Crazy Start to 2019

I didn't see any reason why the market opened so low, but it was a good day to go long. I bought Call Options on QQQ, Netflix and Boeing at the end of the day. It is interesting that most of stocks had the same looking chart. I did sell my Calls on Netflix and QQQ at the number 2 spot instead of 3.

I bought Boeing on 2 different occasions. I sold the first set at the right time, but I should have set my limit higher for the second time as I knew it was not going to close in the negative for the day.

I am glad that I sell my positions every day because the bomb was dropped by Apple driving the market down after the market closed today.

Day After Christmas Boom

What a day! The market opened higher and most stocks retraced to Monday's lows

before taking off higher. I made a profit higher than what I lost on Monday, but failed to wait for the right time to buy and I sold around noon instead of expecting the run to last the whole day which is typical for Wednesday off of an over sold condition.

I didn't trade Alphabet (GOOGL) today, but I did use it for reference as it was one of the only stocks that did not go down to retest Monday's lows. I bought call options on Boeing, Tesla and Netflix on the way down. I was down bad by the time it changed and went higher. I ended up selling everything around 12:30 pm and missed out on the other half of the gains for the day. I made charts on each company below.

I would expect to see more upward movement on Thursday with some pull back for the second half of the day and it should give back half of today's gain. I hope I am wrong, but I will trade carefully tomorrow. Check out my market commentary below along with my favorite pick for 2019.

Turmoil to Profit in the Market... and Tesla

Everything opened lower this morning with the exception to Verizon and McDonald's who reported their third quarter earnings and were awesome. The huge drop was a carry over from the down Asian and European Markets. From open, everything went up for the first 20 minutes before retesting the downside. Most stocks dipped slightly lower than where they opened, but once they hit that retest point, everything went up.

You certainly could have profited by buying anything except Catepiller and profited today, but you would have been best to wait for that retest of the bottom. Buying Call Options on Apple and Netflix were very good to profit especially if you held them until the end of the day. Alphabet (GOOGL) and Amazon had great movement, but because they report earnings on Thursday, their options are too expensive to mess with.

Tesla options got very expensive from open because the company has elected to move up their earnings report to Wednesday which is a week earlier than scheduled and 2 weeks before normal. Obviously they must have good news to move up the earnings report like this as we expect them to produce the company's first profitable quarter in a long time. There was news today that notable short sellers have gone long on Tesla stating their new Model 3 is going to put them over the top.

I am very disappointed because I had 2 weekly Call Options with a 260 strike price that I closed out yesterday afternoon. Those 2 options would have been worth 3700 each by the end of Tuesday. If Tesla produces a huge profit, I would expect the company to trade up to 420 by the end of the week.

Something interesting happened today when Verizon reported earnings. Most stocks that move up before earnings announcement typically sell off the next day even when they beat their earnings report. Verizon has been steadily going up for the past month. After the earnings announcement, not only did the stock move up, but it continued going higher after the market opened. That has not happened since July of 2017. Since the 2nd quarter earnings announcement of 2017, every report has beat expectations but the stock reversed it's premarket gains to actually trade lower.

Apple was the first company to have this kind of positive stock movement after beating their numbers on the second quarter of 2018. McDonald's today had similar movement. This is completely different from Netflix which traded down every day since their earnings announcement until today. This trend appears to be reversing with bell weather companies like Apple, Verizon and McDonld's. On Wednesday before the market opens we will get Boeing and AT&T earnings. Boeing will be is expected to be awesome and AT&T won't. I would expect the market to be mixed on Wednesday with some late day upward movement.

Upward movement is expected when Amazon and Alphabet report earnings this week. Both companies are around 200 points off their all time high that was established 3 months ago. What will be interesting is if they move up after earnings, open the following day higher and if they can keep those gains and move higher to get closer to their all time highs. FANG companies tend to sell off after reaching a huge increase. They were making new highs the past couple of quarters post earnings, so this feels different. 

Separation of FANG

Netflix had a great earnings report Tuesday afternoon and it shot up after the Bell on Tuesday and went straight down after that. It opened Wednesday morning at $380, dipped down to 356 before finishing around 365. It went further down on Thursday and even further on Friday as Disney hit a new 52 week high that is near it's all time high based on belief that Disney will take market share from Netflix moving forward. Alphabet and Amazon traded down but for the most part Alphabet and Facebook finished the week flat while Netflix and Amazon experienced more negative effects due to their high valuation.

Trading Alphabet (GOOGL) options were interesting on Friday as it looked very similar to the prior Friday. Alphabet opened up and went up to 1121 by 10:05am before going down to 1098. It went back up to 1110 and back down to 1097 before finishing the day at 1105. It didn't have the big late day run like last Friday and is why I say that you can't trade expecting a huge Friday afternoon movement or you will get burned more times than not.

Options will be very expensive for Amazon and Alphabet because they report earnings after the bell on Thursday. Like Netflix  their earnings should be great and they will go up huge and sell off the whole day on Friday.

I did take advantage of the sold off Friday position of Tesla to buy a 360 Call for next week when it was at 354. I hope to get a nice move up on Monday or I will be selling quickly.

On Tuesday Verizon will report third quarter earnings before the market opens and as usual it will be great and benefit from not having any tariff exposure or declining media business because they are not trying to be in a low profit market like AT&T which reports Wednesday. It would be nice if AT&T has something good to report. Either way Verizon should be up more which is never the case as AT&T drags Verizon down with it. I would like to see Verizon and AT&T to act like PayPal and Ebay as PayPal had great earnings report and Ebay went in the opposite direction on PayPal highs.

Boeing reports earnings Wednesday morning and they should be excellent as long as they don't have anything to say about tariffs. As with almost every company that has reported earnings, I find that if they have great earnings and go up big, they will sell off that next trading session. If the market does not like the earnings, the shares will go further down in the next couple of market sessions. Either way it appears best to buy Put options in the first couple of minutes after the market opens after earnings are reported. Based on that stance it sounds like we are in a bear market. I don't believe that is the case as positive market movement is based on less than 30 days in a year. That is what history says  but the down days extend into multiple sessions while positive movement occurs in a day and doesn't appear to move as much as the sum of the down days. 

Netflix and Chilled, Interest Rates and Market Correction

Netflix reported a blow out 3rd quarter Tuesday afternoon. The stock rose as high as $400 before

settling around $385 and then opened Wednesday morning at $380. From there it went down along with FANG. Facebook, Amazon, and Alphabet found a bottom earlier than Netflix. Netflix found it's bottom around 355 before moving up for the afternoon. I like to see if that number will hold, but so far on Thursday is barely hanging on. Alphabet bottomed at 1115 which should be a key point to pay attention to on Thursday.

Today Alphabet opened higher at 1130 and went straight down to 1114 before bouncing up and then retesting that level at which I bought Call Options and it didn't hold as it went down to 1110. Much of the downward movement in stocks is due to the Federal Reserve minutes noting they still expect to raise interest rates 3 more times next year in addition to again in December. Rising interest rates is what Trump expects will kill the economy and he is right.

Higher interest rates cost all businesses more. Businesses finance expansion with the issuance of debt and small businesses may use debt to help with daily cash flow. Start up businesses may utilize debt to help establish themselves. Consumers use loans to purchase vehicles, homes and luxury items. If the businesses are being squeezed and the consumers have less desire to purchase higher end items, everyone loses, not just the housing sector.

The housing sector has extra constrains between higher material cost along with higher rates consumers have to pay for the mortgage loans. I believe the ultimate problem is the housing sector got fat and greedy from low interest rates for so long. Because interest rates were so low, people wanted larger houses that are larger than what they actually need. Where are they building homes for the average family? It isn't in Orlando, Florida.

Moving forward, Americans are going to have some of the largest tax refunds at the beginning of 2019. Housing may benefit some but with higher interest rates, not as much that will make a difference for the long term. People buy cars when they get big tax refunds regardless of the interest rates so I think Ford is positioning themselves to be the best along with Tesla. I think with Ford and Tesla at their 52 week lows they are a value and a growth buy for 2019 and investors will be happy by August of 2019.

Friday's Sick Market Movement

After going down sharply on Wednesday and further on Thursday, the markets opened higher on
Friday. The peak came quickly and the market reversed almost all of the gains by 1pm when they reversed to go higher. JP Morgan and other banks reported before the market open and the big banks beat their earnings estimates. JP Morgan opened higher above 110 and sold off below Thursdays low to break under 106 before bouncing to go higher after 2pm. I expected this as it appears to be a common theme with JP Morgan.

There are more bank earnings in the following week as we will hear from Bank of America and Goldman Sachs. The difference is JP Morgan will move up after open and sell off for most of the day. I would expect it to retest the low from Friday by Wednesday. On the right is my chart from Friday on JP Morgan. I did not expect to see it fall as far as it did and would have taken profits early and been happy. I don't know why I didn't follow through with this trade.

Alphabet (GOOGL) closed on Thursday at 1090 and opened Friday at 1119. It peaked early to 1122 and moved down from there. In past Friday, when it moves down, it doesn't appear to change directions to move back up. Friday was similar to the prior Friday when it moved down and changed direction at 1pm. I did buy a Put Option, but at the wrong time. I
keep telling myself that I need to wait for the retest of a lower upward movement before buying the Put. If I had, I could have tripled my profit. Instead I bought too early and sold too late to suffer a slight loss which obviously is not a profit.

I did draw up a chart showing the upward movement for the last couple of hours of the day, but I would not recommend that as it is too risky trading options on the day of expiration. It might be a good time to get options for the next week. I would not recommend holding options for the next week as I expect a retest of the low before moving up. That is exactly what happened as Alphabet moved down to 1099 before moving back up to 1120 on Monday. It did fall off after coming back up to 1120 which looks more like another double top to signal more downward movement.

I think more downward movement might be coming very soon as Netflix reports on Tuesday afternoon. It was just announced a few days ago that Netflix is not bringing back Iron Fist for a 3rd season after ending the 2nd with a cliff hanger. Last quarter Netflix dropped hard after not increasing subscribers as much as the market expected. I think that might continue as Netflix recently stopped Apple from taking a share of subscription revenue by removing the subscription opportunity from the Apple Store. For users that were paying for Netflix through Apple, I am sure it is not that big of a deal to switch over to pay Netflix directly. The main question is how long will it take for those subscribers to change over. I think their revenue will increase for the quarter, but subscriber growth will not occur and force the market to try to sell off Netflix again. When Netflix sells off, it takes Facebook, Amazon, and Alphabet with it.

After Netflix earnings, it will either go up or go down. If it opens up on Wednesday, I would expect to see an early peak followed by a sell half of the difference. If it opens down, I would expect more downside with a reverse on Thursday from a much lower base. Therefore, I would like to buy a Put Option on Netflix Wednesday morning regardless of where it opens.

Tech Hit Hard While Dow Jones Moved Up

Micron led chip stocks lower as Amazon, Facebook and Alphabet went lower also. They dropped lower than yesterday, but appeared to have bounced off the bottom and I would expect a strong move up by next week. Home Depot and Boeing moved up as they seem to catch all of the money that was leaving tech. In the afternoon it appeared that money returned to tech as the big Dow Jones stocks sold off a little in the afternoon.

There were some big moves down that I expect to see a reversal in the next week.

• Alphabet (GOOGL) was 1269 last Thursday and today's low was 1263
• Amazon was 2050 2 days ago and hit 1945 today.
• Apple was at almost at 230 and was under 223 today.
• Facebook was 177 last Thursday and today 160.
• Micron was over 51 last Thursday and today was 44.

Micron appears to be the lowest cost of all of them with a Price to Earnings ratio under 5. Apple has proved to have a strong following since Warren Buffet investing in them so I don't know that it will drop further. These could go lower with more tariff talk over the next few days, but lately we have seen moves up despite tariff talks. If there were going to be a drop due to tariffs I don't believe that we would see as much upward movement in Boeing and Home Depot.

Alphabet is what I like to trade options due to the great movement. I found today's chart was similar to yesterday's, but looked to be the opposite from last Thursday. It appears to be a sign that tech is reversing as Netflix got an upgrade before the market opened. Nonetheless GOOGL moved sharply down from open and bounced off 1163, then moved up and quickly dropped to 1165 where it gained footing and moved above 1183.

On Friday I would expect to see a small movement down followed by strong upward movement for Friday. It could move down on Monday ,but I would expect to see large upward movement on Tuesday if we don't get it on Monday.

Thursday and Friday Market Movement

This past week was a busy week for the end of August. Amazon is still moving to new highs along with Apple despite Netflix cutting off the Apple Store's cut of Netflix subscriptions. There are still more tariff talks as we ironed out a deal with Mexico, Canada is pushing for a deal next. Tesla has continued to move down as Elon Musk has left the headlines and other auto manufacturers are entering the electric auto space. 

Alphabet (GOOGL) had a nice move up this past week. It peaked out around 1269 which was a surprise that it went up on Thursday given that it started the day down. It fell back to 1260, came back up to 1266 and was in free fall mode until 2pm on Friday. I bought 3 1260 Puts on when it was at 1265 and sold it too soon at 1258. If I sold them on Friday at the low of 1225, I would have multiplied my money by 7. 

So that sounds good and you might say let's do that the next time it goes up. Typically Alphabet has a great week ending with a fall in the last day and a half. The next week it starts down with a bottom found on Monday. The bottom is retested on Tuesday and again on Wednesday. By 2pm on Wednesday the bottom is in and you could feel comfortable buying Calls for the end of the week. If the move is huge on Thursday without a pull back, Friday could be a similar sell off day. If Friday is an up day, buy Call options for the next week. If it is not an up day, buy Call options near the bottom at the end of the day.

Given how much Apple has run and their new iPhone announcement, I would expect to see it pull back some before moving higher. I am looking for it to come down to 222 before buying Call Options a week or two out.

Monday Options Profit

More pain came Monday as FANG took another turn down. Facebook got as low as 166.50 which is close enough to the 165 mark that I said it was a screaming buy. Amazon, Alphabet and Netflix continued downward also. I see this continuing a little more as they will retrace to prior earnings highs for Netflix and Alphabet.

I traded options on Alphabet (GOOGL) where I saw it dip down at open, come back near the open price and then continue downward. Here are the charts and how to trade it. The first is the chart showing the 1 minute interval where you find your entry point.

 Next you will see the 5 minute interval chart which determines how long you stay in the trade.

FANG Exposed - Part 5

So far I have said why Facebook and Alphabet are great investments and why I would not invest in Amazon. Now here is my stance on Netflix.

Company	Facebook	Alphabet	Amazon	Netflix
Ticker Symbol	FB	GOOGL	AMZN	NFLX
	A	B	C	D
Earnings Per Share	6.8143	37.2373	6.3429	2.3755
Price to Earnings Ratio	30.95	32.52	284.1	152.67
PE/Growth	1.34	1.89	13.15	2.78
Institutional Ownership	71%	78%	56%	77%
Gross Profit Margin	86.04%	57.41%	37.77.%	38.13.%
Long-Term Debt to Equity	0	2.46	120.59	185.52
Return on Assets	25.54%	13.39%	3.04%	5.46%
Return on Equity	28.79%	16.84%	11.86%	28.09%

Everyone loves Netflix! Netflix raised their price a few years ago and they lost membership. They recently increased their membership price and the market did not flinch. Netflix is available on almost every smart device to watch old television shows and new and old movies. Netflix has spent a ton of money on new content and it has helped grow and maintain membership.

All of that sounds good so why wouldn't I be a long term investor of Netflix?

• Price to earnings ratio is too high. To bring the PE Ratio down to 30 means it is trading 5 times higher than it should which would make it's price around $70/share. At that price I would be a buyer.
• Debt to equity is so high as Netflix creates their content by paying from debt issuance. So many other companies have content but don't have the platform. Hopefully it works out for Netflix, but this point brings me to the next.
• Companies with tons of content are looking to create a platform to compete and take market share from Netflix. Disney, AT&T, and everyone else is looking to take Netflix down. The leader to watch for is Disney as they have a ton of content, acquired more with the Fox acquisition and acquired a strong platform in Hulu that came with Fox.

Cord cutting has grown lead by Netflix and their content is top notch. The membership fee for Netflix is reasonable although it is higher than Amazon Prime, but Amazon is separating their services to charge the user more money. The biggest headwind to Netflix is competition, but their biggest advantage is their unlimited world wide growth potential. 

Netflix is great to buy on dips and sell on highs, but I would not be a long term investor of Netflix. A small dip of subscribers could cut the stock price of Netflix in half.

FANG Exposed - Part 4

I hope you have a better understanding of the investments that make up FANG after reading my blog. I discussed why Facebook and Alphabet (GOOGL) are buys and now Amazon.

Company	Facebook	Alphabet	Amazon	Netflix
Ticker Symbol	FB	GOOGL	AMZN	NFLX
	A	B	C	D
Earnings Per Share	6.8143	37.2373	6.3429	2.3755
Price to Earnings Ratio	30.95	32.52	284.1	152.67
PE/Growth	1.34	1.89	13.15	2.78
Institutional Ownership	71%	78%	56%	77%
Gross Profit Margin	86.04%	57.41%	37.77.%	38.13.%
Long-Term Debt to Equity	0	2.46	120.59	185.52
Return on Assets	25.54%	13.39%	3.04%	5.46%
Return on Equity	28.79%	16.84%	11.86%	28.09%

Jim Crammer coins Amazon as being the death star with the expectation that any business that

Amazon gets into, it dominates. Many think that Amazon has low overhead because it doesn't have any storefronts, then they bought Whole Foods. Most people don't understand that Amazon has many warehouses and many people working at these local locations.

I believe Amazon is working smarter when they partner up with stores like Khols and Best Buy instead of trying to buy more physical locations. Amazon's best location is their website which until their most recent Amazon Prime Day has worked without a hiccup. I see their biggest strength is also their biggest liability which is the Amazon Prime subscription. The market did not see a problem with them raising the cost of Amazon Primer Membership while other companies have used as a point of attack.

EBay and Walmart constantly attack the membership price of Amazon Prime as they provide free shipping with low minimums without paying a membership fee. Walmart has many locations nearby where you may return or exchange merchandise and Amazon does not.

Amazon's web services is a huge money maker, but as the world gets more technologically advanced, there will be more choices to use including Google and Microsoft which are taking market share. Amazon is great for business, but where it enters, it creates opportunity for others to do it better for less.

Speaking of less, Amazon might be attractive if it were trading around $180/share which is 100 times less than it currently trades as indicated by it's PE Ratio. It is a growing company and is why it still has 56% institutional ownership, but it might be considered a value company if it were trading at a more reasonable share price. Amazon's earnings per share and return on equity look nice, but company debt flares a red flag when comparing to other Facebook and Google.

The last problem is when Amazon produces their earnings and everyone sees the growth, does the stock price need to reflect an increase from this level?

FANG Exposed - Part 3

Yesterday I broke down Facebook and today I will go through Alphabet (GOOGL).

Company	Facebook	Alphabet	Amazon	Netflix
Ticker Symbol	FB	GOOGL	AMZN	NFLX
	A	B	C	D
Earnings Per Share	6.8143	37.2373	6.3429	2.3755
Price to Earnings Ratio	30.95	32.52	284.1	152.67
PE/Growth	1.34	1.89	13.15	2.78
Institutional Ownership	71%	78%	56%	77%
Gross Profit Margin	86.04%	57.41%	37.77.%	38.13.%
Long-Term Debt to Equity	0	2.46	120.59	185.52
Return on Assets	25.54%	13.39%	3.04%	5.46%
Return on Equity	28.79%	16.84%	11.86%	28.09%

Where Facebook is on every smart device, the same can be said true for Google. Google owns Android which is on 70% of all phones and has a strong presence on Apple devices also. Google provides free services through apps ranging from maps to translation and has it's assistant built into everything. Google owns the best speaker not because of the sound. Google Home is the best speaker because of the integration of Google's Voice Assistant.

Google also owns Waymo which is projected to be huge by itself. It also owns Nest which has the best thermostat and now video door bell. Most importantly Google owns YouTube which is it's best performing section next to search. To double down on YouTube, Google owns YouTube TV which takes advantage of the growing space of cord cutters.

Based on all of this, you probably understand why institutional ownership is the highest for Google among the members of FANG. When looking at the numbers, the Earnings Per Share scream buy coupled with the low amount of debt the company carries.

Google partners with a number of companies including the largest retailer in the United States Walmart. Do they have a monopoly? I don't know, but can you make it a day without searching Google or using a Google product? I can't either, so it must be a buy.

FANG Exposed - Part 2

Which did you pick? Was it A or B?

What is the order of FANG on the chart that I shared yesterday?

Here is the chart with the companies listed above:

Company	Facebook	Alphabet	Amazon	Netflix
Ticker Symbol	FB	GOOGL	AMZN	NFLX
	A	B	C	D
Earnings Per Share	6.8143	37.2373	6.3429	2.3755
Price to Earnings Ratio	30.95	32.52	284.1	152.67
PE/Growth	1.34	1.89	13.15	2.78
Institutional Ownership	71%	78%	56%	77%
Gross Profit Margin	86.04%	57.41%	37.77.%	38.13.%
Long-Term Debt to Equity	0	2.46	120.59	185.52
Return on Assets	25.54%	13.39%	3.04%	5.46%
Return on Equity	28.79%	16.84%	11.86%	28.09%

So now I will address each of them for the next couple of days starting with Facebook. No matter how many people say they are not using Facebook anymore, there are still 10 times more that are using it. That number might be small, but if you do not use Facebook, do you use Instagram or What's App?

I don't believe that Facebook has really begun to try to monetize Instagram or What's App. Companies pay for advertising with Facebook because they allow you to market your service and products specifically to demographics that you desire. Therefore I believe Facebook has a lot of room for growth in sales numbers.

Facebook has the best Return on Assets of the FANG members and it looks even better when it doesn't have any debt. Facebook is growing and without fines and regulation, it will continue to grow. Even with an increase to fines or regulation, Facebook's financials can absorb it and continue to grow.

The drawback of Facebook which might be considered a strength is it is a service company with no physical products. Instead Facebook may be found everywhere from phones, tablets, televisions, computers and a variety of smart devices.