Today s Close. Crossover #2. Crossover #1

Transcription

1 August 28 th 2013 Note: 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 In this week s Cash Cow newsletter I d like to briefly examine the recent actions of the S&P 500 Index, and then look at several new profit opportunities. As you can see from the chart below, the $SPX has remained in a 50/100-Day EMA uptrend after the recent decline. Interestingly enough, the last two times the price of the $SPX crossed below the 100-Day EMA, a subsequent rally ensued: Today s Close Crossover #2 Crossover #1 1

2 If this tendency persists, we could see a similar short-term rally in upcoming weeks. We still need to keep in mind all of the other external factors that can have an effect on the Market (Fed Tapering, Debt Ceiling, Housing stall, Syria & the increased price of oil, leadership changes in the Fed etc.). Events like these have caused the Market to impulsively react both negatively and positively in the past, and there s a good chance that this trend of unpredictability will continue in the future. Even if these impending variables didn t exist, it would still be virtually impossible to predict what the market will do. The past 13 years have demonstrated just how volatile and sensitive the Market can become. As most of you know, volatility has been a relatively common theme for us since the Cash Cow Newsletter began. Be that as it may, we have worked around this problem by staying disciplined and sticking to the System that has proven itself countless times in the past. This time around is no different. For this week s profit opportunities we will mainly focus on utilizing spread strategies that will help lower our downside risk should the Market continue its drop. We will also use monthly expirations on these spreads to help lower risk. I will also include a weekly covered call and monthly call option purchase to take advantage of any short term gains we might experience. 2

3 The first profit opportunity we ll look at this week is MDSO (Medidata Solutions): Medidata Solutions provides cloud-based clinical development solutions for life sciences organizations worldwide. The company has solid financials including consistent Equity growth, Retained Earnings growth, and Revenue growth MDSO is currently in a 50/100-Day EMA uptrend that s confirmed through the presence of an up-sloping On Balance Volume. The stock closed on the middle Keltner Channel today, providing a good entry point for a Call Option Debit Spread. At current prices the MDSO October /85-Strike call option spread has a 35.1% profit potential. If MDSO increases or remains flat by expiration we would profit 35.1%. If MDSO decreases -2.5% by expiration we would still profit 22.2%. 3

4 The next profit opportunity we ll look at is VRX (Valeant Pharma.): We first looked at VRX in a recent newsletter due to the company s solid Financials and Technicals. The stock has retraced near the lower Keltner Channel but has retained its 50/100-Day EMA uptrend and up-sloping On Balance Volume. We can take advantage of future price increases by initiating a Call Option Debit Spread. At current prices the October /95-strike Call Option Debit Spread has a 36.6% profit potential. If VRX increases, remains flat, or decreases -2.5% by 4

5 expiration we would profit 36.6%. If VRX decreases -5% by expiration we would still profit 12.3%. The next profit opportunity we ll look at this week is BBY (BestBuy): We looked at BBY in our July 18 th newsletter. As you can see from the chart, the stock has noticeably increased since then. Premiums for BBY are unusually high right now, which we can take advantage of by initiating a Covered Call. We should consider initiating an At-the-Money Covered Call on BBY for the weekly September 6 th expiration. 5

6 The last profit opportunity we ll look at this week is CI (Cigna Corp.): Cigna Corp. is a health services organization that provides insurance and related products and services internationally. As you can see from the price chart, CI is in a strong uptrend that has largely ignored the fluctuation in the Market. The stock closed near the middle Keltner Channel today, providing an excellent entry point for a call option purchase. Since CI does not offer weeklys, we should consider purchasing a call option on CI for the monthly September 2013 expiration. 6

7 Note: Profit performance displayed in this newsletter does not include transaction costs. Click on the link provided below to access the Cash Cow Archive. Cash Cow Newsletter Archive: 7