Monthly Archives: July 2022

Go With the Pro

28 July 2022

Go With the Pro

Prologis (PLD) is a real estate logistics company, leasing properties to businesses in 19 countries. The company reported earnings on Monday before the open that beat profit and revenue estimates. PLD also raised guidance for FY22. There were no upgrades or downgrades on the news, but a few target prices were lowered. This is normal these days as analysts are lowering targets across the board to keep up with the bear market. Despite a few reductions, the overall target is $161, 27% above Friday’s close.

The stock reacted with a 1.5% drop on Monday after reporting but recovered to close the week with a 4% gain. More importantly, the shares bounced off the support of the 20-day moving average, a trendline that is now pointing higher for the first time since April. That was just as PLD was embarking on a 40% slide that took less than two months. But the stock has gained 19% off its June 13 bottom to close at its highest point in more than five weeks.

This trade is based on PLD continuing its recent uptrend, buoyed by the support of its rising 20-day moving average. Note that the short strike of our put spread is below the 20-day, meaning the stock will have to pierce this support to move the spread into the money.

If you agree that the 20-day moving average (blue line) will continue guiding PLD higher, consider the following trade that relies on the stock staying above $120 (red line) through expiration in eight weeks:

Buy to Open the PLD 16Sep 115 put (PLD220916P115)
Sell to Open the PLD 16Sep 120 put (PLD220916P120) for a credit of $1.10 (selling a vertical)

This credit is $0.05 less than the mid-point price of the spread at Friday’s $126.90 close. Unless PLD increases quickly, you should be able to get close to that price.

The commission on this trade should be no more than $1.30 per spread. Each spread would then yield $108.70. This trade reduces your buying power by $500, making your net investment $391.30 per spread ($500 – $108.70). If PLD closes above $120 on September 16, both options will expire worthless and your return on the spread would be 28% ($108.70/$391.30). 

Any questions?  Email Terry@terrystips.com

Making 36%

Making 36% – A Duffer's Guide to Breaking Par in the Market Every Year in Good Years and Bad

This book may not improve your golf game, but it might change your financial situation so that you will have more time for the greens and fairways (and sometimes the woods).

Learn why Dr. Allen believes that the 10K Strategy is less risky than owning stocks or mutual funds, and why it is especially appropriate for your IRA.

Order Now

Success Stories

I have been trading the equity markets with many different strategies for over 40 years. Terry Allen's strategies have been the most consistent money makers for me. I used them during the 2008 melt-down, to earn over 50% annualized return, while all my neighbors were crying about their losses.

~ John Collins

July 20, 2022 Terry’s Tips Trade Alert – Wiley Wolf  Portfolio

July 20, 2022 Terry’s Tips Trade Alert – Wiley Wolf  Portfolio

We are raising delta:  


BTC 1 MSFT 22Jul22 245 put (MSFT220722P245)
STO 1 MSFT 22Jul22 262.5 put (MSFT220722P262.5) for a credit of $2.20 (selling a vertical) (100%)

BTC 1 MSFT 22Jul22 255 call (MSFT220722C255)
STO 1 MSFT 29Jul22 270 call (MSFT220729C270) for a debit of $4.85 (selling a diagonal) (100%)


Be prepared to change this (these) price limit(s) by $.05 or more in order to get an execution.

Happy trading.

Terry

Making 36%

Making 36% – A Duffer's Guide to Breaking Par in the Market Every Year in Good Years and Bad

This book may not improve your golf game, but it might change your financial situation so that you will have more time for the greens and fairways (and sometimes the woods).

Learn why Dr. Allen believes that the 10K Strategy is less risky than owning stocks or mutual funds, and why it is especially appropriate for your IRA.

Order Now

Success Stories

I have been trading the equity markets with many different strategies for over 40 years. Terry Allen's strategies have been the most consistent money makers for me. I used them during the 2008 melt-down, to earn over 50% annualized return, while all my neighbors were crying about their losses.

~ John Collins

Don’t Bank on it

18 July 2022

Don’t Bank on It

Wells Fargo (WFC) posted earnings on Friday morning that were underwhelming. Profits declined 48% from a year earlier, while revenue and earnings both fell short of expectations. Yet the stock soared 8% before closing 6.2% higher. Why the jump on seemingly bad news? It’s anyone’s guess, though it’s typical to parse the data to spin a bullish story. For WFC, it was strong net interest income. Whatever.

Oddly, there was no analyst activity following the report. No upgrades or downgrades. No target price changes. WFC remains a solid buy among the 30 or so covering analysts, while the target price average is $53.36, 30% above Friday’s close. I guess analysts don’t like to criticize their peers.

Analysts haven’t been getting a whole lot right with WFC this year. Despite the glowing predictions, the stock is down more than 30% from a February high. And Friday’s rally was soundly rejected by the 50-day moving average, which marked tops in March and June. In fact, the trendline hasn’t allowed a daily close above it since late February.

Parse the data all you want. WFC came up short on the big numbers. Consider this a “fade the rally” trade that is banking on WFC’s downtrend continuing. We are using a call credit spread with the short call strike (red line) sitting above the 50-day moving average (blue line).

If you agree that the 50-day moving average will continue guiding WFC lower, consider the following trade that relies on the stock staying below $43 through expiration in six weeks:

Buy to Open the WFC 26Aug 46 call (WFC220826C46)
Sell to Open the WFC 26Aug 43 call (WFC220826C43) for a credit of $0.70 (selling a vertical)

This credit is $0.02 less than the mid-point price of the spread at Friday’s $41.13 close. Unless WFC drops quickly, you should be able to get close to that price.

The commission on this trade should be no more than $1.30 per spread. Each spread would then yield $68.70. This trade reduces your buying power by $300, making your net investment $231.30 per spread ($300 – $68.70). If WFC closes below $43 on August 26, both options will expire worthless and your return on the spread would be 30% ($68.70/$231.30). 

Making 36%

Making 36% – A Duffer's Guide to Breaking Par in the Market Every Year in Good Years and Bad

This book may not improve your golf game, but it might change your financial situation so that you will have more time for the greens and fairways (and sometimes the woods).

Learn why Dr. Allen believes that the 10K Strategy is less risky than owning stocks or mutual funds, and why it is especially appropriate for your IRA.

Order Now

Success Stories

I have been trading the equity markets with many different strategies for over 40 years. Terry Allen's strategies have been the most consistent money makers for me. I used them during the 2008 melt-down, to earn over 50% annualized return, while all my neighbors were crying about their losses.

~ John Collins

Dressing Down this Stock 

Levi Strauss (LEVI) was one of the only well-known names that reported earnings this week ahead of the banks kicking off the season next week. The company beat estimates on both revenue and earnings, posting higher sales while avoiding – perhaps temporarily – excess retailer inventory and slowing consumer spending. The company cited a shift to more casual clothes from the burgeoning remote work crowd. 

That makes sense, but why wouldn’t that have applied during the past two years? The stock is on a slide that’s covered 46% in the past 14 months. It’s down 34% this year. And all it could manage after a stellar earnings report was a meager 1% gain after peaking 6.6% higher. More importantly, the shares were soundly rejected by the declining 50-day moving average at the $17.50 level. This trendline has rejected numerous rally attempts, allowing just a handful of closes above it since it turned south in January. 

This trade is a bet that LEVI’s downtrend will continue. Earnings and the brief respite they brought are in the past. Now the company must face what all consumer stocks are facing – inflation fears, supply chain issues and a worried customer. Plus, the stock has to contend with its 50-day moving average. Note that the short call of our bearish call spread is 3% above the 50-day, so the stock will have to power through this resistance to move the spread into the money. 

If you agree that LEVI will continue its slide under the weight of its 50-day (blue line), consider the following trade that relies on the stock staying below $18 (red line) through expiration in six weeks.  

Buy to Open LEVI 19Aug 20 call (LEVI220819C20)

Sell to Open LEVI 19Aug 18 call (LEVI220819C18) for a credit of $0.55 (selling a vertical)

This credit is $0.05 less than the mid-point of the option spread when LEVI was trading at $16.58. Unless the stock drops quickly from here, you should be able to get close to this amount.

Your commission on this trade should be no more than $1.30 per spread.  Each spread would then yield $53.70. This trade reduces your buying power by $200 and makes your net investment $146.30 ($200 – $53.70) for one spread.  If LEVI closes below $18 on August 19, both options will expire worthless and your return on the spread would be 37% ($53.70/$146.30).

Making 36%

Making 36% – A Duffer's Guide to Breaking Par in the Market Every Year in Good Years and Bad

This book may not improve your golf game, but it might change your financial situation so that you will have more time for the greens and fairways (and sometimes the woods).

Learn why Dr. Allen believes that the 10K Strategy is less risky than owning stocks or mutual funds, and why it is especially appropriate for your IRA.

Order Now

Success Stories

I have been trading the equity markets with many different strategies for over 40 years. Terry Allen's strategies have been the most consistent money makers for me. I used them during the 2008 melt-down, to earn over 50% annualized return, while all my neighbors were crying about their losses.

~ John Collins

Just Do It … or Not

Nike (NKE) reported earnings on Monday that beat on the top and bottom lines. But many were not impressed, citing disappointing gross margin guidance, among other metrics. The stock was hit with a slew of target price downgrades, though that’s been the norm for all stocks as analysts make feeble attempts to catch up with the bear market. Nevertheless, saying analyst reactions were mixed would probably be an overstatement. The stock reacted by crashing to a two-year low and falling 45% from its November high. Given the current market environment and the latest numbers, it’s difficult to make a bullish case for the stock over the near term. So, we won’t. That said, we’re giving plenty of room on the upside, using a call spread with the short call sitting just below the declining 20-day moving average (red line), which twice rebuffed rally attempts in June. The 50-day moving average (blue line) is also in play as potential resistance.

If you agree that NKE will continue its overall downtrend, consider the following trade that relies on the stock staying below $110 (green line) through expiration in seven weeks.  

Buy to Open NKE 19Aug 115 call (NKE220819C115)
Sell to Open NKE 19Aug 110 call (NKE220819C110) for a credit of $1.05 (selling a vertical)

This credit is $0.02 less than the mid-point of the option spread when NKE was trading at $101. Unless the stock drops quickly from here, you should be able to get close to this amount.

Your commission on this trade should be no more than $1.30 per spread.  Each spread would then yield $103.70. This trade reduces your buying power by $500 and makes your net investment $396.30 ($500 – $103.70) for one spread.  If NKE closes below $110 on August 19, both options will expire worthless and your return on the spread would be 26% ($103.70/$396.30).

Making 36%

Making 36% – A Duffer's Guide to Breaking Par in the Market Every Year in Good Years and Bad

This book may not improve your golf game, but it might change your financial situation so that you will have more time for the greens and fairways (and sometimes the woods).

Learn why Dr. Allen believes that the 10K Strategy is less risky than owning stocks or mutual funds, and why it is especially appropriate for your IRA.

Order Now

Success Stories

I have been trading the equity markets with many different strategies for over 40 years. Terry Allen's strategies have been the most consistent money makers for me. I used them during the 2008 melt-down, to earn over 50% annualized return, while all my neighbors were crying about their losses.

~ John Collins