Note: Due to the celebration of Independence Day next week, the next issue will be delivered Tuesday, July 5.



After two brutal weeks for the indexes, the market staged a very nice snapback last week, and this comes after some decent resilience in many growth names during the June mini-crash. But the real question is can the market build on it: We’ve seen a handful of nice baby steps for the market this year, but each time the sellers reappear quickly and smack everything lower. Overall it’s best to remain mostly defensive until the buyers show they’ve conclusively taken control from the bears, which will take more time.



On a positive note, this week’s list has many names either showing some outsized accumulation of late or are forming solid bottoming areas. Our Top Pick is one that’s had a couple of false starts this year but looks ready to run if the market can get going.

We are only two weeks away from our first subscriber-exclusive event and subsequent earnings cycle. That first week of earnings should offer some nice trades in some of the major banks.

I will be going over potential trades, step-by-step, in our webinar. This will give you all the insights into how I approach earnings trades, our goals for the upcoming earnings season, the approach to order entry and more importantly order exits, managing trades, chasing trades, etc.

We are up to four positions in our Income Wheel Portfolio and I think we are approaching a decent mix right now.

Now that we are up to at least four stocks, I want to focus on finding a few shorter-term trades using a few jade lizards. Expect to see at least one if not two shorter-term trades next week as we continue to ramp up the portfolios.

Since last week’s issue we locked in another profitable trade, this time in XOP.

Convenient timing on our part allowed us to take a 15.2% return on the trade. We had sold the July 15 190/195 bear call spread for $0.70 on June 8. By June 17 our 190/195 bear call was worth less than $0.05, so we decided to lock in some profits and move on to the next opportunity. With 28 days left until expiration it just doesn’t make sense to hold any risk to try and make an additional $0.05, if we have the potential to simply take profits off the table.

Nio (NIO) was up 22% this week though markets face headwinds of inflation and increasingly loose talk of recession by many including Fed Chairman Jerome Powell. With regret, we let go of Sea (SE) but add another favorite selling at a sharp discount to its high—and in the middle of the unstoppable trend of cybersecurity.

Tuesday there were some rays of sunlight amidst the storm, but until proven otherwise, we are in a bear market and should proceed with caution. This brings me to this week’s trade, which is a defensive trade on a recent outperformer, that we recently traded successfully

There is overwhelming historical evidence that buying good stocks in bear markets is a highly successful long-term strategy. After all, it’s better to buy stocks cheap. And the market always trends higher over time. The truth is that buying stocks in a bear market is the most successful investment strategy ever devised.
Of course, the market may fall further before it recovers. You don’t have to pick one day and invest all your cash. You can trickle in over time. You can invest just a little right now. If the low is already in, you got a great price. If the market falls more, you put more money in later. Over time it will work out.


In this issue, I highlight a portfolio position in the technology sector. The sector plunged into a bear market before the S&P and will likely be one of the first sectors to lead the way back up. The sector was already down less than the overall market in last week’s tumult.

The market is enjoying a big bounce today, but that’s not unexpected given last week’s washout; the main trend is still down.

And that means continued caution is the prescription, which is filled this week with an old-school vehicle parts company that pays a solid dividend and has a nearly bulletproof business.



As for the current portfolio, which is 25% in cash, there’s one Sell and a couple of downgrades to Hold.


Details in the issue.

It’s about at this point in a bear phase where investors start to throw up their hands. But it’s important to stay in touch: While the past two weeks brought most stocks lower, the selling was focused on areas that hadn’t yet gotten hit, while some of the “leaders” of this bear phase are actually trying to hold up. If you want to play a bounce, we actually think some of those areas could prove fruitful, though of course we’d keep things small and stay in an overall defensive stance.



This week’s list reflects all of this, with names from a handful of areas that have been forming higher lows in recent weeks (or months) and even showed some solid support (or even upside volume) of late. Our Top Pick is a Chinese EV player that’s showing excellent power and sports fantastic growth.

Before I get started, I wanted to thank all of you that wrote in this week. I’ve received kind words across all four of my services and I greatly appreciate it. I hope you will all find my services and statistical approach to options useful for years to come. As I stated in our most recent webinar, if you have any feedback, comments or question please do not hesitate to email me at andy@cabotwealth.com.

Monday saw a historic amount of selling pressure. In fact, fewer than five stocks in the S&P 500 were able to eke out a gain on the day.



And it only got worse.

Before I get started, I wanted to thank everyone that wrote in this week. I appreciate all of the kind words during and after our first subscriber-exclusive webinar. If you didn’t get a chance and want to check it out, click here or go to your subscriber page at your leisure. As I stated in the webinar, if you have any feedback, comments or questions please do not hesitate to email me at andy@cabotwealth.com. I’m more than happy to help in any way I can.

Monday saw a historic amount of selling pressure. In fact, fewer than five stocks in the S&P 500 were able to eke out a gain on the day.



And it only got worse.

Not much to say this week. We are now four weeks away from the next round of earnings and there is no doubt it will be an interesting one. I will continue to share any ideas that come our way and possibly make a trade or two in the process. This week, we actually have a potential trade on our hands in FedEx (FDX). I will discuss the trade in the “Trade Ideas” section below.

We recognize opportunities are scarce; they always are when we are in between earnings cycles. However, when earnings season is in full swing, we will often see 20 to 30 trade ideas per week, with the potential to send out alerts on two to five each week. Of course, if you wish to trade more (beyond our alerts), other ideas will be there for you to peruse and trade as you wish.



We try to place trades on at least 10-15 trades per earnings cycle, sometimes more, sometimes less.

That tech stocks would cool a bit has been one of my key themes over the past few issues; and September has seen it come to pass.

After pulling back over 8% from the high, the market is having trouble finding any traction. And the selling may not be over.

Through most of the summer, investors had become increasingly confident about the strength and direction of the economic recovery, the likelihood of the arrival of several promising Covid vaccines, another round of federal economic stimulus and other favorable indicators.

As we move closer to October, the S&P 500 is down about 8% from its peak and this is no longer the longest start to a bull market.

The market and big-winning growth stocks from this year remain iffy—today’s drop put our Cabot Tides on the fence and many growth stocks are still in a rough patch.

The flavor of the market hasn’t changed in the last week, in my view. There is still a sense that many high growth stocks have run too far. I think the lesser-informed general public hears about the recent slide in the mega-caps (AAPL, AMZN, MSFT, FB, etc.) and thinks they are “the market,” and that since they’re going down the market is in trouble.

It may seem unnecessary to write covered calls in a raging bull market. but that’s seldom the case. Over time you are likely to get a better return with this income strategy than just holding a market index. And you get a paycheck.

The raging bull market took a breather. The S&P 500 actually pulled back 7% from the high at the peak of the recent Labor Day selloff. But that seems to be over. The market has since regained some traction and appears to be resuming an uptrend.

Election season is now in full swing. In less than seven weeks, or only 49 days, the country will select its next president, representatives from all 435 House congressional districts, 35 senators and 12 state governors.

The beautiful thing about micro-caps is that you can invest in stocks that are both “growth” and “value.”

This closed-end fund has a current annual dividend yield of 6.73%, paid quarterly.

After last week’s two rounds of buying, the portfolio’s cash level is now down to 27%, and all our stocks look good. So now the question is whether we should continue buying.

This Chinese e-commerce company is expected to grow by 21.3% next year.

Today, this portfolio stock published a press release that it will make a $1.35 per share distribution on October 27.

In the past month, four analysts have increased their EPS estimates for this utility.

This food company beat analysts’ EPS estimates by $0.70 last quarter.

Yesterday saw strong buying in marijuana stocks across the board, with both U.S. and Canadian stocks benefitting.

Our second recommendation is a short sale of a company that is being weighed down by COVID-19.

Since its $0.06 earnings beat, our first idea today—a restaurant chain—has seen its earnings estimates upgraded by 31 analysts.

Our second recommendation is a sale of a previous pick that has been stopped out.

Our first idea is a food company that is undervalued and is paying a hefty annual dividend yield of 5.22%, paid quarterly

Eight weeks ago as marijuana stocks topped, I began selling and taking profits and that’s worked out well. We’ve lost less than the index, as the correction took down first marijuana stocks and then all stocks. At the same time, our strongest stocks have gained.

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.