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Monday, July 17, 2017

2 Best Way To Trade Option/Stock Today With Market Insights

The dollar index fell on Friday on release of disappointing inflation data and remains in the soup this morning, tracking the 10-year yield downward. CPI came in unchanged in the June month and up 1.6% y/y when a gain of 0.2% m/m and 1.7% was forecast. It was 1.9% y/y in May—from 2.7% in Feb.

To add insult to injury, retail sales fell 0.2% in June, although May was revised to a less-bad -0.1% from -0.3%. Retail sales were up 2.8% y/y.

Traders revived the narrative that the Fed may stay its hand at the Sept FOMC, but offsetting that dollar negative view, they are also considering Draghi’s comments after the ECB meeting this week more realistically. The probability of Draghi confirming tapering is quite low. This sets up tension in the euro/ dollar that can jiggle it in both directions.

Commodities and equities like the prospect of a slower pace of rate increases. In other markets, oil and gold are both up, along with the CRB index. Equity indices are mostly higher, with the notable exception of the Shanghai.

The FT has a story on the nuances of the US challenging OPEC as the top exporter—perhaps true, but not entirely useful, since the US is exporting light crude but importing bigger amount of heavy crude. It’s complicated. A surprise: the US imports over 3 million barrels per day from Canada, the top foreign supplier, but less than 500,000 bpd from Mexico, which comes 5th on the list after Iraq and Venezuela.

China reported Q2 GDP up 6.9%, the same as the first quarter.Retail sales rose 11% y/y (from 10.7%). Industrial output rose 7.6% from 6.5% in April and May.Chinese data seems designed to refute the slowdown thesis so widespread a few months ago.The FT notes “If the trend [in GDP] continues, 2017 would be the first year China’s growth rate accelerated on the preceding since 2010.” But investment in real estate is up 8.5% y/y in the first half, compared to 6.9% last year and reflecting and “unstable” developments (aka excess leverage) are still a risk.

In the eurozone, final June inflation is 1.3% y/y, the same as the month before and the flash. Core CPI is 1.2% when 1.1% was forecast and from 1.0% the month before. The euro did not benefit.

What’s Happening This Morning: The euro managed a high of only 1.1475 overnight, failing to match the previous high from last Wednesday at 1.1490—but well off the Thursday bottom at 1.1369.

The Main Event The Reuters 10-year yield index closed at 2.319 from 2.348% the day before and is quoted at 2.313% this morning (MarketWatch) or 2.306% (Wall Street Journal). The Bund yield is quoted at 0.574% from 0.582% Friday morning and 0.510% the day before.

Market Outlook: This week the BOJ and ECB will meet but already expectations for the ECB are being reined in. The Fed doesn’t meet again until July 25-26. We might get some cheerful data from housing this week, the Home builders Housing Market Index (sentiment) and June starts and permits on Wednesday (hard).

Also on the agenda is the second round of Brexit talks in Brussels. They will talk about the European Court of Justice, among other things. Bloomberg writes, tongue-in-cheek, that Brexit seems to have ended talk of a European financial transactions tax now that everyone is jockeying to poach banking from London.

US CPI and retail sales on Friday revived the narrative that the Fed may stay its hand at the Sept FOMC, but offsetting that dollar-negative view, they are also considering Draghi’s comments after the ECB meeting this week more realistically. The probability of Draghi confirming tapering is quite low. This sets up tension in the euro/dollar that can jiggle it in both directions.

Bloomberg has a story about a Credit Agicole analyst who devised a formula for ECB tapering, named a “new generation” Taylor rule. Here it is:

Monthly net injection from the ECB in billions of euros (QE +TLTROs) = 120 x (1.5 - core inflation). 

The important number is 1.5, which is the percentage growth rate of inflation before weakness set in about 2013. The 120 is a multiplier derived from the three main instances of changes in the amount of QE. Applying these assumed factors, the analyst gets a forecast of a reduction in monthly purchases to €35-40 billion at the beginning of next year, falling to €20 billion from July and ending QE by end- 2018. Here is the chart:

We imagine Draghi laughed out loud when he saw this. First, it’s brilliant and entirely logical. But second, it assumes everything goes as expected. Third, it assumes no Event Shock. Models always depend upon assumptions, of course. Here we have three unknowns, the multiplier, the base-case inflation of 1.5% and the upcoming core inflation forecast. That’s an awful lot to assume. This is not to deride the formula. The outcome as shown in the chart is entirely consistent with what traders and analysts are now expecting. And there may lie the rub. Not exactly confirmation bias, but something like it, as in the multiplier of 120 reflecting past QE decisions, some of which were dead wrong (one was horribly late). A bigger multiplier would have tapering progress far faster, while a smaller one will drag it out. If we were betting, we’d put a dollar on dragging out.

As for the dollar forecast—expect the least likely outcome. US inflation looks weak and traders in more than one sector jump to the conclusion the Fed will be discouraged from the next hike in Sept. In fact, they have already pushed out the expectation to December. But despite Yellen insisting the Fed is datadependent, we are not so sure the market is looking at the same data as Yellen, or over the same forecast horizon. If doubts begin to creep in, we could see the euro slide back to red support at around 1.1398.


***GBP/USD- no recommended position
BUY EURO/USD- recommended entry @ 11396 ( DAY TRADING)) STOP- 11356, TAKE PROFIT- 11438
SELL AUD/USD -recommended entry @ 7801 ( DAY TRADING)) STOP- 7827, TAKE PROFIT- 7773
BUY USD/CAD- recommended entry @ 12696 ( DAY TRADING)) STOP- 12667, TAKE PROFIT- 12727

CME/Globex FX FUTURES--SEP 2017 Contract 
BUY AUD @ 7744, STOP- 7711, TAKE PROFIT- 7784
BUY CHF @ 10429, STOP- 10402, TAKE PROFIT- 10458
SELL GBP @ 13083, STOP- 13128, TAKE PROFIT- 13037

Stocks Trading Idea For Today ($HLF)

What is one of many things bad traders and investors do that contributes to their failure? Answer; sitting short in a stock that has a high short float % and looks as if it is ready to break out to new 52 week highs. HLF on the “Squueze Me” Scanner!
This week, Trade Ideas technology seeks to exploit those people using the “Squeeze Me” scan for just such a scenario. Herbalife (HLF) has 34% of the 90 million share float sitting short (meaning they need to buy to close their positions). A break above 74.50 and HLF is off to new 52 week highs forcing the short sellers to buy (cover) or sit thru more pain.
image of squeeze me stocks scanner with HLF highlighted

The Trade of the Week is conditional of a print at 74.50 in HLF this week to be considered live and on the books.

The suggested stop for HLF will be a break below 70.00.  The suggested target is 83.50 which just happens to be all-time highs for HLF. If this target is achieved, it may be wise to consider selling only half the position to see if the other half can make new all-time highs. Please only use an amount of shares that works for you in case the stop level beneath 70 needs to be adhered to for risk management.
image of HLF stocks trading chart
Footnote:   This is a table showing the maximum profit for all past 2017 Trades of the Week. Timing the top is impossible but this table shows how much alpha was possible when considering the exit of these positions. The trades outlined in red eventually hit their suggested stop prices, so you can see the importance of timing and harvesting profits along the way when you can, especially those that move above 10%.
image of trade ideas AI trading results 2017
Targets are not absolute. Targets involve timing. Profits can and should be harvested along the way.
Risk to Reward ratio ideal is 1:3
Trades of the week that do not reach entry prices are not considered live and are expired at the end of the current week. (ORCL and JNPR)
TOW Rules: 20% Rule.  If a performance is up 10% and gives back 20%, take the 8 and run. (Profit Save, Trailing Stop).
Stocks that gap up over the entry price are considered up to the discretion of the buyer as to the entry price (WETF)

Closed For Profit!

NOTE:The following Trades option idea should have been closed last Fiday ( 7/14/07)  for a VERY quick 30% profit, as the underlying stock in the recommendation, Facebook Inc. (FB), achieved its $159.90 price target. The reason that the return was not nearly as high as the 99.40% anticipated return is because FB achieved its target in just FOUR days, and most of the time premium was left in the options.

Ideas presented on 7/10/17

Call (Bull) Debit Spread on Facebook Inc.- FB (current price $153.55)
Buy 10 - September 2017, $150 strike calls for $8.45
Sell 10 - September 2017, $160 strike calls for $3.50

Based upon our Trades' projected share price of $159.90 at (or before) expiration on 9/15/17, Return on Investment (ROI) would be 99.40% (including reasonable commission) if FB rises 4.14% in the next 9 1/2 weeks. Options are suitable for only very aggressive investors.

CLOSED ON 7/14/17 for approximately a 30% profit!!!...

Previous ideas can be seen here: HERE

New Option Play Of The Week:

Option Play of the Week- The best option idea each week, based on projected potential return, with less than a $5000 investment and no margin requirement.

Call (Bull) Debit Spread on Broadcom Ltd. (AVGO, current price $249.02)

Buy 10 - September 2017, $250 strike calls for $11.90
Sell 10 - September 2017, $260 strike calls for $7.30

Based upon our Trades' projected share price of $259.20 at (or before) expiration on 9/15/17, Return on Investment (ROI) would be 99.35% (including reasonable commission) if AVGO rises 4.08% in the next 8 1/2 weeks. Options are suitable for only very aggressive investors.

Option Trade of the Day: CSX Corporation ($CSX)

With the news that Saudi Arabia had surpassed its production-cap levels, we think that other OPEC nations will also start to bump up their own production levels, as Saudi Arabia tends to lead the way and show other nations where the trend for oil is going.

But while oil prices and commodities seem to be stabilizing, we’re opening a new bullish trade on CSX Corporation (NASDAQ:CSX). The transportation sector in general has been performing well, and we think freight is starting to look a lot stronger in the short term.
Don’t plan to be in this trade for long, as earnings are coming up next week. CSX looks good as it breaks above a consolidation range, and we anticipate that investors will push the price higher before the quarterly reports are released.
‘Buy to open’ the CSX August 55 Calls (CSX170818C00055000) for a maximum price of $2.10.

JetBlue Airways Corporation (NASDAQ:JBLU).
Another bullish indication was that the transportation sector moved to new highs at the same time that new highs were being set on the Dow Jones index, which, according to “Dow Theory,” is a bullish sign. So it should come as no surprise that my recommendation today involves JetBlue Airways Corporation (NASDAQ:JBLU).
Buy to open the JBLU Sep 24 Calls (JBLU170915C00024000) at $1.00 or lower.

send your TIPS to my bitcoin address below...THANK YOU!
Bitcoin Address: 16uoUH9cTC5Mpf7QttdRkKHdV2XBc5b3XS

Our Credo: What's Good for YOU!..Good For Us and vice versa!...


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