The markets are still range-bound with a great deal of fear over rate hikes being priced in. It’s why we’re asking that you reduce your overall portfolio exposure to the markets until we see some direction.
Consider risking up to a maximum of 10% per trade, depending on your personal preference. I have personally been risking 2% per trade to protect myself from a sudden shock to the stock markets. And please, have at least a -35% stop loss on any and all positions going forward.
Stop losses and money management are essential in today’s marketplace.
Without them, we’re lost at sea without a paddle.
The following trades are some of my favorite ways to profit from the market over the next several months. The technical terms used throughout have been covered in our Strategy Guide.
If you need further guidance with these technical terms used, please feel free to reach me. I’m more than happy to help you. And trust me, these terms get easier the more they are used.
Trade #1: Michael Kors (KORS)
The stock may have plummeted on same store sales weakness, but this is overkill. RSI, MACD and MFI are literally on the floor. When this happens, we typically see a quick bounce.
Again, this is overkill. KORS simply showed weakness in same-store sales. That doesn’t warrant an extreme drop such as this one. I’d like to see a near-term bearish gap refill around $60 before we closed this position.
Relative Strength (RSI) is deep under its 30-line – and indication of an excessively oversold stock. Moving Average Convergence Divergence (MACD) has fallen too far, as well, also indicating an oversold situation. And Money Flow (MFI) has bottomed out.
Here’s another interesting way to look at KORS.
It’s well below its lower Bollinger Band with an excessively oversold read of -100 on Williams % Range. This stock is ready to move higher. Consider buying to open the KORS January 2016 50 call up to $4.50.
Trade #2: Best Buy (BBY)
Stuck at the lower Bollinger Band (2,20) with an oversold read near -100 on Williams % Range tells me the stock may be gearing up for a near-term run from oversold conditions.
Recent shifts in consumer attitudes per the consumer sentiment notes have been greatly priced in, in my opinion. Consider buying to open a long-dated call on the BBY, using the BBY December 2015 35 call up to $3.
