Cash Cow Newsletter April

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Kelley Newman
5 years ago
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1 Cash Cow Newsletter April In this week s Cash Cow newsletter I would like to start by showing you an interesting wedge pattern in the S&P 500: The low we experienced in October was an important technical low for all U.S. indices. We can see from the chart above that there has been a clear rising wedge with additional support in recent weeks. If the $SPX is able to hold the existing support level in the next week or two we could be looking at new highs thereafter. Even though the index is nearing the middle Keltner Channel, many stocks have dropped to their lower Keltner Channels and even further in some cases. Not surprisingly the $VIX gained 7% today, making it clear that volatility is still present. This doesn t mean we can t take advantage of the current market situation. We want to focus on choosing stocks that are currently oversold but have not dropped too precipitously in the past few weeks. We also want to continue to utilize our call option spread strategy while volatility (and premiums) is high. If the market does rally in the next few weeks 1

2 these spreads will likely do well. If the market is stagnant, these spreads still have a chance of doing well. The first profit opportunity we ll look at this week is AMBA (Ambarella): Ambarella develops semiconductor processing solutions for video that enable high definition video capture, sharing, and display worldwide. 2

3 Over the past several years the company has consistently grown their Revenue, Equity, and Retained Earnings. The stock recently dropped below the middle Keltner Channel which could offer us a good buying opportunity. Additionally, the slow stochastic indicator recently dropped to the 20 line. The previous 5 times the slow Stochastic indicator dropped on or below the 20 line and headed back up, the stock went on to rally for several weeks afterwards. We should consider initiating a call option debit spread on this stock to take advantage of future price appreciation. At current prices the AMBA Jun 19 th 60/75-strike call option spread has a profit potential of 33.7% or $378: Buy to Open AMBA Jun strike call Sell to Open AMBA Jun strike call We can see from this analysis that if AMBA remains flat or increases at all in price by expiration we would profit 33.7% or $378. If AMBA decreases -2.5% by expiration we would profit 20.2%, and if AMBA decreases -5% by expiration we would still profit 3.4%. Those wanting a more leveraged approach could purchase a call option on AMBA for the May 15 th expiration. 3

The next profit opportunity we ll look at is LLY (Eli Lilly): Eli Lilly discovers, develops, manufactures, and sells pharmaceutical products worldwide.

4 The next profit opportunity we ll look at is LLY (Eli Lilly): Eli Lilly discovers, develops, manufactures, and sells pharmaceutical products worldwide. The stock recently dropped near the lower Keltner Channel which offers us a good buying opportunity. The slow stochastic indicator is currently at 23.6 which is considered oversold. If you look at previous instances when the slow stochastic line was at this level, more times than not the stock went on to rally shortly after. We should consider purchasing a weekly call option on LLY for the May 8 th expiration to best take advantage of a sharp rally 4

The last profit opportunity we'll look at this week is TYL (Tyler Technologies): Tyler Technologies offers integrated information management solutions and services for the public sector with a focus

5 The last profit opportunity we'll look at this week is TYL (Tyler Technologies): Tyler Technologies offers integrated information management solutions and services for the public sector with a focus on local governments in the United States. The company has a long-standing history of consistent Revenue, Equity, and Retained Earnings growth. We should consider initiating a call option debit spread on this stock to take advantage of future price growth. At current prices the TYL Jun 19 th 110/120-strike call option spread has a profit potential of 36.1% or $265: 5

Buy to Open TYL Jun 2015 110-strike call Sell to Open TYL Jun 2015 120-strike call We can see from this analysis that if TYL decreases -2.

6 Buy to Open TYL Jun strike call Sell to Open TYL Jun strike call We can see from this analysis that if TYL decreases -2.5%, remains flat, or increases at all in price by expiration we would profit 36.1% or $265. If TYL decreases -5% by expiration we would still profit 25.6% or $188. Note: Profit performance displayed in this newsletter does not include transaction costs. This newsletter includes some trading ideas following Chuck Hughes trading strategies along with educational information. For a complete listing of Chuck s exact trades, including specific entries and exits and real time Portfolio tracking, please call Brad at or Cash Cow Newsletter Archive Click on the link provided below to access the Cash Cow Archive. Cash Cow Newsletter Archive: 6

Cash Cow Newsletter March

Cash Cow Newsletter March 11 2015 In this week s Cash Cow newsletter we are going to start by reviewing the recent action in the S&P 500 Index and then we will look at several new profit opportunities.