The recent rally has lifted call premiums to the highest levels in many months as more investors are willing to bet on higher prices going forward. But unless this current rally leads us to the next bull market, it’s probably nearly over. It’s a great time to lock in a high income while premiums are fat, and stocks may be close to a near-term high.

The current market is creating a golden opportunity to get a high income in an otherwise crummy market. Let’s grab it. In this issue, I highlight two call-writing opportunities in stocks that have rallied strongly since being added to the portfolio. While I like the prospects of these stocks over the next year, it’s time to err on the side of income.

Today we are going to keep the profits rolling by selling a defensive covered call in a recent earnings winner.

First off, a quick note: Due to our regular schedule (50 weeks a year), there won’t be a Movers & Shakers update this shortened week, or a Top Ten issue next Monday—but we will send out a Movers & Shakers update next Monday and will be around all next week if you have any questions. Have a fantastic Thanksgiving!

Nothing much changed with the market last week: The major indexes were down, but not severely, and the intermediate-term trend continues to point up. That said, under the surface, it remains a very mixed bag—some areas look great, but there are as many (or more) wobbly names out there compared to names in solid uptrends. We’ll keep our Market Monitor at a level 5 this week, though we’d like to individual stocks act better soon.

This week’s list is heavy on old world companies, though there are a few great-looking growth names, too. Our Top Pick is in that space and has shown great power before and after its recent earnings report.

Happy Thanksgiving! The market is relatively quiet at the moment, and will likely continue to be ahead of the Thursday holiday. And as we head into the final month of the year, our portfolio is in good shape, with most of our stocks acting well. But it can never hurt to add a bit of safety, especially in a bear market, which is why this week we’re adding a reliable real estate investment trust (REIT) that tends to outperform coming off of down periods for the market. The company comes highly recommended by Cabot Dividend Investor Chief Analyst Tom Hutchinson.

Details inside.

The three leading indexes were slightly lower last week as the S&P 500 fell 0.61%, the Dow declined by 0.5%, and the Nasdaq lost 1%.

We currently have two open positions: a bear call spread in SPY and an IWM iron condor. Both are due to expire December 16, 2022 and both are currently in a profitable state. So there really isn’t too much to say at the moment. I do plan on adding a bull put spread to the portfolio, mostly to even out the deltas a bit, but as always, I’m not going to force it.

The three leading indexes were slightly lower last week as the S&P 500 fell 0.61%, the Dow declined by 0.5%, and the Nasdaq lost 1%.

This week we have two positions due to expire: one in GDX, the other in KO.

Both positions are in the covered call phase of the income wheel strategy and both have calls that look to close in-the-money at the end of this week. If both close in-the-money, we will simply lock in our capital gains, premium and begin the wheel process over again by selling more puts in both positions early next week.

I also intend on adding a new short-term trade to the mix this week. Stay tuned!

Another earnings season is finally behind us.

After two winning trades in Home Depot (HD) and Walmart (WMT) last week our cumulative total for the earnings cycle was 21.7%. That’s an average gain of 3.1% per trade, below our expected return per trade but certainly nothing to sneeze at, especially in this volatile market. I’ll take what can be thought of as paying myself a 3.1% dividend, seven times, over the past month or so. Again, not even close to a home run, but remember, we aren’t playing long ball. Aaron Judge doesn’t interest us. Our goal is to hit singles and doubles with each and very trade we place. We’re taking the Tony Gwynn/Rod Carew approach to trading earnings.

The top-down evidence isn’t completely green, but it’s certainly taken steps in the right direction, with our Cabot Tides clearly on a buy signal, the broad market improving in the face of tons of bad news and sentiment still in the dumps. We think there’s a decent chance this rally can morph into the real deal.

That said, there’s no rush to jump in when it comes to growth stocks, as few are really moving on the upside–the sell-on-strength pattern remains in place, with far more air pockets out there than moonshots. That can change, and if it does, we’ll embark on a buying spree, but we still favor going slow on the buy side for now.

In tonight’s issue, we go over all our stocks and our recent moves, as well as dive into the sell-on-strength action, which to us, is the #1 market trait of 2022. When it ends, many will likely be caught leaning the wrong way (selling/shorting at new highs), but that’s what we’re waiting for to floor the accelerator.

In the November Issue of Cabot Early Opportunities, I take a quick look at some recent earnings reports and continue to spread things out among different industries with our new additions.

This month I cover a premium furniture retailer, a micro-cap biotech, an online finance specialist, an oil refiner and a somewhat speculative space economy stock. There should be something in this Issue for everybody.

Sparked by an inflation data point that showed some signs of cooling, the market surged higher last week. The S&P 500 gained 6%, the Dow rose 4% and the Nasdaq gained a whopping 8.8%.

Markets are a bit jittery despite strong earnings and expected strength as America opens up its post-pandemic economy. China is already at a 5% growth path while India, Japan, and other important economies struggle to get the pandemic under control.

The market’s relentless march ever higher is being interrupted. What’s going on?

Investors have started to see a cloud or two in an otherwise sunny stock market sky. We don’t focus much on short-term market moves, but we have noticed that the weather is shifting, at least slightly.

During his 30+ year career, my dad was a professional investor in Boston, Massachusetts. He worked for several firms, but always specialized in managing value portfolios worth hundreds of millions of dollars for institutional clients. I am lucky that he’s a great teacher and enjoyed passing along his investing wisdom over the years.

The market is still in an uptrend and not far from the highs. But things are changing.

Today’s note includes earnings updates, ratings changes and the podcast.

This has been another tough week for most growth-oriented small cap stocks as the sellers have clearly taken control. There are easy targets to point to as driving the decline, namely fear of inflation. But the reality is it is mostly just a lot of uncertainty about the path of the recovery that’s likely driving the selling. And the fact that most stocks are still up very nicely over the last twelve months, meaning a lot of room for profit taking.

Remain defensive. Growth stocks remain under severe pressure, and today notwithstanding, that selling is starting to spread to the broad market (our Cabot Tides are on the fence).

It looks like the relentless bull market is finally running into trouble. The market indexes are down a lot for the third straight day.

We’ve seen signs of it everywhere. Retail prices for homes, apartments, food, gasoline, cars and everyday services are higher than they were a year or two ago and are going higher. Upstream from these consumer-facing prices, input prices for raw materials, semiconductors, crops, wages, energy and transportation are going up. Inflation is no longer around the corner – it is here.

Today’s note includes earnings updates, ratings changes and the podcast.

Cloudflare (NET) earnings are out today as sector rotation and scrutiny of SPAC-acquired target company valuations continue. Electric vehicle (EVs) stocks are struggling a bit and could be presenting us with attractive entry points.

Cardlytics (CDLX) reported Q4 2020 numbers this morning that surpassed revenue expectations by roughly 10% and missed modestly on earnings. Revenue was down 3.2% to $67.1 million (beating by $6.2 million) while adjusted EPS of -$0.05 missed by $0.02. Management gave 2021 guidance that called for revenue of $250 million to $275 million, which straddles consensus expectations of $260 million (up 40%).

This oil, natural gas, and mineral company recently announced its fourth quarter distribution of $0.242260 to unit holders. The shares have a current annual dividend yield of 8.60%, paid quarterly.

Arcosa (ACA) released an uninspiring report on Wednesday that was particularly ill-timed given yesterday’s market retreat. The company missed across the board. Revenue was up 2.7% to $459 million, missing by $4.7 million while adjusted EPS of $0.33 missed by $0.08. Guidance for 2021 also missed.

Personalis (PSNL) released preliminary Q4 results on January 11 and the official release after the close yesterday offered no surprises. Personalis (PSNL) Moves To SELL

This mining company sees bullish demand, and its shares were recently upgraded by Goldman Sachs to ‘Buy.’

A move to invest more than expected in its non-capital investment, created an earnings miss for this building products and equipment company, but it looks like the investment will pay off as six analysts have just increased their earnings forecast for the company.

Sprout Social (SPT) reported Q4 results yesterday that surpassed expectations. Revenue was up 32.6% to $37.3 million (beating by $1.4 million) while adjusted EPS of -$0.06 beat by $0.05. Guidance for 2021 looks solid with management calling for 2021 revenue of $172.5 million (up 30%), modestly ahead of estimates for $170 million.

Upwork (UPWK) reported Q4 results yesterday that surpassed expectations on the top and bottom lines. Revenue was up 32% to $106.2 million (beating by $8.8 million) while adjusted EPS of $0.06 beat by $0.06. Guidance for 2021 also surpassed consensus.

This power solution company beat EPS estimates by $0.14 last quarter and set record annual earnings.

Last week wasn’t great for growth stocks and so far, this week is just plain awful. The primary culprits are known; risk of inflation and higher interest rates have pushed cyclical stocks up and growth stocks down (generally speaking).

The overall market isn’t cracking yet, but growth stocks are beginning to flash lots of abnormal action. With our trend-following indicators still positive, we wouldn’t sell wholesale, especially if you came into this week with some cash (we had 20% in the Model Portfolio).

With the shares continuing to surge past our recently raised 65 price target and now being priced at a premium to even our upgraded valuation metrics

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 Momentum 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 Momentum Trader features.