Hi Wealth Builders!
As long-term investors, we had another amazing rally this week!
Let's take a look at the overall markets:
Here's SPY:
Here's QQQ:
Here's DIA:
Technical Analysis 📈📉
Now that we see a shift in sentiment in the overall markets, I am now using the capital that I've been saving up from my wheel premiums, bear call spreads, dividends, and monthly deposits and slowly deploying them into a couple of stocks and ETFs that I see institutions putting their money into as well.
SPY:
I am slowly adding some shares of SPY. Be mindful that we have a potential resistance line somewhere around $457. I'll still be adding shares at this current level and wait for a break out above $457 before adding more.
QQQ:
Likewise, I am adding more share of QQQ as the ETF has broken out and stayed above the downward resistance line.
DIA:
The same goes for DIA and I will be slowly adding more shares.
MSFT:
It looks like MSFT is at a horizontal resistance line of around $303. If the stock breaks above, I will consider starting another wheel. From years past, MSFT is a company with a wide moat that endures well through many turbulent events.
AMD:
I am also considering starting another potential wheel on AMD if the stock breaks above $123. It seems that the stock has been in a holding pattern since mid January.
COST:
Again, COST seems be in favor by Wall Street right now. I added more shares this week but will add more shares if the stock makes another all time high. I'll keep you posted when this happens.
SQ:
I added more shares of SQ this week and also plan to slowly add more shares if it gets back above the $140 level.
NVDA:
I like the price action on NVDA and see that there has been a lot of buying of this stock. I am slowly adding more shares to my portfolio.
Again, please be mindful that with stocks like AMD, SQ, and NVDA, they are usually volatile and have extreme price movements on a day-to-day or week-to-week basis. Always remember to slowly scale into your positions because you never know if any negative news can come out again, which will cause these stocks to quickly sell off.
As you have noticed my investing style over the past couple of years, I like to be patient and let the stock come to me, rather than go it. This means that the stock has to prove to me that it can keep climbing and that institutions are favoring it before I decide to add more shares.
In the game of investing, patience really does pay off.
Trade of the Week:
We are planning on shifting our trading from bearish to neutral/slightly bullish now. This means that you can consider starting new wheels if you feel comfortable.
One particular underlying stock you can start the wheel on is AAPL since there seems to be a lot of institutional buying.
If you want to be more conservative, you can consider selling further 2-5 strike OTM CSPs. Since we've had 9 consecutive green days, it is possible that the stock might take a little breather. If you have a more bullish outlook on AAPL and don't mind the volatility, you can also sell a CC or CSP NTM. Doing so will give you a larger premium upfront, especially if the stock decides to trend neutrally.
Below is a trade recommendation. See if it fits your risk tolerance before executing it in your portfolio:
AAPL Monday Open: $163.51 Friday Close: $174.72 5-day change: 6.85%
Starting a New Wheel: Selling a Cash-Secured Put on AAPL - AAPL's Current Price: $174.72 - Capital Needed: $17000.00 - Sell at the Expiration Date: 2022-04-22 - Select the Strike: $170 - Premium you'll receive: $277.00 - Cost Basis: $170.00 - $2.77 = $167.23
Starting a New Wheel: Selling a Covered Call on AAPL - AAPL's Current Price: $174.72 - Capital Needed: $17472.00 - Sell at the Expiration Date: 2022-04-22 - Select the Strike: $175 - Premium you'll receive: $425.00 - Cost Basis: $174.72 - $4.25 = $170.47
Another stock that I'm eyeing is NKE. The company just delivered their fiscal year reports of increasing quarter-over-quarter and year-over-year revenue. Looking at the technicals, NKE has fallen around 25% from its all time highs, but has broken out of its downward resistance line. I anticipate that the stock will slowly retrace as external fears dampen.
Again, if you want to take a more conservative approach, you can sell 2-5 strike OTM CSPs to start your wheel. If you have a more bullish outlook on NKE and don't mind the volatility, you can also sell a CC or CSP NTM. Doing so will give you a larger premium upfront, especially if the stock decides to trend neutrally.
Below is a trade recommendation. See if it fits your risk tolerance before executing it in your portfolio:
NKE Monday Open: $129.72 Friday Close: $133.70 5-day change: 3.06%
Starting a New Wheel: Selling a Cash-Secured Put on NKE - NKE's Current Price: $133.70 - Capital Needed: $13000.00 - Sell at the Expiration Date: 2022-04-22 - Select the Strike: $130 - Premium you'll receive: $258.00 - Cost Basis: $130.00 - $2.58 = $127.42
Starting a New Wheel: Selling a Covered Call on NKE - NKE's Current Price: $133.70 - Capital Needed: $13370.00 - Sell at the Expiration Date: 2022-04-22 - Select the Strike: $135 - Premium you'll receive: $340.00 - Cost Basis: $133.70 - $3.40 = $130.30
Ask Steve 💭
Let's see what some of our members asked this week. Here are the top questions we received:
Q: for me it actually does make sense to sell OTM during bearish markets because you can be pretty sure that the strike price will not be hit . why does steve in a level 1 video advise to sell ITM then in a bearish market? Thats confusing to me. Could you please explain that to me one more time? Thanks.
A: In a bearish market, the overall trend is downward and typically continues to move downward. Therefore, there is a lower chance that if you do sell your covered call 1 strike ITM, that your shares will not get called away. When you sell a covered call ITM you would also get a higher premium for the month as opposed to selling more OTM and getting a lower premium for the month during a downtrend. The more OTM strikes you choose, the less premium you collect. However, we typically like selling covered calls at our cost basis just in case the price of the stock rises and we don't sell our shares at a loss.
Q: Hi, I started to invest in 8 different fundamentally strong companies you show on your website and bought 5 shares of each company as a start. I was wondering if it might be better to have less companies to invest in and to sell covered calls on. by that it will be faster to have more shares on the long run to sell covered calls on. Would that make sense and would you advise that? Thanks in advance.
A: It is completely up to you. You can invest for the long-term by investing in various companies OR you can consider obtaining 100 shares of a company to sell covered calls. You can even consider first investing in multiple companies and once your assets appreciate to a target amount, you can sell some of your shares to reallocate into a new wheel.
Q: Is it a good time to invest? I'm new to the program and I'm excited to get started!
A: From having a long-term investing perspective, yes, we believe it is a good time to invest. If you are new, you can consider investing in some ETFs that track the overall S&P500, such as SPY and VOO. Once you familiarize yourself with the markets and its volatility, you can slowly add more shares of these ETFs and even consider investing in individual stocks that follow our investing guidelines.
Earnings
NKE:
NIKE released their third quarter reports this week and reported top-line revenue of $10.9 billion, compared to $10.3 billion a year ago. This is up 5 percent compared to prior year and up 8 percent on a currency-neutral basis.
NIKE Direct sales were $4.6 billion, up 15 percent on a reported basis and up 17 percent on a currency-neutral basis.
NIKE Brand Digital sales increased 19 percent, or 22 percent on a currency-neutral basis, led by 33 percent growth in North America.
NIKE also has had dividend increases for more than the past 5 years. Each share currently has a quarterly dividend payout of $0.305 per share. I expect that the company will continue to increase its dividend by the end of the year.
I am still trading the wheel and investing in NKE in separate accounts and believe the stock will continue to retrace within the next 12 months.
Shoutout to the Discord Community
I wanted to take some time to say thank you to all my friends in the Discord Community for helping each other out and leading discussions, especially Richie, George, Jess, SVG, Verapamil, Page, Ali, SirLuis, RWang, Wather, NinjaTrader, and Ylakh. You guys are such a fun group! Also, special thanks to Jess, Page, H-Montero, Tyler, and Chef Narb for joining the livestreams. (Sorry if I missed any other names!) You guys are wonderful students and always willing to learn!
If you still haven't signed up for the Discord, why not? You are totally missing out!😉I talk to several of you who are experienced traders and investors on a weekly basis in our dashboard but haven't seen you on the Discord yet! It would be wonderful if you could share your experience and expertise with investing and options theory to the group. 😊
And yeah, "Daddy" is watching. Heh heh.
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.
Have a restful weekend and continue to stay positive and patient! 😊
-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.