Archive Category: Wednesday Windfalls Alerts

The energy sector has been marching to the beat of its own drum this year. Shares of the Energy Select SPDR Fund (NYSE: XLE) soared higher through June, while all other sectors were sliding deeper into bear-market territory. Then, XLE eventually succumbed to a 20%-plus drop during its pullback in July … but rallied quickly to make new 2022 highs last month. Now, the sector is off by about 10% as traders and investors wait for the latest batch of inflation data this week … as well as the Federal Reserve’s decision on interest rate hikes. All told, much of the volatility in energy prices and energy-sector stocks has been to the upside this year. We call that “good” volatility.

The weakness we bought into on Monday’s down day unfortunately extended into Tuesday as well. That put a significant headwind against our bullish positions and ultimately led to a sizeable loss in two of the plays. Shares of Enterprise Products Partners (NYSE: EPD) have lost about 2.3% during our holding period, causing the call options we bought to trade down by about 80%. And shares of Nordstrom Inc. (NYSE: JWN) lost an even heftier 7%, putting our calls down about 90%. The one bright spot is that shares of Hormel Foods (NYSE: HRL) edged a little more than 1% higher.

Stocks are trading down today with the major indexes off more than 1%. Yet, implied volatility — a measure that directly affects the cost of buying options — is at the lower end of its 2022 range. Together, this means we’ll take advantage of weak Monday prices and “cheap” call option prices. I used my system and have identified three stocks that are best positioned to benefit for a midweek bounce…

Not much action so far this week. The S&P 500 edged lower yesterday and today, as have the three stocks we made bullish plays on. At last glance, we’re facing medium-sized losses in each of our three positions. I’ll also go over the final results of this week’s trades tomorrow in your Weekly Trade Wrap. For now, let’s exit our open positions…

The broader stock market enjoyed a lift last week, in line with the favorable Thanksgiving Day seasonality I wrote about. Specifically, the S&P 500 was up almost 2% from Monday’s open through Friday’s close — with its largest daily gains on Tuesday and Wednesday. We skipped last week’s normal slate of trades because of how the market’s closures on Thursday and Friday (half day) were likely to affect the rate of decay in the option premiums we would have purchased. Nonetheless, as a Thanksgiving “bonus” I shared with you all of the tickers that triggered “buy” signals last Monday, according to our Wednesday Windfalls system.