CAJ
Canon, Inc.
stock NYSE

My strategy is to squeeze trade on short term directional momentum. I prefer buying medium term options to lower the risk of the option expiring out of the money, and for the leverage of course. I also prefer buying options that are already in the money with strike prices at levels of strong support. I try to buy stocks that have good potential through the length of my option so that I have the choice of holding the contracts for a few weeks or months if I don’t want to exit the trade quickly.
My current positions are:—
1. 6 contracts for $100 calls on Weibo (WB) expiring 19/10. Position was entered on June 13th for an average cost of $15.20. Current price as of COB June 14th is $17.90; unrealised PnL $1,560 (16.99%).
The rationale for this position is that the market is eating up JPM’s upgrade of Twitter. I personally don’t like to buy a stock that moves as much as TWTR did just on the basis of a salesperson’s say-so, and I’m also pretty sure people like soccer in China too. I also think a lot of people turned to WB after they were done buying TWTR. WB is 100% safely moated behind the Chinese government and is not going anywhere in the medium term. It is also posting very healthy growth numbers, as would be suggested by its very strong performance in the last couple of years. Still, I think the stock is overvalued, and that long-term prospects aren’t that great since they will be likely limited to China, but I also think that a lot of stocks are overvalued *cough* Netf*lix c*ough. At $107, I can see the stock trading higher towards resistance at $130 at $140. There was also a bizarrely abrupt move to $130 a couple weeks ago, and now that the price has bounced off of strong support at $100 I can see attempts being made for $120 and $130 within the next month. Most importantly, TTM Squeeze indicates that WB is in a lull before volatility returns. RSI, MACD, and WaveABC indicate that volatility is more likely to be to the upside.
2. 10 contracts for $5 calls on Corbus Pharmaceuticals (CRBP) expiring 19/10. Position was entered on June 13th for an average cost of $1.75.
The rationale for this position is that CRBP is close to, but above, major support at $5.50. The stock is neutrally poised in my opinion and a move back below $6 is as likely as a move towards $7. That being said, the stock has spent a lot of time above its current price in the last few months and has a decent amount of volatility within a well defined range between $5.50 and $10.
My plan tomorrow is to watch how WB opens. If the open is higher than today’s close, I will let the trade run for another day so long as the stock stays above $109. My expectation is that the stock will trade between $110-115 since resistance at $110 was taken pretty convincingly today. If the open is lower, then I will sell my position and monitor WB. MACD is approaching 0 while RSI is approaching recent highs. I am not convince the stock will not retest $100 in the short term, so I would prefer to take my money off of the table until TTM Squeeze indicates a bullish move.
I am probably going to sell most if not all of my CRBP position at a loss of around 9% tomorrow. Although I think the position will pay off, the opportunity cost of having capital tied up in the trade does not make me want to wait around for a move to happen.
Watchlist:
Lockheed Martin (LMT) and Northrup Gruman (NOC) are getting hammered by the positive developments with DPRK. I doubt the stock’s valuation is going to be significantly affected by a reduction in the long-term threat from DPRK, but if people are making money selling war stocks then I want to too. LMT looks like it might retest $300 (down $10) but NOC looks like a better option to retest $300 (down $25).
Canon (CAJ) looks like it is touching support and is primed to bounce back. Travelers (TRV), Fomento Economico (FMX), Bristol-Myers Squibb (BMY) are also under the microscope.
I’m keeping a close eye on Netflix (NFLX) and Twitter (TWTR) and am looking to short the first sign of resistance at $400 and $50 respectively.