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Chart of Day: Own Nucor on the Trump Tariffs

May 31, 2018

The rally in steel and aluminum stocks may just be getting underway.

The tariffs — 25% on imports of steel and 10% on aluminum — take effect at midnight Friday. They are expected to lead to retaliation from European nations, says National Public Radio. Likely targets are thought to be U.S. exports of jeans, motorcycles and bourbon.

As we speak, shares of U.S. Steel (X), AK Steel Holding (AKS), Century Aluminum (CENX), Nucor (NUE) and Steel Dynamics (STLD) are seeing wins after President Trump moved ahead with tariffs on aluminum and steel imports from Canada, Mexico and the European Union.

Of the bunch, we like NUE the most here.

In fact, in its last earnings call, the company said that earnings should significantly increase in the second quarter based on tariff concerns. Adding Europe to the list of places that’ll see tariffs would only serve as a bigger catalyst for the stock.

While plans can always change, we’d recommend buying shares of NUE at market prices at this time with a stop loss of -25%. Also, consider buying to open the NUE July 20, 2018 65 calls at market. Use a -35% mental stop on the calls.

Chart of Day: Applied Materials (AMAT) Starts to Rebound

May 29, 2018

On May 21, 2018, we noted:

Shares of Applied Materials (AMAT) beat on the top and bottom line, but slipped on a weaker than expected sales outlook. But what’s interesting to note is that every time this stock gaps lower, as it has many times, it doesn’t take long for the stock to rebound and refill its bearish gap, as it’s again trying to do now. After finding double bottom support around $48 a share, we believe AMAT can refill its gap at $54 shortly.

At the time, the stock traded at just $50.26 after a ridiculous gap lower. It’s now up to $51.65 and could refill its bearish gap at $54.50. If you bought in on the excessive fear, you’re already seeing a respectable win so far. If you have not yet taken a position, the AMAT stock is still a buy along with the AMAT July 20, 2018 52.50 calls at market prices.

Chart of Day: Buy the Most Hated Stock on the Street

May 27, 2018

One of my favorite ways to make money on the Street is buying stocks every one hates.

Look at Campbell Soup (CPB) for example.

The company has struggled lately, most recently with a sharp decline after cutting its full-year guidance. It even fired its CEO after its stock price plummeted. But with a new CEO transition plan in place, there are hopes things can turnaround here.

Plus, with the stock as hated as it is right now, it’s the perfect time to buy with the stock now at bargain basement prices. Plus, we believe a lot of the bad news has been priced into the stock, which now sits at a 52-week low. Investors are slowly buying again on hopes the recent bearish gap can be filled at $40. In addition, CPB is no stranger to tough times. But each time the stock gaps down, that gap gets filled not long after. While this trade does carry higher risk, we believe it’s worth buying at a 52-week low.

There are two ways to trade CPB here. One is to buy the stock at market prices and hold. The other is to buy to open the CPB August 17, 2018 35 calls at market.

Chart of Day: Caterpillar (CAT) could Run to $165

May 22, 2018

On May 16, 2018, a filing with the SEC revealed that Director David L. Calhoun bought 5,000 shares of Caterpillar at a cost of $155.37 a share for $776,850.

While the stock pulled back from highs of $170, there is certainly a lot to like here.

Not only did it beat estimates with its latest earnings report, it raised guidance.

For one, the company posted EPS of $2.82 share – 120% growth year over year, which also beat estimates for $2.08 to $2.10 a share. Revenue was up 31% to $12.86 billion, beating estimates of $11.98 billion. Sales around the world were just as strong. IN the Asia-Pacific region, sales were up 44%.

In North America, sales were up 33%. In Europe-Africa-Middle East market, sales were up 25%. In Latin America, sales were up 24%. And then the company raised estimates for the full year based on strong quarterly results and higher demand. Previous earnings guidance of $8.25 to $9.25 was raised to $10.25 to $11.25.

Even more interesting, the stock appears cheap with a PEG ratio of 0.58.

Another positive for a stock like Caterpillar is the fact that the trade war fears have now cooled between the U.S. and China. “With tensions between China and the US now in at least temporary abeyance, markets should react positively to a situation which had threatened to derail the synchronized global economic recovery,” said Interactive Investor, as quoted by Fortune.

There are two ways to trade CAT.

One is to buy the stock at market. The other is to buy to open the CAT July 20, 2018 165 calls at market. These calls may be out of the money here, but we believe they’ll pay off well.

Chart of Day: Applied Materials (AMAT) Offers Opportunity

May 21, 2018

Just last week, shares of Applied Materials (AMAT) beat on the top and bottom line, but slipped on a weaker than expected sales outlook. But what’s interesting to note is that every time this stock gaps lower, as it has many times, it doesn’t take long for the stock to rebound and refill its bearish gap, as it’s again trying to do now. After finding double bottom support around $48 a share, we believe AMAT can refill its gap at $54 shortly.

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