Forgotten Profits Trade Setup Archive

Lumber Liquidators (LL) is coming back very nicely. It’s back above $34 a share. Raymond James just upgraded the stock to outperform with a $40 price target.

I’m just as upbeat on the stock, as they are. Hold the stock and the call option.

As for Coke, the stock finally bounced off the floor, as I had expected. The stock is up 88 cents on the day. I’m now recommending that you sell to close half of the KO May 40 call and half of the KO May 41 call for solid gains right now.

As for new positions, I’ve been watching Qualcomm (QCOM) for further downside. The trend is down even if we get a slight bounce. Consider buying to open the QCOM June 2015 67.50 put up to $3.50.

I’ve been a trader for 16 years.

And I’ve never seen a market this rigged or this disorganized.

One day, we’re up hundreds of points.

The next day, we’re down hundreds of points.

We’re now stuck in a directionless market that’s just bouncing inside a channel between 17,600 and 18,200 over and over again.

Unfortunately, there really is very little to get excited about in the market. Consumer spending, which accounts for a great deal of GDP, just hit a three year low. Yet the Dow is up 120 points. That makes no sense.

Unemployment is pitiful. Yet, we’re up 120 points.

Very little makes sense in the markets right now. While we continue to hold all open positions in the portfolio, moving some of your personal funds to cash is a good bet at the moment. Eventually, reality will give way to steep market declines.

Ian L. Cooper
Forgotten Profits

Please excuse this late alert.

I just got back from a funeral. They’re always “fun.”

But when the guy lives to 93, it’s easier to deal with.

Shortly after issuing a hedged bet on Lumber Liquidators (LL), we exited half of the put option, holding the underlying stock and the May 37 calls.

While we still hold the stock and the calls, I’m recommending that you exit the second half of the put to secure gains with it. The stock is just beginning to rebound – up $2.30 on the day so far.

I still strongly believe this stock will make a big move north.

As for other positions, we continue to hold everything in this market. In 16 years of trading and investing, I’ve never seen a market do what it’s doing before. For it to swing hundreds of points every other day is wild.

Ian L. Cooper
Forgotten Profits

It’s been an “interesting” market.

The latest 230-point move is because of Janet Yellen.

But there’s no telling if the move will last. Over the last week, the Dow has sunk and rallied hundreds of points. It’s wreaked havoc on the Forgotten Profits portfolio, too. After closing quite a few winners over the last few months, we do have positions that are down.

In fact, we’re removing the Electronic Arts (EA) and AT&T ( T) put options from the portfolio today. However, we are replacing with a new trade on Coke (KO).

After falling from $43 resistance, KO just found historical support at $40 a share. I strongly believe the stock could rally well off this low. RSI and MACD are both oversold and ready to reverse off lows.

Consider buying to open the KO May 2015 40 call up to $1.80 and/or the KO May 41 call up to $1.35.

Ian L. Cooper
Forgotten Profits

As my attorney just got finished telling me, “I know your ex is nuts. You just have to deal with it.”

The same thing applies to the market. It’s nuts, and well off its rocker, but we have to deal with it. Last week, the Dow lost about 500 points after running and selling off, making us all a bit batty.

Today, we are up about 200 on the idea that another oil pullback will increase consumer spending. But here’s the thing. Even as oil pulled back from highs, all consumers did was save money. We can see that in the savings rate.

We have to deal with this reality for quite a while. So we will trade a bit more conservatively until some sort of rational thought returns.

As for our trades, consider exiting half of the Lumber Liquidators put option side of the new hedge. The stock was taken down again by short sellers now alleging insider trading.

Look for new trades shortly.

Good investing,

Ian L. Cooper
Forgotten Profits

The markets have been a disaster this week.

One day we’re down 300. The next we’re up 250. And then, as we’re seeing today, we’re down another 250.

No wonder investors — and traders — have lost their minds this week.

I’m pretty sure I’m balding from it myself.

While I believe the Dow could pull back to its 200-day moving average at 17,267, we need to be a bit cautious here.

At any time, the bulls could ramp the market back up on absolutely nothing, as we’ve also seen this week.

While holding all other open trades, consider selling to close half of the DIA April 179 put for good gains here. Hold the second half going into next week.

Ian L. Cooper
Forgotten Profits

Just yesterday I issued a buy on the Lumber Liquidators (LL) stock as it traded around $34. Today, it’s 7% higher at $36.61… and the short sellers aren’t happy.

I didn’t recommend options at the time because the bid-ask spreads were too wide. But that has since changed.

While holding the Lumber Liquidators stock, consider hedging. I believe the stock could refill its bearish gap at $50 but want to protect for any “bear raid” potential.

For every two calls bought, consider buying one put.

• Consider buying to open the LL May 2015 37 calls up to $6…
• Consider buying to open the LL May 2015 36 puts up to $6.20.

Hold all other trades, including the McDonald’s (MCD) puts. MCD pulled back to $95 the other day before moving a bit higher with the broader market today. The underlying MCD stock is over-extended, as money flows out of the name.

Ian L. Cooper
Forgotten Profits

“Ian, I did take a hit on the Lumber trade. But I like the idea. And I see that the stock is moving aggressively higher again. How would you trade it now? Other than this trade, I have done well overall. Thanks for your hard work,” wrote John C.

Thanks for the kind words, John.

The day after we exited under $30, the stock began to rocket well off its lows for the reasons we stated. There are no victims being reported. And a growing number of big investors are questioning the methodology used with the 60 Minutes report.

Better yet, the CEO of Chapman Capital just took out a large long position with call options in the stock.

This attack on the stock was nothing more than shoddy work by shoddy short sellers. I still strongly believe this stock could refill that bearish gap at $47.50. This story has gotten way out of hand on no real substantial news, in my opinion.

Unfortunately, the bid-ask spread on most of the options makes it impossible to buy at the moment. For that reason, consider just buying the underlying LL stock up to $35.

Have a -30% stop loss on the stock.

Ian L. Cooper
Forgotten Profits

I’ve been watching McDonald’s (MCD) as a short candidate. Technically, it’s all screaming, “sell me” after double top failure. RSI is reversing well off its 70-line. MACD is insanely over-stretched into overbought territory.

Money is flowing out of the name, per Money Flow Index (MFI). The last time, MFI was this high, we saw MCD fall from $96 to less than $90 in no time at all. There’s nothing to get excited about with this name at the moment. Hopefully that changes. But right now it’s an overvalued mess.

There are two ways to trade this.

• One, consider buying to open the MCD May 2015 97.50 put up to $3.60 without risking the house.
• And, or two consider buying to open the MCD June 2015 95 put up to $3.50 without risking the house.

We have to also consider the overall market is a bit over-extended with very little to get excited about.

Also, going forward we’re going to be implementing a -40% stop loss strategy on all trades.

Good Investing,

Ian L. Cooper
Forgotten Profits

The short sellers won.

And there’s no reason for it.

I’m recommending that you consider selling to close the Lumber Liquidator calls today to stop the hemorrhaging.

In my opinion, the news is already priced in. Now, traders are panicking. The put-call ratio tells me that they are shaking in their boots with fear.

Once the selling has stopped, I will look for a the best opportunity to jump back in and hopefully make up for this loss. For now, consider selling to close.

Ian L. Cooper
Forgotten Profits

Talk about a disaster. Not only has the snow wreaked havoc, but economic realities have, too, sending the Dow down more than 200 points on the day.

Our DIA puts should do very well if this fall continues, especially if the Dow tests its 200-day moving average near 17,240.

After closing quite a few wins between January 5 and February 23, 2015, we have run into some losses, including Lumber Liquidators (LL).

I still love this trade. The stock is over-crowded with bears on no real news. Sure, there are investigations being launched, but that’s old news. Sure, there was a 60 Minutes report, but most of that report was from a short seller, two attorneys backed by short sellers, and unidentified factory workers.

The key piece of evidence is missing, though. There were no victims.

Not only is MACD and RSI deep in oversold territory, but if we look at Money Flow, we can see money is beginning to flow back into the name. They know as well as we do that this is nothing more than a bear raid.

I’m watching it, and holding for the moment. However, if the underlying stock falls under $30, we’ll jump out. For now hold.

Ian L. Cooper
Forgotten Profits