Hi Wealth Builders!
Whoa, we had a significant sell-off this week with all of the major indices in red again.
Let's take a look:
Here's SPY:
Here's QQQ:
Here's DIA:
Technical Analysis 📈📉
SPY:
SPY is now back to its previous horizontal support of around $426. If next week's earnings do not serve as a positive catalyst, there is a chance that we may revisit the $414 or $411 support again.
QQQ:
QQQ may even revisit the $317 levels.
DIA:
DIA may revisit the $331 levels.
AMD:
AMD earnings are set to report earnings on May 3rd. If we continue drop even more, we may hit the $84.50 support.
SBUX:
SBUX is also set to report earnings on May 3rd. This week, the stock made a new low. I am going to wait until earnings to see how/if I am going to pivot with this stock.
AAPL:
AAPL is still holding relatively strong as it nears its previous upward trending support line denoted in orange. If the sell-off continues, we could be retesting the $155 level.
MSFT:
Lastly, MSFT may be retesting its previous lows near the $270 level.
Trade of the Week:
This week, I don't recommend starting any new wheels since major corporate earnings come out next week and markets may be too volatile. I believe it may be more wise to observe how Wall Street reacts to their reports and if they serve as positive or negative catalysts on top of news of looming interest rate hikes.
If you already have shares for your wheels, you can continue to sell 4-6 week calls against them to bring in cash, as I am also doing right now.
Ask Steve 💭
Let's see what some of our members asked this week. Here are the top questions we received:
Aditya
Q: Hi Steve, I hope you are doing well. I am about to invest $10k and I am wondering is Netflix is a good place to start investing the money. Considering the recent 30%+ drop in the stock and the PE ration is around 20?
A: I personally would not invest in Netflix right now, especially with their decreasing numbers of subscribers and increasing number of competition in the streaming space. Also keep in mind that we are not in an environment that favors tech/growth stocks that don't pay a dividend.
Bryan
Q: Hi Steve, MSFT had a pretty rough week and my covered call that I've been doing a wheel on has lost a lot of value. I know you've mentioned that we can buy back and roll out when the underlying stock drops a lot in a short amount of time, but it seem like rolling out even 6 weeks out doesn't give me much premium at the same strike price. Am I missing something with this strategy? Recommendations? Thanks!
A: With the recent broad-base sell-off, we may want to be more patient with our stocks as many of their fundamentals have not negatively changed. Remember that selling these OTM covered calls, even if it "only" brings in around $50 per contract, is still better than not collecting any premiums at all. You can view these collected premiums as a dividend payout. but for now, let's stay patient and see how their earnings turn out in the next couple of days.
Kathy
Q: On a Roth IRA, you can deposit up to $6k per year. If your current AGI is $100,000 then jumps to $150,000 (for someone filing Single) the next year, are you no longer eligible to deposit to your Roth IRA?
A: No. You will not be able to contribute into a Roth IRA since your MAGI surpasses the Roth IRA's limits. You can consider using a Backdoor IRA, which is a strategic and legal method of transferring funds into a Roth IRA, even with a high income. You can find more information here: https://www.investopedia.com/terms/b/backdoor-roth-ira.asp
Q: Can you continue to keep the account open if your income is higher than the limit?
A: Even if you choose not to contribute to your Roth IRA anymore, you can still have the account open and the assets inside continue to grow.
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 and Predictions On The Market
Market Fears
As you already may know, there is news that the Federal Reserve may become more aggressive with increasing interest rates due to the quick rise in inflation. Does the stock market like the rise of interest rates and inflation? Absolutely not. These two factors may affect business' top and bottom line revenue in the short-term, which may cause large institutions to temporarily sell off their shares and stay in cash.
Future Outlook
I believe that if there is no evidence that inflation is decreasing in the next couple of months, even with the efforts from the Federal Reserve, the markets may stay fearful with the belief that even more interest rates will continue to come. If this happens, I foresee many tech/growth stocks to continue to sell off even more and many dividend-paying DOW30 components will continue to consolidate sideways.
Earnings
With the recent deep sell-offs in the markets, I believe that companies that deliver strong numbers may serve as a catalyst to having a market rally. Many institutional investors will keep a close eye on company reports and if the recent shifts in inflation and interest rates have affected businesses.
Potential Market Rally
I get it. It may feel like the markets will never rise again. However, I'm here to tell you that it will!
How do I know this? Well, we've seen historical market patterns where retracement always happens, especially on certain S&P500 and DOW30 components, and usually at a time when we least expect it.
Remember that many of these money managers, institutions, and banks have multi-billions of dollars, with even more coming in every day from people wanting to invest and depositing money into their retirement accounts.
All this money is getting piled up and these large institutional investors want to put it in somewhere, so it can grow.
Once we see all of this uncertainty fade away, be prepared to buckle your seat belts as money will start pouring back into the markets, and our favorite stocks will rise once again.
Stay patient with the markets, especially with the fundamentally strong stocks/ETFs that you are holding in your portfolios. Keep disciplined with depositing money into your account and let your premiums, dividends, and deposits sit as cash for now. Good things are coming our way.
Stay calm, everyone! 🙏
-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.
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