Hola amigos! 

Hope you’re enjoying the summer as much as my tomatoes and I are, and I also hope you didn’t commit trade-suicide this earnings season. If you’ve been trading EH and following this blog, well you should be fine as I spent a ton of time (at least three blogs) discussing how to approach and ride earnings with ongoing EH trades.  Last week we discussed the “Tiger Position” and identified a few candidates for post-earnings trading, today we’re changing the tape as we’ll move from Tiger Position to actually hunting as we have some great post-earnings setups. I’m starving for trades and this week is, for me, one of the best times to trade. I’ll tell you why with a fishing analogy. 

On top of the gardening and brewing beer, I also enjoy fishing. Although I don’t do it as often as I used to when I was a kid, I still love it. The connection with nature and everything around fishing is amazing, but it takes some skills, knowledge, concentration and, mostly, a lot of patience and good timing. Just like trading. The difference between an amateur fisher and a let’s say veteran or experienced one, is not much on the skills or patience, but on the timing aspect. See, you would probably think that a perfect day for fishing is a sunny one, no cold nor hot, calm waters, no wind…beautiful weather. But the truth is that that’s a perfect day for hiking or camping maybe, but not necessarily a good one for fishing. Actually, those days usually suck. You would be the entire day singing “come on fishy fishy fishy…” and nothing or very little action would happen. Do you know when the action really happens? For example, after a big storm. Water gets oxygenated and cools down, earth in the bottom of the lake moves up and a lot of plankton starts floating around. This is a perfect environment for fish to go out like crazy looking for food. And that’s when the patience fisherman makes a difference. If not, ask Forrest and Lieutenant Dan. 

The week after earnings to me looks like the day after the storm for the fisherman. Still, some volatility (premium) but controlled exposure, some great set-ups and all the earnings boost like the wind on our back. I don’t hunt so I couldn’t really tell, but I assume this analogy would also apply to hunting. And since last week we talked about the Tiger position…today, then, let’s go hunting. 

Folks, this week set-ups are solid. Stay tuned and trade them, at least paper-trade them, and give me some feedback. Let’s get some juice from Mr. Market. 

SPWR 

Last week blog: “Going down to a multi-year support…I will be waiting for it to kiss it and go back up”. It did in fact went back down that earnings day, then doji and then up. I issued naked-puts the day after earnings, if you haven’t  yet, well first you need to wake up and second, you might have another opportunity on Monday as it retraced a little bit. Get it cheap as you can. 

TSLA 

TSLA showed some strength during earnings, Elon apologized for some of his craziness, and the marked loved it. If you got in with a bull-put one day after earnings, well palm yourself in the back because that was great timing. If you didn’t like myself, now is probably a little late as it’s overextended and approaching resistance. Two options moving forward: we let it retrace a little bit, how much? Well it’s up to you, my rule is usually enough to allow me cut a Bull Put spread underneath $280 with >10% ROI. If it keeps moving north, a break-out above $380 would definitely work as well. 

FSLR 

Earnings on FSLR were not as good as expected, however the stock barely moved. Moreover, it remains very loyal to that strong $50 support which is always a good edge. As I own SPWR and also have naked puts on it, I will not trade this one. However, naked-puts at $48 for example are offering a nice premium. You could always exit if it closes below $50, or get assigned if you can afford that. This is a very good covered call candidate. If you own 100 shares today you could sell a covered call with 0.40 delta at $55 strike price (above resistance) and cash in a nice 20% return. I am considering switching my SPWR long term position into FSLR, let’s see. 

NRG 

Good investment candidate here. Moving north slow but steady, investing in green energy, huge company with history and big daily volume. And it pays a dividend. Naked put below $30 looking for assignment could be an alternative. That or you can just trade it with a credit spread below that support level. If you rather wait for a retracement, or until it breaks above $33 for confirmation that’s fine too. 

EXC 

Another good investment candidate, beautiful upward channel. Keeping the momentum after beating earnings, solid. I would like to see it coming down to the bottom of the channel and then swing trade it next week or so. If you own it, then covered calls above resistance ($44 or so) is always a good cash flow move. 

AMD 

Last blog “I will not jump in right now after an 18% boost. Instead, I will wait for a retracement”. Well, we have it now so let’s trade it. Any credit spread trade below $17 looks good to me. A September expiration put with 0.20 delta is offering around 17% ROI today…not bad. I will probably issue some naked-puts this week, aiming for either 80% profit on them or assignment. Position size accordingly, folks. 

AMD chart 

X 

Last blog “Once it moves south a little bit I will issue naked-puts below $33 again”. It ain’t get much prettier than this, folks. Nasty red candle on earnings and a nice doji the day after which was Friday, and usually Bulls are already partying in weekend mode. So I will give it a few days to think about what it has done, realize she was wrong, apologies and slowly go back up. And then, boom…naked puts below $32. Wait for confirmation!! But this has potential as premium on X is always nice. 

FCX 

Another solid set-up. Beating earnings, retracing down to a strong support of 15ish, doji and green candle. I will wait for one more green day and then probably issue naked puts around $14 with a stop loss if it touches it as I don’t have any interest in owning this stock. Chart looks solid to me and premium is decent. 

GDX 

Metal prices are going down like James Brown, it’s one of the few solid bearish moves in the market right now. However, the chart looks interesting this week as it is sitting in a very strong support. Last candle is green, so if it shows another one it might become a good swing trade candidate, I don’t know. I am very cautious as I am still bearish on Gold and Silver right now, but again from a purely technical analysis perspective this caught my attention. One thing I am sure about, I will get myself some cheap gold or silver coins this month [Symbol].  

Other puppies I ’m keeping an eye on are REGI, ITRI, AMAT. Nice set-ups but earnings coming up shortly, so still on Tiger mode for these ones. Stay tuned. 

Operation Market Garden Phase IV: Building the Garden 

For the ones of you that are reading this blog for the first time, let me summarize what Operation Market Garden is (and was). It was a strategic operation designed and implemented by the British during WWII, and although the ultimate goal was not achieved with it (taking over the last city of Amhem), it was the beginning of the German defeat. Apart from the war and combat details, what fascinates me about this story is the strategy behind it. This master plan basically consisted in taking control of a series of 9 bridges by using two combined strategies: an air attack (market) and a ground attack (garden). It was like a chess match, in which each move has to be perfectly planned, timed and executed.  

The analogy for us is the following. Our ultimate goal is to win the War of financial freedom. And to win that war, we need small victories that compound into the ultimate objective. One of those victories is to reduce our monthly expenses (food, power) and to achieve that I have designed a 9-steps plan by using two combined strategies: getting money out of the financial markets by trading EH system (Market), and compounding those gains into a home-built veggie garden (Garden). And that’s our Operation Market Garden. We have covered 4 out of the 9 steps since April, as follows: 

• Phase I: Conceptualize the Garden and design it.  (Read it HERE)
• Phase II: Quantify the concept. What do we need in order to build the Garden and how much is it going to cost. (Read it HERE)
• Phase III: Get the money from Market with EH trades and go buy the tools to build the Garden. (Read it HERE)
• Phase IV: Start building the Garden. Today’s and upcoming blogs. 

Phase IV will take us a few weeks and blogs, and we start today…  

Cheers,  

Franco.