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Ask Alan 133 – “Stocks with a Bullish Outlook Despite Poor Technicals”

Alan answers a question posed by Mike, who asks:

Would you consider using the BCI method with stocks that have poor technicals? I purchased Facebook from our running list and took a big hit after a disappointing earnings report. I am now at a breakeven with the stock, not counting my option premium profits. There were many positives in the report that give me a bullish outlook. I can continue to sell options or allow assignment. Any thoughts are appreciated”

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It’s the 2nd Wednesday of the month. Time for another original episode of Ask Alan. AA#133, “ Stocks with a Bullish Outlook Despite Poor Technicals”

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About Alan Ellman

Alan Ellman loves options trading so much he has written four top selling books on the topic of selling covered calls, one about put-selling and a sixth book about long-term investing. Alan is a national speaker for The Money Show, The Stock Traders Expo and the American Association of Individual Investors. He also writes financial columns for both US and International publications along with his own award-winning blog.. He is a retired dentist, a personal fitness trainer, successful real estate investor, but he is known mostly for his practical and successful stock option strategies.

14 Responses to “Ask Alan 133 – “Stocks with a Bullish Outlook Despite Poor Technicals””

  1. Jay April 13, 2017 9:35 pm #

    Hi Alan,

    I enjoyed your OIC talk yesterday. A refresher for those of us versed in the concepts but that never hurts!

    I am sure many wish they had over written their portfolios as this month plays out. Few sectors are safe when the broader markets fail but the rapid rotation out of the financials, chips and foreign markets has been pronounced since Syria.

    We all kow when bombs fall gold rises and stocks go down. But that always leads to buying opportunities as the dust settles. – Jay

    • Justin P. April 14, 2017 8:35 am #

      Some covered call opportunities in United (UAL) after their “re-accommodating” issues recently too Jay – the fact that UAL’s price hasn’t fallen much after three days would lead me to think that at least it should hold up for a while longer? :)

      • Jay April 14, 2017 12:49 pm #

        Hey Justin,

        Most of us have been on crowded airplanes so the UAL blunder hit home touching a chord. Many thought “that could be me”.

        I’m never certain how to play bad PR events on a stock. Usually there is a dip on reaction but if nothing changed fundamentally about the stock/sector/market it recovers quickly. The dip buyers on UAL the following morning who then wait for recovery before selling May calls will likely do the best. – Jay

      • Roni April 14, 2017 3:20 pm #

        WATCH OUT,

        UAL will report earning next monday after the bell.
        As Alan always says, and repeats in the above video : “Do not sell covered calls before earnings. You will cap your up side”.

        Roni

        • Justin P. April 14, 2017 7:48 pm #

          Oops you’re right Roni, I’d thought I’d checked that on Earnings Whispers but I must have been thinking of another stock :)

          • Justin P. April 14, 2017 8:36 pm
            #

            Still seems to be good value in some other airline stocks – AAL’s $42 strike (share price 43.35) is offering a “negotiated” ROO of 0.9% with only five days left in the monthly contract, giving 3.1% in downside protection of the ROO – does this appear to be a ‘high probability’ trade or am I missing something here? :

          • Roni April 15, 2017 10:43 am
            #

            Hi Justin,

            In my opinion your reasoning on buying UAL while it is temporarily in the dog house is good, but do not sell a covered call.

            Roni

        • Alan Ellman April 15, 2017 7:17 am #

          Airline stocks:

          Another concern regarding all airline stocks is that produce monthly “capacity reports” usually mid-contract. These can impact like an earnings report and that is why they are included in our list of “banned stocks” as it relates to option-selling.

          They can still be good stocks to own but are of higher risk if we are selling options.

          Alan

          • Justin P. April 15, 2017 8:57 am
            #

            Thanks Alan, yes I recall that problem with the airlines from a previous blog now that you mention it. Also taking a closer look at the charts of the major airlines they do seem to have more than their fair share of turbulence and sudden downdrafts as well.

    • Alan Ellman April 17, 2017 6:30 am #

      The geopolitical concerns have moved me from a bullish to a more defensive posture. I feel it is more prudent to be conservative until policies become well-defined.

  2. Charles April 14, 2017 8:19 am #

    Alan,

    I appreciate your recent webcast on portfolio overwriting.

    Thanks for the free calculator. Is there a more advanced tool that includes commission and fee costs? A tool that compares multiple trades that may have more than one contract? Say to compare one AAPL contract with 3 KO contracts?

    Also, Yahoo Finance has recently stopped providing option chain data beyond the current month expirations. Is there another free source of this data?

    Charles

    • Alan Ellman April 14, 2017 10:36 am #

      Charles,

      Glad you enjoyed my OIC webinar.

      We do have a Daily Covered Call Checkup spreadsheet that incorporates trading commissions and multiple contracts that is available to our premium members and we are in the process of beta-testing additional trading tools that will become available later this year.

      Another free site for option chain information is:

      http://www.cboe.com

      Look for the “quotes” link at the top of the page.

      Alan

    • Justin P. April 14, 2017 11:42 am #

      What sort of comparisons are you doing Charles?

      Re chains another site is http://www.nasdaq.com/symbol/trex/option-chain
      as you can save up to 25 stocks (also can do NYSE stocks despite the name.)

    • Roni April 14, 2017 3:31 pm #

      Hello Charles,

      Please explain about Yahoo Finance option chain data ?
      Yahoo is my preferred source for this data, and I have not noticed any recent change.

      Roni

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