Markets want to go higher especially in Europe. Perfect time to be just nibbling away at laggards and waiting in the wings. Jobs report helps and inflation eyes need to be wide open
Portfolio News
In a week where S&P 500 rose 0.9% to eke out an all time high, my pension portfolio rose 0.79%. The drags were metal commodities and shipping in the US portfolio.
US markets were jittery earlier in the week especially hanging on every word from the Federal Reserve but happy to rebound on earnings data and a stronger than expected jobs report.
Big movers of the week in my portfolios were 88 Energy (88E.AX) (+27%), Pilbara Minerals (PLS.AX) (+18%), Livent Corpration (LTHM) (+13.4%), US Masters Residential (URF.AX) (+12%), Nippon Steel & Sumitomo Metal (5401.T) (+11.8%), Kairos Minerals (KAI.AX) (+10.3%).
There is some heat building in the alternate energy space especially in lithium.
European Banks made a move with several over 6% up - examples, Banco BPM Società per Azioni (BAMI.MI) (+8%) and ABN Amro (ABN.AS) (+7.1%) and Banco Bilbao Vizcaya Argentaria, S.A (BBVA.MC) (+6.5%). Even old dog Credit Suisse (CSGN.SW) was up over 5%.
Crypto booms
Bitcoin price pushed lower to start the week dropping over 5% and then bounced and will finish the week over 14% higher
Crypto news of the week was Ethereum hard fork #11 completing successfully. The hard fork is far reaching but particularly tackles the unpredictable nature of gas fees and adds in some scaling factors.
ETH Price relative to BTC jumped 9% on the day before the fork but has since given up half of the jump but is still up more than 10% on the week - this makes for a 24% rise against USD.
Biggest move in my portfolios was Uniswap with 35% open to peak move
HIVE was not far behind with two spikes in the week.
Bought
PayPal Holdings, Inc (PYPL): Payment Services. Share price has dropped close to 10% since results were announced on July 28. Jim Cramer idea to add on this selloff even though this entry raised cost base. I added a small parcel in one portfolio.
United Parcel Service, Inc (UPS): US Logistics. Share price has also dropped close to 10% since results were announced on July 26. Jim Cramer idea to add on this selloff as he felt the market had over-reacted to the results. I added a small parcel in one portfolio. Price paid was 9.6% premium to assigned price for May expiry. I will nibble back on this until I can start to write covered calls again
Centrica plc (CNA.L): UK Gas Utility. Centrica has been a frustrating investment. I first bought based on a price to sales screen and a chart showing the potential for a breakout (April 2018 - see TIB218). Dividend yield was then 7.97%. Price wanted to go the other way as the business just seemed to stall into a low growth model. I averaged down entry in November 2020 on another potential breakout - maybe let the chart talk.
The chart shows two downtrends that were broken and then not sustained. My first two entries are on each of those breaks. What I see now on the chart is a series of higher lows which might just indicate that the bottom has been seen. Of note: Centrica cancelled the dividends in 2020 citing the difficult times - sounds like difficult management to me. It feels like Centrica has not grown past the British Gas of old that I did consulting work for in the early 1990s
Barclays PLC (BARC.L): UK Bank. Share price has been inching ahead since I set up the August covered calls with the potential that I will be assigned on August expiry. I recall seeing a stock idea that Barclays could do better than other UK banks. I chose to set up a near term bull call spread to test this idea rather than sell a naked put. I bought a January 2022 1.80/1.95 bull call spread for a net premium of £0.0575 which offers maximum profit potential of 168% for a 10% move from the £176.50 open (Aug 3).
Let's look at the chart which shows the bought call (1.80) as a blue ray and the sold call (1.95) as a red ray with the expiry date the dotted green line on the right margin. Price has to pass previous highs to reach the maximum - the trajectory looks right but it needs to stretch to prices not seen since early 2018.
American Eagle Outfitters, Inc (AEO): US Consumer. Jim Cramer added again in the Action Alerts Plus portfolio. I opened a new small position in one portfolio. Wrote a covered call for August expiry for 1.8% premium with 4.7% coverage for 12 days exposure. Disappointing to see price close 3.8% below my entry - makes the covered call look even better.
United States Natural Gas (UNG): Natural Gas. Received another bullish trade signal for a continuation move. Wrote a covered call for 1.3% premium with 7.4% coverage.
Quick update on the chart which shows the bull call spread I am currently holding. I have put in the new stock holding as the green ray. The research signal suggested a 13% possible price move which gives me the chance to add another bull call spread - though the run would need to be longer than the previous one to make that.
I did set up a bull call spread in some portfolios. I chose September expiry and bought a 15/17 call spread for a net premium of $0.47 which offers maximum profit potential of 325% for a move of 16.5% from the $14.59 close. I did note the trade signal suggested a 13% possible move which would have made a 16.5 sold call strike better than 17. I did look at the weekly options to see if I could set up a 15/16.5 call spread but there was no liquidity at trade time. Given I could not get liquidity I sold a 13 strike put option to partly fund the trade. This brings net premium down to $0.25 and ramps up potential profit to 700%.
Credit Suisse Group AG (CSGN.SW): Swiss Bank. Averaged down entry price in one portfolio with a view to writing covered calls on the new parcel. A quick look at the chart.
Price reversed off the previous lows and seems to be respecting a level - that gives me a degree of comfort that the lows are in. What is good too is price is staying up above the strike 8 sold put I am holding (dotted red line) but it also is not yet following the required price scenario to win that options trade. There is still time.
I did write a September expiry covered call for 1.7% premium with 6% coverage. This is also within my broad parameters for writing covered calls - 1% premium for 5% move for stocks that are in profit (or just bought)
**Commerzbank AG) (CBK.DE): German Bank. Commerzbank announced results during the week which contained two big write-offs, one for restructuring costs and the other for a problematic securities settlement outsourcing contract which has been cancelled. That looks to me like the CEO (and the German government) are getting serious about costs reductions.
https://finance.yahoo.com/news/commerzbank-swings-q2-loss-amid-052705403.html
Market dumped the stock with a 7.77% drop. I averaged down entry price in one portfolio as I see the restructuring as positive news. The last two purchases were made below the level I had stock assigned in May. I did write a covered call on the new parcel for September expiry at 1.3% premium and with 8% coverage. This is in line with my metrics even through expiry is more than a month away.
Cryptocurrency
No trades
Income Trades
A quiet week with only 3 covered calls (2 Europe, 1 US) written in one portfolio. I do have quite a few pending orders waiting.
Currency Trades
US Dollars Sold US Dollars to fund Swiss and European stock purchases
I went through the screen for forex trades at London open on Monday. I rejected all the trend trade ideas but did place one swing trade
Euro (EURUSD): Chart for Euro is showing divergence on the daily - so setting up potentially for a swing trade.
4 hour signal from one provider shows RSI Stochastic on 4 hourly chart breaking out of the oversold zone.
Trade did head in the right direction for a while and then failed - stopped out for 0.5% loss.
Two other trades set up on Japanese Yen - short NZDJPY looking for a trend continuation stopped out when RBNZ suggested they might be hiking rates earlier than expected = another 0.5% loss.
The challenge I have with this trade signal service is knowing which trades to accept or reject as I do not full understand the model they use.
One trade open through the weekend short EURJPY. Trade set up is looking for continuation of the downtrend.
Moving averages are stacked 9<20<50. Seller bar on August 1 - if trade triggers below the low of that bar, the 2nd bar would be a seller bar too. Price has tested the 20 day moving average. RSI Stochastic (lower window) has reversed in the overbought zone. Should be a safe set up. Time will tell with price testing back to the 20 day moving average.
Cautions: This is not financial advice. You need to consider your own financial position and take your own advice before you follow any of my ideas
Images: I own the rights to use and edit the Buy Sell image. News headlines come from Google Search. All other images are created using my various trading and charting platforms. They are all my own work
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August 2 - 6, 2021