoon, leading a nearly across-the-board rout in most precious and industrial metals. Platinum took the brunt of the selling pressure, falling 8%, while silver was down 7%.

This bank has restored its dividend, and now is paying $0.03 annually. It’s a start! And it is a very positive bet on the future.

This is just a quick message regarding today’s action in Roblox (RBLX)—the stock had been correctly normally in recent days, but last night, it gave its May business update, and the numbers left a lot to be desired, with users actually shrinking from the prior month (though revenues were still up triple digits from the year before).

Since bottoming at the end of March, stocks in the marijuana sector have been building a base, with the best stocks in our portfolio still showing a healthy pattern of higher lows. But we still don’t have a renewed uptrend, and that’s OK. We’re patient. What we do have are 200-day moving averages that are coming close to our stocks and that, ideally, will provide support.

The top five holders of this closed-end fund are: Morgan Stanley, McGowan Group Asset Management, Inc., UBS Group AG, Wells Fargo & Company, and Invesco Ltd. The fund pays a current annual dividend yield of 7.19%, paid monthly.

Wednesday has witnessed some mixed action among the key metals, with liveliness in silver, weakness in copper and platinum and exceptional strength in steel.

This clothing retailer beat Wall Street’s estimates on both the top and bottom lines, posting revenues $535.6 million (up 44%), and EBITDA of $11.6 million, compared to the forecast of a loss of $5 million to $9 million.

This gold producer beat analysts’ earnings estimates by $0.02 last quarter, and four brokerage firms have boosted their EPS forecasts for the company in the last month.

This closed-end fund focuses on high-yielding debt (income).

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.