Wow. 400 posts. Earnings feel a bit soft for US markets. Cannabis market gets a shake and I am adding exposure. Oil markets feel the pinch in Libya. Trades in oil, gaming and Russia and a bit of a hedge trade in US real estate.
Portfolio News
Market Rally
Goldman Sachs (GS) and Citigroup (C) results shook the confidence of US markets.
European markets had made a good lead. This article caught my eye. 3 countries rated by an analysts ahead of US, which is feeling a little jittery ahead of earnings and with high valuations - China, Russia and Norway = 2 of those are oil plays. I will explore Norway and I am already invested in Russia and China.
Cannabis Carnival
Cannabis carnival gets a reality check with Aphria (APHA.TO) results.
This is a fledgling growth industry - the road will be rocky.
Bought
Aphria Inc (APHA.TO): Canadian Marijuana. Aphria announces earnings that disappointed markets on operating margin level and non-cash writedown of Latin America assets. I bought a small parcel of shares in one portfolio which is lightly exposed to marijuana without reading the report = a way to get a low entry price. I later watched an interview with recently appointed Chairman, Irwin Simon, which suggests that this is all to do with growing pains. He mentions that the hostile takeover from Green Growth is dead. Interesting that, given I receive a corporate action notice the minute I got the stock about a share tender from Green Growth. The offer may be dead but it has not gone away.
MMJ Group Holdings (MMJ.AX): Australian Marijuana Investment Trust. Australian-listed, MMJ entered a management contract with a major Canadian investment firm to manage its Canadian investments. The net cost is lower than they were paying the recently departed CEO who will not be replaced. I noted in the announcement that net asset value was $0.39 vs share price of $0.235. I averaged down entry price in one of my portfolios. MMJ's largest investment is in Harvest One (HVT.V), one of the leading Canadian operators
SPDR S&P Oil & Gas Exploration & Production ETF (XOP): US Oil. Following the takeover of Anadarko (APC) by Chevron (CVX) and the Libya supply disruptions, I am expecting some things to begin moving in oil. Averaged down my entry price in one portfolio.
Las Vegas Sands Corp. (LVS): Gaming. CNBC Options Action team discussed gaming stocks (LVS, WYNN, MGM) which have bounced tidily after the selloff - 14% points more than S&P500. LVS are due to report earnings on April 17. The trade is predicated on a continuation of momentum, the opening exposure to sports gaming and to Macau positives from a China trade deal being completed. The trade idea was to buy a June 2019 72.5 strike call and sell a 60 strike put. This offered a small net premium.
https://www.cnbc.com/video/2019/04/12/a-jackpot-casino-trade.html
One of the analysts suggested that gaming as a sector was a candidate for a continued move as a sector especially with the Macau angle. I chose to explore the trade a little differently. With opening price of $66.87, I went one strike out-the-money and bought a 67.5 strike call option and sold a 60 strike put option for a net premium of $1.80. This allows the trade to benefit immediately from any upside and opens the window to enter the stock around the recent lows if it pulls back. Let's look at a chart which shows the bought call (67.5) and 100% profit as blue rays and the sold put (60) as a red ray with the expiry date the dotted green line on the right margin.
100% profit level is comfortably below the 2018 highs achieved before tariffs were imposed on China. LVS has 34% market share of Macau gaming. I have modelled a price move after a consolidation phase and applied it to current situation (left hand pink arrow). Get a repeat of that and trade will clear 100% profit. Of course, a red arrow is possible on earnings miss and that takes price down just below the 60 put level.
VanEck Vectors Gaming ETF (BJK): Gaming. I did explore the other gaming stocks (WYNN and MGM) and was not able to find a better structure than the LVS trade. I also looked at this ETF which trades at a lower price (opening at $38.93) which gives lower option contract size. I was able to buy a June 2019 40 strike call option for $0.60 premium (i.e., one third less). Implied volatility was also lower than LVS (18% vs 27%). I see today that I am the one trader on the idea although there is open interest.
Let's have a look a the chart which shows the bought call (40) and 200% profit as blue rays with the expiry date the dotted green line on the right margin. It also shows the dates that tariffs were imposed on China (solar panels and washing machines first end then the wider list).
I have modelled some of the prior runs (left hand pink arrow) - they are all about the same length and steepness. Current price move is a little steeper but if those patterns repeat the trade might just pass strike and needs another month to reach the 200% level - too bad I did not do this chart at trade time. But at $60 a contract, this is less than the price of a dinner for two.
Now this ETF is a broad based gaming stock with holdings across several markets (i.e., less exposed to Macau). China exposure shown with ticks. It is also exposed to UK markets which are being softened by Brexit (Paddy Power - PPB.L).
Sold
Gazprom NEFT (GAZ.IL): Russian Gas. I have had a profit target at 52 week high on this stock for some time. I pulled that target lower to close the trade as the momentum has just not been working for me. Trade made 70% profit since December 2016.
The chart shows the exit point works well with this level only exceeded once in 8 years and respected 5 times (top dotted green line). Trade set up was a classic break up entry after breaking a weekly downtrend. Break up and retest would have been neater a few months later (second visit to lower dotted green line).
Shorts
iShares U.S. Real Estate ETF (IYR). CNBC Options Action team discussed Real Estate REIT's. The technical view is that this is overbought with the key chart showing how price falls back each time it extends too far away from the 50 day moving average (red line). There are strong Fibonacci relationships for each extension (1.27 mostly with the current level closer to 1.618).
Trade idea is to trade this as a bear put spread from current levels back to the moving average. With a opening price of $88.17, I went one strike out-the-money (just) and bought an 88/81 bear put spread for June expiry for net premium of $1.72 offering maximum profit potential of 307%. Why June? It takes us past the end of current earnings season. Let's look at the chart which shows the bought put (88) and 100% profit as red rays and the sold put (81) as a blue ray with the expiry date the dotted green line on the right margin.
I have modelled one of the price corrections (middle red arrow) and applied it to now. Get a correction like that and maximum profit will be achievable. If price moves more like the move where the left hand red arrow is = easy. Now there is risk in the trade. This is a technical chart based set up. Fundamentals say that low interest rates are good for REITs and investors will keep buying for the higher yield (3.03% vs 2.5% available on 10 year Treasuries).
Cryptocurency
Bitcoin (BTCUSD): Price range for the day was $244 (4.7% of the high). Price makes a bearish engulfing bar to test the support level at $4995. Price needs to respect the low of the prior day to have any chance to push ahead to clear the recent highs.
Ethereum (ETHUSD): Price range for the day was $15 (8.9% of the high). Price also makes a bearish engulfing bar to test the short term support level at $159. Same deal here - needs to respect the $155 low
CryptoBots
Profit Trailer Bot No closed trades
New Trading Bot Trading out using Crypto Prophecy. Trade opened and closed on CDT (1.84% profit)
DCA trade opened on SC. With the strong move up in Bitcoin price since my last SC trades were created, trade size was equivalent of the two trades already open.
Currency Trades
Outsourced MAM account Actions to Wealth closed out 2 trades on AUDNZD for 0.52% profits for the day. Trades open long on AUDUSD (0.03% negative)
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. BJK mix image is credited below the image. All other images are created using my various trading and charting platforms. They are all my own work
Tickers: I monitor my portfolios using Yahoo Finance. The ticker symbols used are Yahoo Finance tickers
Charts: http://mymark.mx/TradingView - this is a free charting package. I have a Pro subscription to get access to real time forex prices
Crypto Prophecy provides a useful tool to identify oversold and overbought coins -
https://mymark.mx/CryptoProphecy
Trading: Binance offers a wide range of coins to trade, tight spreads and low fees if you use BNB to pay https://mymark.mx/Binance
Tracking: Keeping track of your crypto trades is a whole lot easier with CoinTracking.info. Get 10% off all your account upgrades https://mymark.mx/CoinTracking
April 15, 2019