Exits, 10/28/2023

How we did on the trades we exited this week.

Dids/Pexels

This Week’s Trade Exits

As soon as I exit a trade, I note that in the comments of the post where I first mentioned the trade; at the end of the week, I try to track them all in one post. These are the trades I this week:

Stocks or Exchange Traded Products

1. Wynn Resorts, Ltd. (WYNN 0.00%↑). Bought at $108 on 3/10; sold at $90.62 on 10/25. Loss: 16%.

Options Trades

1. Call spread on Mattel (MAT 0.00%↑). Entered at a net debit of $0.35 on 10/25; expired worthless. Loss: 100%.

2. Call spread on Harley-Davidson (HOG 0.00%↑). Entered at a net debit of $0.35 on 10/25; expired worthless. Loss: 100%.

3. Call spread on Microsoft (MSFT -0.37%↓). Entered at a net debit of $1.05 on 10/24; Exited at a net credit of $2.25 on 10/25. Profit: 114%.

4. Put spread on Betterware (BWMX -31.02%↓). Entered at a net debit of $1.02 on 10/26, exited at a net credit of $2.25 on 10/27. Profit: 121%.

Comments

Stocks or Exchange Traded Products

So far, 12 of the 16 weekly top ten names cohorts I’ve presented here as part of our core strategy have outperformed the market, as I noted in yesterday’s top names post.

Wynn Resorts, Ltd. (WYNN 0.00%↑) wasn’t one of our winners, obviously, and we got stopped out. Not much more to say on that. Let’s move on to the options trades.

Options Trades

We had four exits this week, two losers and two winners. Let’s look at how they measured up on the metrics we used to select them, and see what we can learn from it.

Recall that we’ve been looking at eight different metrics for earnings trades:

• LikeFolio’s earnings score based on social data. The higher the number, the more bullish, the lower (more negative) the number, the more bearish.

• Portfolio Armor’s gauge of options market sentiment.

• Chartmill’s Setup rating. On a scale of 1-10, this is a measure of technical consolidation. For bullish trades, we want a high setup rating; for bearish trades, a lower one.

• Zacks Earnings ESP (Expected Surprise Prediction). This is a ratio of the most accurate analyst’s earnings estimate versus the consensus estimate.

• The Piotroski F-Score. A measure of financial strength on a scale from 0-9, with 9 being best.

• Recent insider transactions.

• RSI (Relative Strength Index). A technical measure of whether a stock is overbought or oversold. We’re looking for RSI levels below 70 for bullish trades and above 30 for bearish ones.

• Short interest (noted when at 10% or above).

Here’s how our winners and losers measured up on those metrics:

Losers

Mattel (MAT 0.00%↑)

1. Social data: +79.

2. PA Options sentiment: Moderately bullish.

3. Setup rating: 6

4. Zacks ESP: 1.15%

5. F-Score: 5

6. Recent insider transaction(s): Open market sales in July and August.

7. RSI: 42

Social data and Zacks (to a lesser extent) predicted positive earnings for Mattel, and Mattel did beat on the top and bottom lines. Perhaps it’s notable that of the three bullish trade exits we had this week, the one winner was the one with the highest F-Score (Microsoft).

Harley-Davidson (HOG 0.00%↑)

1. Social data: +62.

2. PA Options sentiment: Bullish.

3. Setup rating: 6

4. Zacks ESP: 1.68%

5. F-Score: 7

6. Recent insider transaction(s): Open market sale in February, open market purchase in July

7. RSI: 33

Again, social data and Zacks were bullish on earnings, and HOG also beat on the top and bottom lines. On top of that, it had an insider buying in July. Of the two losers here, HOG seems more attractive from a valuation standpoint, though not attractive enough in this market.

Winners

Microsoft (MSFT 0.00%↑)

1. Social data: +69.

2. PA Options sentiment: Moderately bullish.

3. Setup rating: 8

4. Zacks ESP: 0% (Neutral)

5. F-Score: 6

6. Recent insider transaction(s): Some large open market sales in August, including by the CEO, but I’m not sure how useful this is as an indicator with mega caps.

7. RSI: 53

As with the previous two, social data was bullish (though not Zacks in this case), and Microsoft beat on both top and bottom lines. Unlike the other two, this one had enough of a small bump after earnings that we were able to exit our call spread for a nice gain. This one also had the highest F-Score of the three. We’ll keep a closer eye on that going forward.

Betterware (BWMX 0.00%↑) (Bearish trade)

1. Social data: -22.

2. PA Options sentiment: Moderately Bearish.

3. Setup rating: 6

4. Zacks ESP: 0% (Neutral)

5. F-Score: 6

6. Recent insider transaction(s): None in the last 12 months.

7. RSI: 55

The two aligned bearish indicators here were social data and Portfolio Armor’s options market sentiment. We made over 100% on this one with a put spread, but in hindsight, straight puts on this one would have given us a gain of maybe 350%, as this stock got clobbered after earnings, down about 38%. Something to keep in mind for lower priced stocks going forward.