Wassup my friends, hope you had a great 4th of July celebration with lots and lots of BBQ and beers. Today I want to talk about a few different things but first I will dedicate a few words to the birthday boy. Yessir, this week Mr. Shannon turned 32 (I think…). I know exactly whatcha thinkin “dang, he’s 32?? I thought he was barely exiting puberty”. Well, he does look fantastic I have to admit…eating organic food, avoiding work-stress and exercising (options) regularly is what keeps him young looking but yes, he turned 32. Now jokes apart, I remember when me and Sol, my wife, met him in Houston a couple of years ago…We talked about the program and his trading journey, and without even asking if I would sign in he gave me his personal cell phone number and email address for anything we needed. That is something I appreciated a lot, and I am sure he regrets since I text him quite often now lol. I’m happy I got to know him and even happier that he shared his trading methods, philosophy and this blog with me. He did not have to do it, you know? But he did…and today I will honor him by doing a review of my performance trading the Environmental System year to date. Let’s call it a “mid-year review”.  

Summary in numbers 

• Trades made: 35 

• 12 Naked-put trades 
• 10 Covered Call trades 
• 6 debit trades (long calls/puts) 
• 5 Bull-put Spreads 
• 2 long straddles, failed attempts to play IV built up 

• Profitable Trades: 27 (77%) 
• Profit-Loss Ratio: 2.03 
• AVG Win/AVG Loss: 0.83 (this is my biggest area of improvement) 
• Compounding: currently own 200 shares of SunPower, three tomato plants, two pots with kale plants, one teenager basil plant and some parsley. 

Bob… Happy Birthday and cheers to you and to EH system. For many more years and gardens to come! 

General comments about the Market  

Before going through this week’s peeks, let’s talk about Mr. Market for a minute. Needless to say that the last two weeks it has shown a lot of strength, probably the longest bullish period year to date. Swing lows and highs, and nice upward channel. But as we mentioned during last blog, we need to be able to look at things into its right perspective. Below you will see two charts, one is a 5yr-weekly and the other one is a 1yr-daily. No doubt we are in front of a nice long term bullish trend here. But what do you see when we zoom in and look at the last months? Can anyone tell me? Ding Ding Ding…you are right, there is a strong resistance at $280 (or $2,800 if you’re looking at the actual index) with multiple failed break out attempts. And although today it closed right at that value, it has not been broken until we have one day closing above it as showing some follow through, some momentum.  

SPY – Daily

SPY weekly

Where am I going with this? let’s be careful and patient. We are in the very top of a market move, sitting at resistance. I personally think the market will break out post earnings, but I don’t know it. Unless you can convince me of that, the best choice is to trade carefully, play the pull backs and most important, have a solid watch list and some available cash in your trading account, for whenever the markets breaks out. 

Now with that in mind, let’s do the same thing we do every night, Pinky – go over the Dirty and Clean list and try to take over the world! Chorus: They’re Pinky, They’re Pinky and the Brain Brain Brain Brain Brain! 

TSLA 

There is no surprise that TSLA has been and continuous to be very loyal to the $300 level, and we should profit from that. Most of my bull-puts the last six months have been on TSLA. What I do is wait for a retracement, the closer to $300 the better. And then when I see a sign of swinging back up I issue a bull put underneath $270. I like to think that should the price drop, it has two “safety nets” to prevent it to fall further. Those nets are the $300ish level and the $270-275 level, two very strong supports. That, ladies and germs, is what I would call an edge on this trade. My most recent trade was on 7/6 (last week) when, in my interpretation, TSLA gave us a sign of short-term rebounding after a little overextended down move. It bounced back on $300 during the day and it closed with a semi-doji, practically sitting on the 50 MA. That day, I issued a bull put spread which I am still on currently with 60% profits. I’ll exit before earnings. 

SPWR 

This is my prime example of Step 1 and Step 2 of EH System, combined. I have 200 shares that I write covered calls on every month. At the same time, I usually sell naked puts on a monthly basis. My rule is basically to sell puts only that I can afford getting assigned to, and at a $7 strike price of lower since, in my analysis, that’s a bargain for this stock. If I get assigned, covered it immediately. If not, buy the puts back for $0.05 and wait for a retracement to re-issue. That’s the beauty of options, you can still make money when the stock moves sideways.  

FSLR 

Since it broke the bottom of the channel, I did not trade this one much. I only attempted a failed long straddle and when I say failed I should actually say poorly-managed one. Long story short, I had to exit before giving it enough time to build up IV, because I miss calculated the potential loss while waiting for it, so I reached my max lost rule sooner than expected and boom, got out. But besides that, it has formed a solid base and I will keep an eye on it post earnings. This price definitely picks my attention for covered calling this one, since premium is usually very juicy. Let’s see post earnings. In any case, If I am playing SPWR I usually don’t play FSLR, and vice versa. Having shares and puts on both would make my portfolio very overweighed with Solars, and hence exposed to only one niche sector. 

EXC 

Ask me what a bullish trend is, and I will show you Exelon. This is one of the new kids in the block, and need no drawings to look beautiful. If I was a millennian, I would post this one with a #nofilter. 

I asked for a retracement during last blog, and although it kind of did, it ain’t pretty. Looking at the three last trading days, those long tails on the candle mean that bull stepped up over bears, but softly. I don’t like indecisive stocks so I will wait for it to give a better sign. But the trend is too beautiful not to include it in today’s picks though. 

X 

By far, my favorite pick from the Dirty List. I traded it a lot last year and this first half of the year as well. There is a reason why this puppy is included in most of the systems we at Tackle trade. It started the year showing some muscle, but then our chief in command mudded things up for the steel folks and you can see that in the chart. Having said that, remember, sideways means money for us position traders. USS has made very what is the lowest price is willing to go, so similar to TSLA analysis, we use that as an edge. Naked puts or bull put spreads bellow $32 are rock solid, as long as you position size assuming it can drop 20% in one day. I currently have a that exact naked-put play on, expiring (hopefully worthless) before earnings. 

AMD 

Last blog we pointed out a potential swing high over the base formed around $15. Since I put my money where my mouth is, I swing traded it with a long call [Symbol]. I have to admit, I am not good and swing trading and long calls/puts, but this one was a clean set-up with a great risk-reward ratio so I played it. No need to say that I exited after two and put that money in the “Operation Market Garden” bag for next month. Right now, I will wait for it to either break above $17 or retrace back to $15 after earnings to play it again, most likely with naked puts. 

AMAT 

Another one of the new kids in the block. So, this puppy does not look very promising in the long term. LSL and LSH after its peak of $62.4, and trading below all its moving averages. However, folks, if you zoom in on the price action of the last two weeks, it has bounced back around $44.70 four or five times. What a coincidence (or not), that price level was also a strong support 6 months ago. So given that liquidity and premium on AMAT are as good as X, and it keeps bouncing on a support level, I issued naked puts with a $41 strike price. Plenty of cushion for it to move down, but actually I would get out and take a small loss if it breaks down below $44.5. That, for me, would be reason enough to get out. 

UNG 

“Ask and you shall receive” is what UNG said when she read my last blog. Couldn’t look any better, although right now is in a promising set up, not a trading set up yet. Upon confirmation, and only upon confirmation, I might swing trade this one. Premium usually suck so bull call or long call could do it. I have some concerns about the price of Natural Gas in the US, given demand and production, so I wouldn’t be surprised it if actually breaks down. But hey, no need to guess…just follow the move. Watch Mr. Holmes report this weekend and be ready to trade it. 

Next steps… 

From the mid-year review I just shared, I am happy to announce that we have reached the profit target to go buy stuff for the garden. Yeeeeyyyyyyy !!! I will let the ongoing trades mature, hopefully collect those profits and then kick off the Phase 3 of Operation Market Garden…folks, we will go shopping. And I will record that in a nice little video, be ready! 

See ya next week  

Cheers,  

Franco.