🔒Membership Positions - June 5, 2022

Hey Wealth Builders!

This week, the major indices trended sideways. On Friday, the Labor Department reported that 390,000 jobs were added to the U.S. economy in May, with the unemployment rate holding steady at 3.6%. Many economists had expected job gains to total 318,000 to 328,000 with the unemployment rate falling to 3.5%.

Shouldn't this be good news though?

Because the labor market seems to be holding strong after the previous rate hikes, the data may signal the Federal Reserve to give another steady rate hike in the future.

Remember, the Federal Reserve wants to decrease inflation by increasing interest rates, but also make sure the economy still has its wheels spinning. By increasing interest rates too fast, it may yield to negative economical effects. This is why the Federal Reserve is slowly increasing interest rates by 25 to 50 basis points each time and observing the effects a couple months later to see if they can safely increase another 25 to 50 basis points again.

However, the stock market typically does not like the idea of rising interest rates as it may impact many companies' revenue, which again, is why we've been observing the sell-offs over the past half year.

Technical Analysis 📈

SPY

SPY kissed the magenta resistance on Thursday and seems to have some trouble getting above the $414 level. However, if we get any good news in the next couple of days, it may serve as a catalyst for the index to break out.

QQQ

Looking at QQQ in the short-term, the index is nearing the $317 resistance level. However, from a mid-term perspective, there is still room for it to run up towards the magenta resistance. If the ETF rallies towards the magenta line, SPY will follow the movement and may finally break out of its resistance.

DIA

DIA is nearing the $331 resistance and also still has some room to run towards the magenta resistance before deciding if it wants to break out or get rejected again.

SBUX

Go ahead and take a sip of your coffee because SBUX may have broken its downward trend this week. However, can it hold above the resistance line and start making higher highs and higher lows? I'll be keeping a close eye on this one this upcoming week.

MSFT

MSFT opened lower on Thursday due to news of the company lowering their guidance for their Q4 revenue. However, the stock surged right back up as many investors shrugged off the concerns. Like many stocks we're observing, we would like to see MSFT break above the $273 resistance and the downward magenta resistance.

AAPL

AAPL rejected the $150 resistance this week. However, my hunch is that the stock will want to retest this level soon, which we will then want to see if it can break above the magenta resistance.

AMD

AMD had a strong upward movement this week where it finally broke and stayed above the $100 level. We can also observe that the stock has been making short-term higher highs and higher lows. I am keeping a close eye on if the stock is able to stay above the magenta resistance in the upcoming days.

COST

Lastly, I noticed that COST has been in a strong upward trend since they delivered their reports. The stock even broke and stayed above the $469 level. I am thinking of slowly adding 1-5 more shares into my long-term positions.

Ask Steve 💭

Let's see what some of our members asked this week. Here are the top questions we received:

Yasmeen

Q1. Hello! I was assigned AMD at $100 and my cost basis is around $92. A few weeks ago I sold a CC at my assigned price of $100 which expires this Friday. AMD popped today and is at approx $108-109. Would you recommend rolling out and if so what date/strike would be ideal or just let the shares get called away this Friday and move on to the next trade? Trying not to focus on the almost 1K gain since I sold at my assigned price but man! Thank you.

A: Congrats on your ~$1K income! What you do with your portfolio is completely up to you. Whenever we sell a covered call, we typically don't mind getting our shares called away since this was initial goal. However, if you would like to buy back and roll up and out, you can consider doing so by selling a further dated expiration and at a higher strike price. Keep in mind that if you buy back the call option for a higher price, you will essentially be increasing the cost basis of your shares, opposed to reducing them.

It’s okay! AMD is a fast mover. It can go up quickly, but it can also go down quickly. We try not to time the market because it is impossible. Instead, we just trade the wheel and collect whatever premium we can. If you are bullish on AMD, you can also consider buying a few extra shares on the side. For example, you can buy an additional 25 shares, so if the stock rises above your strike price, these 25 shares will capture the unrealized gains.

You're doing a wonderful job, Yasmeen! Keep up the great work :)

Austin

Q: How can I stop the financial bleeding in the Stock Market, looks like I've lost 15 to 20 thousand dollars.I'm fairly new to stocks and use Robinhood and Webull.

A: We are always subject to market conditions. Unfortunately, we can't control which way stocks go. However, we can still make money during these conditions by selling covered calls and setting up bear call spreads. When we invest, we have the long-term perspective in mind, and understand that stocks will have short-term fluctuations. We recommend sticking to our guidelines when stock picking: Part of the S&P 500 and/or DOW 30, fundamentally strong, technically strong, and pay a dividend. We have seen that high quality stocks retrace and trend higher over time.

Q: How can I switch my portfolios to TD Ameritrade?

A: You should be able to do a broker to broker transfer. Consider reaching out to TD Ameritrade for further instructions. If your older brokerage charges you a transfer fee, you can let TD Ameritrade know and they typically would be happy to cover the fee for you.

Q: I am already 61 yrs of age have I started too late to become financially free?

A: This will depend on many factors, such as market conditions, the amount you are able to contribute, and the time horizon of when you wish to become financially free.

If you want to be more on the conservative side, we recommend only investing and trading stocks that primarily are a part of the DOW30 and pay a dividend. Though your portfolio may not grow as fast compared to portfolios that hold growth stocks, dividend-paying DOW30 stocks typically are more steady and do not get sold off as violently as growth stocks during market uncertainty.

Only invest what you are comfortable with because there will always be a degree of risk with any investment.

John

Q1. What should I invest in right now to make money? Should I try LEAPS or Spreads? I'm a premium member and I haven't even started cash secured puts or covered calls because of the market.

A: We are currently being patient and observing the trend of the market. We are in a highly volatile market, so we don't recommend starting any new wheels or buying many shares at the moment. We also do not recommend buying call options at the moment as these are leveraged securities that require a bit of knowledge on options Greeks. Instead, you can be an observer or practice selling covered calls in a paper trading account. You can also take some time to review the videos in levels 1-3 to understand how these trades work.

Submit Your Questions 🙋‍♂️🙋‍♀️

Have any other questions? Before asking me and my team, feel free to check out our Level 1 FAQ. This FAQ is located on the Dashboard. You might find what you're looking for. 😊

If you do have questions, make sure to ask them on our Dashboard, rather than asking us via email. We also encourage you to watch all of the core video content and some of the past archived videos, read past Membership Positions, and take all the quizzes before sending us your questions.

Join Our Discord 💬

Investing, trading, and building wealth was a lonely journey for me. This is why my team and I created a Discord group for you and the other members to shares ideas and support one another. You don't have to go through it alone as we're all here to help. 😉

Make sure to check it out on the bottom of your "Dashboard" and follow the instructions on how to sign up. Coming from a teacher's perspective, I believe it's important to engage in conversations with people who are also seeking to reach financial freedom.

Remember that we are a community of wealth builders at all different levels, so be positive, kind, and helpful to others, so we can help each other get to financial freedom much faster.

Steve's Thoughts 💡

I am a cautious optimistic right now and may have a slight feeling that we may start retracing back up or at least start to consolidate sideways.

From SPY's all-time high to its recent May lows, we've had around a 20% drop (see below as reference). We tested this 20% drop twice on May 12 and May 20 and seem to have a strong bounce off the support. This makes me think that institutional algorithms are trying to not let the index cascade into a bear market.

Also, we can see that SPY rose from $380 to our recent high of $417 (see below as reference), which is around a 9% increase. For the broad indices to move up 9%, it typically shows that there is institutional money going back into the markets.

On the other hand, we did see around a 12% bounce back in March, where I thought we may be moving back up. Sadly, the index was then rejected at around the $458 level and came back down to $380.

I am still not recommending any new wheel trades at the moment because I would like to see more evidence of higher highs and higher lows, and positive market sentiment.

If you feel comfortable, you can consider nibbling on stocks/ETFs. However, I would be cautious and lean towards stocks that are part of the DOW30 and/or pay a dividend. As you have all learned, high growth, tech stocks are the ones that usually get sold off by algorithms when there is even a slight whiff of uncertainty. And yes, there is still some uncertainty with the potential interest rate hikes.

If you don't exactly feel comfortable investing, I feel you too. I'm also going to stay as an observer.

Believe it or not, sometimes the best thing to do is nothing.

I want to give many of you kudos for staying disciplined with consistently depositing money into your account and patiently selling OTM covered calls on your initial positions. You have done well with respecting the downward trend, understanding that we cannot control the markets as retail investors, and not catching any falling knives.

Please keep your eyes peeled this week and we will talk again in the next post.

Stay patient and positive, everyone! Have a wonderful weekend!

-Steve and the Call to Leap Team

The following article is strictly the opinion of the author and is to not be considered financial/investment advice. Call to Leap LLC and the author of this article does not claim to be a registered financial advisor (RIA) or financial advisor. Please visit our terms of service and privacy policy before reading this article.