Market Summary (continued)
Friday finally brought a bounce and some impressive percentage advances -- at least on some indices -- but it was not a sure bet.
Stocks gapped upside in relief. Each financial station or website gave credit to its pundit for calling the bounce. Massively oversold, down/up volume ratios, percentage down volume -- all were pretty extreme and it was just a matter of when the bounce triggered.
Even so, it was no done deal. Stocks gapped nicely with NASDAQ gapping to the 200 day MA, SP500 gapping just over, while DJ30 and NASDAQ 100 gapped nicely above that key level. RUTX, SP400, and SOX? Ha ha ha. They gapped upside for sure but they are so far over the hill from the 200 day they can barely see the hump.
Further, the bounce showed fragility. The prior day or two the talk was that Trump and Xi would meet at an upcoming gathering of many world leaders. Friday right around 11:00ET, Larry Kudlow said it was not '100% decided' that Trump and Xi will meet. The market did a Peter Pan over the next 1.5 hours, the Dow wiping away a 400 point gain and even turning negative, RUTX and SP400 turning red as well. The other indices did not hit red, but they gave up huge chunks of their gap gains, indeed the majority of the gains.
Stocks caught a bid on that selloff, however. Apparently still as oversold as of the Thursday close (and indeed most were), stocks bounced, tested into 2:30ET, then rallied straight up into the close. Sighs of relief, back slapping on the financial stations as their pundits were not to be humiliated -- at least not that day. All's well that ends well in the prepackaged media world I guess.
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CGC (Canopy Growth Corp.--$45.74; -3.11; optionable): Marijuana grower
STATUS: Pennant. A rally from mid-August to early September followed by the current 6 week pennant at the 20 day EMA. Note the low volume the past three weeks as CGC worked laterally in a tight range. These stocks needed a breather and this is a good job of doing just that. Ready to play a new break higher on some volume.
Volume: 10.37M Avg Volume: 16.651M
BUY POINT: $51.01 Volume=12M Target=$62.97 Stop=$47.44
POSITION: CGC JAN 18 2019 50.00 C - (59 delta) &/or Stock
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Here's a leader play and our current analysis.
STATUS: Impressive run from early May to early August, moving up 4x. Faded into mid-September, bounced, then faded to Wednesday last week, putting in a short double bottom. Big volume Thursday on a gap and fade, then a big volume Friday move higher to the 50 day EMA. We want to play a continued move up through the 50 day EMA for a run to some resistance near 25 to 26 as the initial target. Nice setup, ignoring the selling, just building its pattern.
Volume: 3.711M Avg Volume: 1.6M
BUY POINT: $21.24 Volume=2.2M Target=$25.64 Stop=$19.75
POSITION: HEAR JAN 18 2019 20.00 C - (62 delta) &/or Stock
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ROST (Ross Stores--$95.87; +1.55; optionable): Discount retailer
STATUS: After a solid rally from early August through September, ROST is testing the 50 day MA the past week. It rode out the selling with a low volume fade to the 50 day, then holding it through Friday. We want to play a bounce up off this level for a run to near 104 and a 65+% gain on the call options.
Volume: 2.984M Avg Volume: 3.081M
BUY POINT: $96.48 Volume=4.5M Target=$104.31 Stop=$93.89
POSITION: ROST JAN 18 2019 95.00 C - (56 delta)
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--by the MarketFN STG Team
OI (Owens-Illinois, Inc.)
Our Success Trading Group will be watching closely for entry points next week on some of our favorite stocks such as Owens-Illinois, Inc. (Ticker: OI) and Bank of America Corporation (Ticker: BAC).
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PBR - Petroleo Brasileiro S.A.-Petrobras is currently trading at $15.35. The November $15.00 Calls (PBR20181117C00015000) are trading at $1.28. That provides a return of about 7% if PBR is above $15.00 on expiration Friday in November.
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