Focusing On Capitulation Trades II

Summary

  • Large caps are showing weakness.
  • Remember, it’s not interest rates, it’s the QT.
  • SMID caps and emerging markets, including China, are showing signs of bottoming and setting up breakouts when the dollar slips a bit more.

Retirement Income Options offers my top option selling ideas. The stocks and ETFs are from the quarterly “Plug & Play” lists and Global Trends ETF.

Make sure to read “Using Retirement Income Options” and “Technical Trading Basics” in the Getting Started area so you can follow my methodology and reasoning.

The following trades are generally for six and seven figure accounts. Remember to check out the noon Monday Retirement Income Options webinars live or on YouTube.

Consult the VSL for long-term charts. Consult recent articles for intermediate term charts and commentary (use article search bar).

Featured Trades This Week

Until we are sure the bear market is over, we are focused on getting net buy assignments at about our bottom fishing prices. Set your strike a bit lower and accept less premium if you already have a full position in a security. If we see a rally in coming weeks or months, we might go back to selling covered calls.

Always remember to use GTC orders to use volatility to your advantage.

SPDR XLE (XLE) overbought and new trouble at Exxon. Need to trim to sell outright or in combination with covered calls.

  • Sell XLE $80 March covered calls for $10+ 

New Fortress Energy (NFE) is dipping on natural gas market relief due to warm weather. 

  • Sell NFE $35 March puts for $4

Ford (F) has a primary wave setup around $10-11 and that’s where I have my bottom fishing as well.

  • Sell F $11 March puts for $1

Intel (INTC) has some downside to the lower $20s, but I don’t want to quibble too much given the tremendous upside.

  • Sell INTC $30 March puts for $3

Unity Software (U) is plumbing bottom fishing and showing a good base technically. Earnings are Feb 1st and I want time value to burn off if earnings are good, or a lower cost basis if there’s short-term disappointment.

  • Sell U $25 May puts for $4

SunPower (SPWR) has a very attractive growth curve and has been chopping in teens a while now. Earnings are Feb 1st and I want time value to burn off if earnings are good, or a lower cost basis if there’s short-term disappointment.

  • Sell SPWR $17 puts for $2

Ginko Bioworks (DNA) continues to scale operations and add streams of revenue on their platform despite lumpiness which is causing depressed price in my opinion, aka, opportunity. Value in codebase likely exceeds market cap of stock. Over $1b on balance sheet. I have a half position now and continued execution could lead to a full position.

  • Sell DNA $1.50 puts for $.25

Option Selling

To make reading easier, lists will be switched to alphabetical per category soon. Remember to use weekly RSI, open contracts and Maximum Pain as a guide to setting GTC orders. Remember, my prices are the LEAST, not the most, I’m looking to receive in premium.

S&P 500 Growth Stocks

A combination of growth and value with strong intermediate term runways. Of note, there are not many “growth” companies on the S&P 500 as few have growth rates over 20% because they are already large. Most of the S&P 500 companies worth owning pay a dividend and appear in the S&P 500 Dividend Stocks below. I’m only including stocks here with a dividend below 1%.

CompanyBottom FishingGTC Orders
Berkshire Hathaway (BRK.B)270
Alphabet (GOOG)7585 March put 9
Amazon (AMZN)6675 March put 8
Nvidia (NVDA)90
Warner Bros Discovery (WBD)1312.50 March put 1.50
Freeport McMoran (FCX)13
Generac (GNRC)7885 May put 9
Occidental Petroleum (OXY)6060 March put 3
Tesla (TSLA)50

Mid Cap Growth Stocks

$3b to $20b, or $20b+ but not on the S&P 500. Higher growth potential than the large caps in most cases.

CompanyBottom FishingGTC Orders
Square/Block (SQ)53 ↓60 March put 7
Unity (U)3025 May put 4
SunPower (SPWR)1416 Feb put 2
Shopify (SHOP)29 ↑35 March 6
Palantir (PLTR)77 March put 1
MP Materials (MP)1825 March put 5
Uber (UBER)2225 March put 3

Small Cap Growth Stocks

Under $3b or not regularly profitable yet. Here’s where you will find a bit more “high risk” in our lists. Not all small cap stocks are high risk though. Some are just more volatile. There is a difference. Many of these are market risk, though some are indeed high risk. See the VSL for risk ratings.

CompanyBottom FishingGTC Orders
Aemetis (AMTX)55 April put 1
Ginko Bioworks (DNA)42 March put 40¢
Enovix (ENVX)910 April put 2
Heron Therapeutics (HRTX)44 March put 1
AST SpaceMobile* (ASTS)55 March put 1
Rocket Lab* (RKLB)55 April put 1
Planet Labs* (PL)55 January put 1
Satellogic* (SATL)5buy
BlackSky* (BKSY)4buy
Spire Global* (SPIR)4buy
Stone Capital (STNE)89 April put 1
Jumia (JMIA)34 March put 1

* Space basket.

S&P 500 Dividend Stocks

Looking for strong dividend growers and hidden value. Value usually comes from hidden future growth, ability to pay down debt often quickly (often by reducing capex) or company assets the market is not assigning enough value to (or in many cases no value).

CompanyBottom FishingGTC Orders
Microsoft (MSFT)142
Apple (AAPL)80
Ford (F)1112 March put 1
Intel (INTC)2830 March put 3
American Tower (AMT)156
Pfizer (PFE)3640 March put 4
Kinder Morgan (AMT)1517 March put 2
Paramount Global (PARA)1820 March put 2
AT&T (T)1718 April put 1

Non S&P 500 Dividend Stocks

A lot of special stories here that could yield large gains, including special dividend payouts.

CompanyBottom FishingGTC Orders
New Fortress Energy (NFE)3335 March put 4
Permian Resources (PR)89 April put $1
BlackStone (BX)60
KKR (KKR)39
VICI (VICI)2325 June put 2
Innovative Industrial Properties (IIPR)7890 June put 12
STAG Industrial (STAG)24
Digital Realty Trust (DLR)78

ETF Core Holdings

Diversified and market cap funds.

ETF EquitiesBottom FishingGTC Orders
Invesco QQQ (QQQ)201225 June put 24
IShares Evolved Technology (IETC)3235 March put 3
BlackRock Science & Tech (BST)20n/a
Invesco Midcap Momentum (XMMO)6070 March put 3
Invesco Small Cap Revenue (RWJ)6775 April put 8
Emerging Markets Internet & Ecommerce+ (EMQQ)2835 April put 7
iShares 20 Plus Year Treasury Bond ETF (TLT)8495 March put 11
Emerging Markets Bond (EMB)7480 March put 6

ETF Tactical/Satellite Holdings

Sector, industry and nation funds.

ETFsBottom FishingGTC Orders
SPDR Energy Select (XLE)58March 80 covered call 10
Invesco Solar (TAN)4770 April put 6
First Trust Nasdaq Clean Energy (QCLN)3340 June put 7
Invesco Wilderhill Clean Energy (PBW)3135 March put 4
Blackrock Science & Tech II (BSTZ)14na
ARK Fintech Innovation (ARKF)1415 April put 1
ARK Genomic Revolution (ARKG)2528 April put 3
AdvisorShares Pure Cannabis (YOLO)4too thin
Pure U.S. Cannabis (MSOS)77 March put 1
KraneShares China Internet+ (KWEB)2730 May put 3
Frontier Internet & Ecommerce+ (FMQQ)10na

+ Feel free to break apart your EMQQ position into FMQQ + KWEB, or to overweight a portion of your EMQQ position with FMQQ or KWEB.

  • (XLE) is near overbought on monthly and has new Exxon risks due to newly verified climate change manipulation. Can certainly sell most or all of the position too. As gets back into $70s will look at conditions and momentum.  Absolutely a trading ETF.
  • (TAN) will need to use shorter term charts than VSL to trade properly, but long-term chart shows a long-term major wave up soon. Very well could hold middle $60s which would become buy point into major bull market.
  • (PBW) more SMID cap driven, where a lot of M&A is coming, with a large bull market set-up. Clearly signs of bottoming process. 
  • (QCLN) more large cap driven, so take into consideration any broad large cap sell-off. 
  • (ARKF) buy the dips, a bottom might be in, if not, it’s reallly close. 
  • (ARKG) the future is bright for SMID cap biotech, but, wait for a bit of a pullback after recent rally.
  • The weed ETFs are bottoming finally. I’m getting the munchies.
  • Be careful with commies, but I think we are firmly in “buy the dip” territory before a breakout a few bucks higher.

Closing Investment Thoughts

Risks are high now, but so are premiums. That gives you some flexibility to be aggressive with your strikes and premiums.

I focused on monthly charts this week because we are in a bear market and I want to know how close things are to bottom.

As you can see, small caps, tech and international are all near bottoms. It’s really only the S&P 500 stocks that have held up. This is in line with what I said all year.

“The stock market is a device to transfer money from the impatient to the patient.” – Warren Buffett (again)

Take a look at where the big bunches of options are open. That’s where big players are making bets. Use that information. Look for the ranges where the big money is bullish.

Remember, always mind your asset allocation.

Oh, turns out I’ll be trading a couple of Bluemound ETF asset allocation funds for retirement plans come midyear. These will be slow moving asset allocation vehicles. So, you’ll get model portfolios for Global Trends ETF soon. 

The model portfolios for 401k plans will be called: 

  • Bluemound Growth, which is essentially Global Trends ETF with a target of 100% equities. 
  • Bluemound Global Allocation, which is essentially Retirement Trends ETF with a target of 80% equities and 20% fixed income. 

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Looking For Capitulation Trades

5 stocks with big upside, 2 with fat dividends, that are near bottom fishing prices to sell cash-secured puts on now. Learn how to add more income without adding risk while getting the full upside or more than the S&P 500.

Q4 2022 Plug & Play Stocks

Each quarter we publish our list of “Plug & Play” stocks to focus on this quarter. With the bear market raging, we tighten up and look at 27 growth stocks and 22 dividend stocks that should lead us out to much higher levels in the next several years. Join us. All you need is an Investor Ideals membership to get our full focus list of top stocks.

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