Yesterday I said it’s time to get defensive, and that has not changed.
If you’re in the GLD trade recommended a couple times over the last few weeks, then you can see that defensive trading can also be very profitable.
The original suggestion of the GLD August 127 call is now up over 700%.
The success of that trade is a result of being one step ahead of the market.
Today’s trade is another example of lookup ahead.
Looking ahead simply means being prepared for what might happen rather than focusing on what is happening.
For example, right now the market looks like it may pull back, so if it does, we’re ready with the VXX trade from yesterday.
However, if the market doesn’t pull back, there are stocks that look like they could rally nicely. Apple has been mentioned recently and still looks good, but today I have another one.
Big tech is holding up well. Today’s example of this is Cisco, (CSCO).
As you can see by the chart below CSCO has been trading in a wide range for several months.
Additionally, it has established several days of consolidation at the top of this range in the last week.
If the market moves higher and CSCO closes over $57.75 then a new bull move higher should begin.
Once CSCO closes over $57.75 the trade’s stop is a close under $56.50.
Based on the height of the multi-week range it’s breaking out from, a quick $5 move could be expected.
A $5 move in CSCO with call options could yield triple digit gains.
For example, the September 60 calls will yield a 100% gain with a $5 move and anything beyond that will result in substantially larger gains.
Of course the $5 move is not a guarantee so respect the stop, and don’t get in until CSCO closes over $57.75 because we need to confirm that the upward momentum is still there.
Rick Nartarian, Chief Investment Officer
Darwin Wealth Creation