This week, we’re going around the world — looking at the global benchmark stock market indexes.
In general, they tell me one thing: The picture is bullish.
However, U.S. small-cap stocks are still not signaling a bull market. That’s a concern — and I continue to believe it means a pullback is coming.
As I explain in today’s presentation, this pullback would be an ideal buying opportunity for us. I’m preparing for that, and any other market action, that may come our way.
To learn more, let’s turn to my market analysis for this week:
Click here to view the slides.
Finally, if you have any questions or comments that you’d like me to address on a future update, please send your emails to email@example.com. As always, I aim to give you data here that you won’t be able to find anywhere else.
Visa Recap and Portfolio Update
Today, we bought the Visa Inc. (NYSE: V) July $95 calls.
I’ve received emails from some of you who got in within my buy range, and others who placed a Good ‘Til Canceled limit order and are waiting to get in.
To those who placed a limit order — and not a market order — well done. The price is flirting at the end of my buy range. If you placed a limit order on the cheaper end, you may have to sit tight until the price comes back down.
And that’s completely fine.
Remember, patience pays in these situations. Don’t feel you have to get in immediately — the price will likely pull back in a number of days.
Our trade in Lowe’s Companies Inc. (NYSE: LOW) is a great example of this.
The stock briefly surged when we bought in. But then it drifted back, and now many of you have been filled at the prices in the middle of my buy range. So congrats on entering this trade.
If you still have an open buy order on Lowe’s for any reason, you can close it now. It’s been a week since the buy was signaled, and now we’ll want to watch for the uptrend to continue.
As for the rest of the portfolio, remember that we have call options in Fortive Corporation (NYSE: FTV) expiring this week. So please be on the lookout for a sell alert.
I’ll have a thorough update tomorrow, but in the meantime, I can tell you that I will either recommend exiting the calls with a market order or a limit order.
The decision will depend on the market conditions at the time.
That brings me to a reader question that I want to quickly address. Our last sell alert used a market order, prompting Robert J. to ask: “Why do you suggest placing limit orders when we are buying options, but market orders when we are selling options? Why not attempt to get a better price with a limit order on sales?”
Robert, you’re right — I could do that. When placing a trade, you can always use a limit order. In fact, placing a limit order between the bid and ask price will likely improve your execution price.
To learn more about this idea, you can watch our Intro to Options Tutorial: Part 2 here.
However, there are times when a market order is more prudent. When I recommend those orders, it means the trade needs to be closed.
See, limit orders might not be filled. So if I recommend a limit price, and that’s never hit, we risk having the option exercised.
For example, Fortive is trading above $62, and the call has a strike price of $60. If we do nothing, and the stock is above $60 at expiration, the call will be exercised.
That means your broker will deliver 100 shares of FTV for each call contract you own, debiting your account by $6,000 each. Then, with the stock trading at $62, you could immediately sell each 100 shares for a profit of $200.
By closing the call option at the market, we avoid the bother associated with exercising contracts. Of course, more experienced traders could use a limit order to improve their fill by a few cents. If you do this, it will be important to monitor your account to ensure the order is executed.
I hope this explains my thinking on exits. If not, please send additional questions to firstname.lastname@example.org. I want to make sure you all are trading this system confidently.
That’s all for today, but I’ll be back with a portfolio update tomorrow.
Michael Carr, CMT
Editor, Peak Velocity Trader