March 25, 2024
Before I dive into the Weekly Review, I want to bring to your attention that the market will be closed for Good Friday on the 29th. Also, I will be traveling that weekend for a quick Mintz family getaway. Because of that, I will send a shortened Week in Review/Position Update the following Monday morning, April 1.
Moving on …
It was a strong week for the market following the Federal Reserve meeting. And while some talking heads may say the reason the indexes rallied was the Fed’s moves, or lack thereof, more likely the reason is we are in a bull market.
By week’s end, the S&P 500 gained 1.4%, the Dow rallied 1.6% and the Nasdaq advanced by 1.7%.
Stocks on Watch
One of the best signs for the market in my opinion is when my potential buy list grows. And that was the case last week as more and more strong stocks, which also saw bullish option activity, popped on my radar. Here are some of those stocks and trades:
After looking suspect/terrible to start the year, the Financials (XLF) have come alive in a big way. And the leader in terms of price action, as well as bullish option activity, is JPMorgan (JPM) which is trading just short of its all-time high. And on Thursday a trader bought a bull call spread looking for the stock to continue to move higher in the months to come. Here is that trade:
Thursday - Buyer of 20,000 JPMorgan (JPM) May 200/220 Bull Call Spread for $5 – Stock at 199.
There is a lot to like about JPM as the stock looks terrific and the option activity has been overwhelmingly bullish.
Next up is Dell (DELL), which exploded higher on earnings three weeks ago from 92 to a high of 131, before pulling back to 106 last week. However, into that dip traders aggressively bought calls, including these trades:
Wednesday - Buyer of 2,000 Dell (DELL) May 120 Calls for $2.25 – Stock at 108.5
Tuesday - Buyer of 1,200 Dell (DELL) June 115 Calls for $6.20 – Stock at 107
Tuesday - Buyer of 1,100 Dell (DELL) July 130 Calls for $3.80 – Stock at 108.5.
Much like JPM above, I like this setup in DELL quite a bit.
And finally, while there have not been many “big” trades in Oracle (ORCL), option activity has been very strong throughout last week (250-750 calls purchased, etc.) and the stock (which looks great) is on my radar should technology and AI plays get in gear.
Volatility
The Chicago Board of Options Exchange Volatility Index (VIX) closed the week at 12.95, which broke the multi-week range the “fear index” has been at between 13-16. This lack of fear, at least in the short term, is a bullish sign in my estimation as big traders are not racing to buy protection.
Option Order Flow was fairly mixed this past week as my Options Barometer came in at:
Monday – 5
Tuesday – 5
Wednesday – 6
Thursday – 5
Friday – 5
Events for the Week to Come
The big event for the week will be the release of the PCE Prices (PCE) number on Friday. This is one of the Federal Reserve’s “favorite” measures of inflation. Though of note, that data release will be dropped on Friday, when the market is closed for Good Friday.
On the earnings front, it will be a fairly quiet week outside of Carnival (CCL) and RH (RH) reporting on Wednesday:
What Traders Are Saying
Tim Lutts, who was the former head of Cabot for many years, often said “The most bullish thing a market can do is make new highs.” And given the data below, I think the odds favor the market continuing to move higher in the weeks and months to come. For example …
@jasongoepfert on Thursday: Today has seen the most fresh 52-week highs on the NYSE since June 2021. Nearly a 3-year high in new highs.
@RyanDetrick: The S&P 500 has a shot at being up 10% YTD in March. Previous years that were up 10% in March? Only happened 11 times, but the rest of the year (so the final three quarters) was higher 10 times.
At some point the market will top … it can’t go higher forever. But given the low levels in the VIX, relatively strong option activity, and the data above, for now at least, I’m fairly bullish on stocks.
Open Positions
Celsius (CELH) July 60/95 Bull Call Spread – CELH was mostly unchanged on the week and looks great. Our position is now at a potential profit of approximately 225%.
Freeport-McMoRan (FCX) November 46 Calls – FCX is the newest addition to the portfolio after weeks of strong stock action and option activity. Trading commodities can be challenging, but the group, and FCX, look great.
Robinhood (HOOD) January 15 Call – HOOD gained 1.5% last week and looks great … though admittedly the stock was volatile day to day along with the market. Of note, option activity remains RED HOT in HOOD, including these trades from Monday:
Monday - Buyer of 13,000 Robinhood (HOOD) March 19 Calls (exp. 3/28) for $0.55 – Stock at 18.2
Monday - Buyer of 1,000 Robinhood (HOOD) January 25 Calls for $2.80 – Stock at 18.
Novo Nordisk (NVO) September 135 Calls - NVO had a less-than-ideal week as the stock, along with its peer LLY, came under some pressure. Stepping back, both stocks look great and these pullbacks feel normal (for now).
Palantir (PLTR) April 19 Call – PLTR gained 2% last week, which was good to see as the stock had been under pressure the previous two weeks. Time is running out on our calls, though they are still at a potential profit of 70%.
Permian Resources (PR) April 15 Covered Call – PR is now $2 above our short strike price, which is perfect. Our trade appears to be headed for its full profit, though we do still have four weeks until expiration.
Equal Weight ETF (RSP) June 158 Calls – On Thursday we locked in a profit of 69% on a third of our RSP calls. This “sleepy” market play is working better than I had anticipated (good to be wrong when it comes to these kinds of profits).
Snap (SNAP) August 17 Calls – SNAP is still terrible, though interestingly call buying activity picked up on Friday. Not much more to add.
Taiwan Semiconductor (TSM) September 130 Calls – TSM was mostly unchanged last week, which isn’t the worst scenario as many of its semiconductor peers were under pressure. At current levels, our calls are now at a potential profit of approximately 56%.
Nasdaq ETF (QQQ) November 430 Puts – For better or worse our hedge came under some pressure last week as the Nasdaq broke out to a new high on Thursday. As a reminder, we want the Nasdaq higher, our puts to fail, and the rest of the portfolio to gain in value.
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