Trading After Amazon Earnings

On Thursday, after the market close Amazon reported their fourth quarter earnings. They beat their earnings expectation, but due to increase expenses as stated on the conference call, and drove the price down largely. It attempted to make her early recovering, but just think further and further.

Like last year, when Amazon and Google disappointed on their earnings, the whole market came down. It is extremely important to make sure that you get out of your trade in a timely fashion. When you get too greedy, you end up losing more than you gained.

I got out of my puts on Alphabet missing the right time and
costing me $600 on Thursday. I didn't make the same mistake today which was very important because it was the day of expiration. I did make money on alphabet 1130 calls, but lost a little too much on a 1135 call that I didn't sell promptly.

Alphabet's normal trading on Fridays consist of going up sharply, retracing down near the low the day, going back up and falling short of where it peaked earlier, and going down for most of the rest of the day. Very good money can be made with puts and decent money can be made with calls on Fridays as long as your problems with your execution and don't fall in love with your holdings.

From my chart above you can see where I recommend positions. This is the typical movement of Alphabet on a Friday, but the past 3 out of 4 weeks it has not moved in the typical pattern.

Then there was Tesla. After reporting fourth quarter earnings on Wednesday afternoon, we didn't get a big movement in either direction. I believe it would have fallen further if Tesla reported a loss in the 4th quarter of 2018. Since Tesla reported a slightly lower than expected profit and already came down so sharply in the prior week, it should back up to trade above 330 next week. I bought 2 315 February 8 calls on Tesla within the first few minutes of Fridays open.

I don't like holding options over night because you don't know what will happen by the next day let alone after a weekend. Typically you can buy the same calls on Monday unless Tesla opens considerably higher. Hopefully I can benefit from Tesla running up to 330 early Monday morning and I can sell then.

On Thursday morning, when I saw that Tesla was not going down, I decided to sell a covered 3/1/19 Put with a 280 strike price for $800. I picked that strike price because it bounced off 280 at the bottom of the most recent drop before the earnings release. Therefore I expect it to go up and this option expire worthless on March 1st, but if it does go down by then even in a larger market decline the level of 280 should hold for Tesla. I found this strategy makes more sense than being subject to risk of holding on the stock.

I got fed up with UGAZ and it's strange movement that don't make sense. I did find that Antero Resources Corporation (AR) does make sense as it is a company in the Natural Gas field with positive earnings and does have options available on it. AR his a 5 year low on Thursday below 10 and it bounced when UGAZ didn't. UGAZ went down further on Friday, but AR went up. When AR was at 10.21 on Friday, I sold 5 3/15/19 10 strike Puts. I might decided to buy this stock also, but at this point I feel I can make a high probability profit even if it doesn't go much higher by expiration.

I had been following someone on YouTube recently who discusses options trades, but I have found him making some dumb errors that didn't make sense. I am not saying that I am an expert, but to sell an out of the money naked call option 5 months out on Boeing the day before earnings has to be the dumbest move I have ever seen. There is a possibility that it goes down and he might be able to buy it back slightly over what he received on it. There is a probability that Boeing blows through that 400 strike price before the next earnings call, especially if there is a trade deal done, but definitely by their next earnings report.

This year is starting to look like last year in terms of the market movement, but this year is quite different. Last year the market had a large amount of volatility due to over inflated market after the next tax bill was passed, companies wrote off more expenses in the fourth quarter of 2017 to take advantage of the higher tax break, emerging markets were declining, new Fed Chairman Powell starting moving interest rates too quickly and trade tariffs were affecting everyone when nobody was expecting them at all.

This year is different because the Fed chairman has learned how to talk without disrupting the stock market, we might be getting closer to a trade agreement, and consumers are about to experience some of the largest tax refunds ever. Amazon's warning of higher expenses might have spooked investors Thursday and Friday, but it is the same thing that Google did last year when everything reversed course. It was pointed out on CNBC's Options Action on Friday that Alphabet appears to be in a head and shoulders pattern, but you could say that about so many companies that I broken out after hitting a 52 week low and bounced to move sharply up. Typically these 52 week lows have been 50% of their all time highs. Alphabet is the one FANG member with probably the highest diversity along with the lowest growth movement. I don't see Alphabet moving more than 100 points lower, but I also don't see that coming until it have moved 300 points higher.

How to Make Patients Pay Off Today

I am a big advocate for studying one or two stocks that have decent daily price movement to trade options daily. I follow Alphabet (GOOGL) closely and understand its tendencies. Similar tendencies can be found in other stocks, but I am comfortable with it's tendencies for trading.

Today it opened higher than Monday's closing price, but Monday it broke below the 1249 level that held the week of Alphabet's 2nd quarter earnings. I expected it to go down initially today and roar upwards after it finds a bottom. It closed Monday slightly below 1249, but opened at 1252 and pointed down quickly. It was so quick that it didn't come back to where it started the way I like to typically jump into a trade. It did find a bottom at 1240 where it retested a couple of minutes after 10am which made it perfect to buy Call Options.

Unfortunately I was influenced by last Tuesday's movement where it opened 10 higher and went higher right off the bat so I bought my Call Options too soon. Rather than sell at a loss, I decided to wait for the turn. The only problem with waiting is that what I paid for the Call Options when Alphabet was trading at 1252 I had to wait for it to get to 1256. I sold up slightly due to lack of discipline for not waiting for the bottom. This would not work well on Thursday or Friday as it doesn't have that kind of change in direction most of the time.

When there is a big drop with Alphabet, it moves in $10 to $12 peaks. What I mean is that it opened at 1252 and bottom at 1240. It closed yesterday at 1248 and peaked at 1260 although the tradable peak was 1258. Therefore you can use the price movement of the stock to measure good times to take profit it is in an extended overbought or oversold state based on the stochastic indicators.

In other news, Home Depot had a blow out quarter report before the market opened and it went up in the premarket trading and fell sharply during the market session  This stock will go up over the next couple of days as long as Macy's and Walmart don't disappoint over the next couple of days. 

Macy's hit a new 52 week high today. I find that when a company runs up before reporting earnings, it receives too high of expectations and will sell off after the report no matter if the earnings is good. With it running like this, I bought a Put for protection on the downside and expect to buy a Call Option after it finds a bottom if the report is good. Nvidia is following a similar pattern, but the problem is their options sell at a hefty premium and the report is due after the market is closed on Thursday which doesn't give you time to anticipate the direction. 

Tesla appears to be losing stream after last week's Tweet by Elon Musk about going private with the company stock. I feel it is going to be in a tight Trading range Unless we get some market altering news. 

Amazon and Apple Go Higher and then...

Amazon and Apple went broke out to new highs this morning while Netflix opened lower due to the CFO leaving the company. Netflix did rise with the rest of FANG before coming down with FANG for the rest of the day after 11am. Tesla opened higher and traded down until it reversed when it got around 350/share. I believe Tesla will move up this week, but find it hard to believe that the company will go private at $420/share. I think $400 is more likely to be the go private price, but either way it is higher than where it is at and is why I will hold a small amount of shares in my portfolio.

Alphabet (GOOGL) opened up, came back to 1252 in the first couple of minutes and that is where I bought my Call Option and sold just after 10:30am for a nice profit. It came down to 1252 where I bought another Call Option with a higher 10 strike price and ended up selling it when it didn't appear that Alphabet was going much past 1254. It did trade down for the afternoon. Tomorrow might be similar to today. I like taking my profit when it goes up about 12 higher than where it starts when it starts flat. See my chart:

Strong US Economy Outweighs Tariffs

• Tariffs on China went into effect at midnight and things were looking down at open until a great labor report came out at 8:30am. The timing of the labor report was so perfect to offset the tariff news that the market went higher. China placed tariffs on US imports to offset the US tariffs and some industries like soy beans and lobster are crying. Germany wants to eliminate tariffs which is a positive sign for auto makers, but I don't believe it is positive enough when the largest populated country in the world is going to target our vehicles. 

•  Trading Alphabet looks very similar to last Friday. It opened down and that is where I bought 5 Call Options like last Friday. It felt some resistance around 9:55am before pushing higher where it stayed for the rest of the day. If you didn't make it by 1pm, you were not today as it did little for the rest of the day. I did look at Amazon and Netflix charts to justify the movement of GOOGL.
  
  
  
  

•  There was a small moment of gain that was possible when GOOGL fell below 1153 with less than an hour to go. If you could have bought a Call Option with a strike price of 1152.50 for a dollar,, you could have placed a sell order with a limit of 2 and doubled your money.

Market Oversold Created Buying Conditions

• The stock market was over sold for the past couple of days and especially yesterday. Everything was poised to go higher. Amazon had the nicest gain due to the news on the acquisition of a mail order pharmacy. Amazon and Netflix looked hot to open, but Google on the other hand looked as though it was still over sold.
• Not only was Google oversold opening down another 4 from where it closed yesterday, it went down another 6 after open. This is crazy since the Stochastic Indicator shows that it is over sold on the 1 and 5 minute intervals. This was a great time to reel in profits. Check out my charts below.
  
  
  
  

Big Drop in the Market Again

• Wednesday was a crazy day in the market. There were huge moves before the market even opened. The Dow Jones was poised to open down over 250 points at 7am and then there was news from the White House regarding stealing of our technology. Boeing led the market to high peaks until everything reversed led by technology stocks. 
• So my first chart will show Boeing. Assuming you had Call options or bought some at open you would have enjoyed a nice run. The chart below shows if you bought Put options at the peak and sold them at the first bottom.
  
• Netflix is my next chart and it signified what was happening with it's brother (Amazon) and sister (GOOGL) stocks. The stochastic lines were high on the 1 minute and 5 minute charts. There was some money to be made going up higher, but there was plenty indication that it was changing direction to go lower after 10am.
  
• I find that Alphabet (GOOGL) continues to experience the same movements to start the day that I have noted before. It showed upward movement, came down to near where it started around 9:40am, shot back up higher and peaked. Sometimes that peak happens at 10:30am, but today happened at 10am. This was a good time to get out of those Call options.
  
• Alphabet has movement throughout the day and below are some additional opportunities. I believe trading based on the 5 minute interval charts, but finding your entry and exit points based on the 1 minutes charts. You can get the 1 minute easier through Yahoo Finance.
  
  
  
  
  
  
  
• Each dollar in price equals around 700 in option contract profit. It doesn't take a lot of time to profit, but if you don't use the signs you will lose money.