Trading Newsletter – 2/7/2020
Quote of the Week
“Do more of what works and less of what doesn’t.”
– Steve Clark
Thanksgiving and Giving Thanks
It’s a short week folks and I’d like to tell you not to trade, but I know that small itch of not trading on Monday can snowball into a major “need to trade” moment on Tuesday. So, for those people, we’ve compiled some potential plays for you below (the ones who just can’t stay away from trading in the market).
I do advise, as the other contributors agree, to shy away from using large amounts of your account this week, if possible. The week is short and liquidity will be scarce. There’s no reason to risk unnecessary capital going into the holidays.
I did want to remind everyone that during this rough year there have been plenty of positively surprising moments. To name one, if you’re reading this, you’re still able to read. You woke up able to get out of bed and live life. You’re here for a reason.
Don’t squander the greatest gift in the world: life.
During this holiday season, let’s continually remind ourselves of the blessings we’ve been granted. We love trading because of the freedom that money can provide, but let us never forget to show kindness to others. So, give or volunteer to a local charity. Buy the person’s coffee behind you in the drive through. Help a stranger in need. We’re all in this together.
With that being said, onto this week’s newsletter…
*See below for full calendar Presented by Earnings Whispers (check them out here)
Upcoming Economic Events
On watch for next week:
- Initial Jobless Claims — how many people were looking for a job but couldn’t find one?
- New Home Sales — how many new homes have been sold?
Charts, Charts, & More Charts
These charts are intended to help you to become a better trader. Don’t take every trade in this newsletter and expect to make money. Do your own due diligence and research before investing and/or trading.
ZM (1-hour timeframe)
Analysis: Last week Zoom was moving off of travel restriction news along with schools moving to all online learning. I believe we will continue to see more school shutdowns and restrictions which should push Zooms price higher with it. I don’t believe we will fill the gap this week but I expect the fill to begin Monday. Watch for the breakout to begin over $445 and confirm over the $450 price level.
Resistance to watch: $445, $450, $475, $500
Support to watch:$429-$434, $438
Long Invalidations level: a close below $429
Breakout level to watch: $450
BABA (1-hour timeframe)
Analysis: After a few weeks of bearish price action BABA finally made a push higher out of the large wedge pattern near daily $250 support level. Due to Black Friday/Cyber Monday being right around the corner I expect baba to continue to push higher with other e-commerce names this week. If BABA can see price action above the $272 leveI I do believe this name can see $280 before the weeks end and rather quickly at that. If BABA remains extremely bullish after the $280 price level watch for it to begin to fill the gap higher towards $284-$285 resistance.
Resistance to watch: $272, $275, $280, $284-285
Support to watch: $263-$265, $269-$271
Long Invalidation level: a close below $263-$265 demand zone
Breakout level to watch: $272
WMT (4-hour timeframe)
Analysis: As mentioned in the BABA analysis, Black Friday and Cyber Monday are right around the corner. Every year we hear some crazy stories about people getting hurt during the Black Friday rush into Walmart… if you couldn’t guess, I don’t expect that to change this year and currently Walmart is consolidating very constructively at ATH price levels. What I’m watching for is a breakout of this bull flag to the upside this week and a push for the 1.618 fib at $159.50. If we continue to see bullish price action above the 1.618 fib level look for this name to test $163 then $165 next.
Resistance to watch: $152-$153.50, $155, $159.50, $160, $163, $165
Support to watch: $147-148 demand zone, $150
Long Invalidations level: a close below $147
Breakout level to watch for: $153.50
Do not buy same week expiration on any play noted in this newsletter. All option expiration dates should be at least 2-3 weeks out at a minimum.
FSLY (1-hour timeframe)
Disclaimer: You can potentially lose all of your entry cost into this play as it’s noted as a ‘lottery play’.
The following play is intended to be low cost and high reward, driven by the following analysis:
I expect this stock to pull back next week (a short holiday week). My ideal entry point is between $80-$82.
FSLY – Call Debit Spread
Buy the call $90
Sell the call $95
Projected cost of this lotto play, as of right now, is $90 (if a 12/6 expiry is taken) and max profit is $410. Profits/losses can be taken earlier at any time before expiration with no penalty.
11/20/20 – Unusual volume detected with call sweep
11/17/20 – Company announces low latency, high performance live streaming for sports in Australia
Analysis: FSLY is getting a boost recently as new lockdown measures are sweeping across the nation. Currently, a ‘v-shape’ recovery is taking place from recent sell off. FSLY reached resistance at $85.45 and is now pulling back to retest that resistance in the coming days. My ideal entry of entering the lotto play is any point below $79. Remember, expiries should be at least 2+ weeks out, so we have a lot of time to see this trend higher.
Support to watch: $82.02 / $80.60
Resistance to watch: $89.40 / $91.41
PTON (15-minute timeframe)
11/20/20 – PTON shares trade higher amid new lockdown restrictions.
11/19/20 – Kourtney Gibson from CNBC’s “Fast Money Halftime Report” stated she bought shares
11/19/20 – OptionsMonster Jon Najarian reported that it will “take PTON a while to sort through a backlog for recurring revenue
Analysis: PTON, just like FSLY, is benefitting from new COVID-19 restriction measures. We’ve witnessed this before: news overrides all chart patterns. PTON was showing a bearish rising wedge until new announcements of lockdowns started sweeping the nation. Its chart was showing a bull flag in power hour before the week concluded, signaling a potential for continuation into the next week. ***Keep in mind that if vaccine news comes out before market open on Monday, COVID stocks will most likely pullback next week***
Support to watch: $110.38 / $106.31
Resistance to watch: $116.27 / $118.60 / $121.02
SNAP (15-minute timeframe)
11/20/20 – Analysts expect Snapchat to hit $200B valuation by 2025
11/19/20 – SNAP acquires Tiktok competitor Voisey
11/19/20 – SNAP shares trade higher with fresh social media sector optimism amid new U.S. lockdown measures.
Analysis: You may think SNAP is overdone already, but wave 5 is not fully complete. This upcoming week were looking to enter on a pullback to take the next leg up in completing wave 5 (potential $48 target).
Resistance to watch: $43.04 / $44.70 / $45.09
Support to watch: $42.56 / $41.14 / $40.24
BBY (4-hour timeframe)
11/24/20 – Earnings report (before market open)
Analysis: Just be conscious that this massive run has created a gap below between $91-$95. Most stocks tend to fill these type of gaps (I highlighted most of them). Company is providing earnings this coming week that I advise you not to play. My only mindset here is if the stock does fall from earnings report to play the continuation to gap fill below. This is only a continuation play if the stock drops from ER.
SPR (4-hour & 1-hour timeframes)
The biggest benefactor from the 737 Max approval for flight is actually not BA; it’s SPR. SPR manufactures 70% of components used to make the 737 Max. With rumors of orders starting to roll in again, SPR can be a great long-term play with potential for major upside. SPR generates about $6 million in revenue per plane built as BA announced plans in 2021 to produce 20 planes per month, while ramping that number up to 31 per month in 2022. This provides great long-term stability to SPR, and, while SPR does provide a small dividend, I believe the most lucrative move would be January 2022 or 2023 call options.
BLDP (4-hour timeframe)
BLDP creates fuel cells in a market that’s exploding and expected to grow over 25% in the next four years. On Friday, BLDP broke out of its pennant and is now poised to explode upwards. While everyone is talking about EVs, let’s not forget that fuel cell technology is also exploding. New deals with Audi AG and huge advances in marine battery technology provide no better time to go long on BLDP.
VALE (4-hour & 1-hour timeframes)
VALE is finally turning it around after a rough 2019 as they have increased profit and revenue at an impressive rate over the last four quarters. It looks to make 2020 one of its best years in recent memory. VALE is the largest producer of iron ore and nickel in the world, and with the recent break out of the long-term downtrend, this is an opportunity worth pursuing. Since VALE pays a 3.4% dividend, shares or a covered call LEAP strategy could pay well. Alternatively, 2022 or 2023 LEAPS could also provide a nice return.
EPD (15-minute timeframe)
This is a chart I will be looking at next week to see how it breaks out of this head and shoulders formation. The red scenario is if EPD breaks out of the neckline and then follows a retracement down. Failure to break the neckline could provide a great opportunity to go long on a stock that has major upside. The green scenario is the bullish scenario. With a 9.2% dividend yield, EPD is among my favorite dividend stocks to hold in your portfolio.
– The Financial Cloud Team
Disclaimer: Investing involves substantial risk. Neither TFC, the publisher nor any of their respective affiliates make any guarantee or other promise as to any results that may be obtained from using the Newsletter. While past performance may be analyzed in the Newsletter, past performance should not be considered indicative of future performance. No reader should make any investment decision without first consulting his or her own personal financial advisor and conducting his or her own research and due diligence, including carefully reviewing the prospectus and other public filings of the issuer. To the maximum extent permitted by law, the Author, the publisher, and their respective affiliates disclaim any and all liability in the event any information, commentary, analysis, opinions, advice, and/or recommendations in the Reports prove to be inaccurate, incomplete or unreliable, or result in any investment or other losses.