I Don’t Think T-Mobile Can Answer the Call

Amazon reached a $900B market value for the first time on Wednesday, nipping at Apple’s (NASDAQ:AAPLWealth Strength IndexAAPL is Moderately Up and trending Up) heels as Wall Street’s most valuable. The news comes after the company announced it sold more than $100M in products during its annual Prime Day sale. Shares are up over 57% so far this year, bringing Amazon’s (NASDAQ:AMZNWealth Strength IndexAMZN is Moderately Flat and trending Down) increase to over 123,000% since it listed on the Nasdaq in 1997.

*Source:  Seeking Alpha

Let’s consider T-Mobile US (ticker: TMUSWealth Strength IndexTMUS is Moderately Flat and trending Down):

The VantagePoint platform recently indicated downside momentum.

Using the predictive indicators embedded within the VantagePoint platform and its predictive AI technology, we will point out three significant things. We have a bearish crossover indicated by the blue predictive indicator line crossing below the black simple moving average between July 17th to the 18th.  We can combine that with the VantagePoint propriety neural index indicator moving from the GREEN to the RED position the day prior.  This indicator measures strength and weakness for a 48-hour period, in this case weakness.  The move to the RED position further makes the case for a potential bearish scenario. We also have the predicted high and low below yesterday’s actual high and low indicating further strength.  I want to play the VP bearish indication.

Strategy Discussion

If one was strictly a stock trader, selling TMUSWealth Strength IndexTMUS is Moderately Flat and trending Down in the $60.00 area could be prudent.  You are anticipating a move to the downside.  As a protective measure, it is always good practice to place a buy-stop order.  In this case, placing that order in the $61.50 area will mitigate potential losses.

For active traders with a shorter investment time horizon, you can consider a setup utilizing options. Given the market conditions outlined above, taking an active, premium debit approach may be the best path to success.

Because of the reasons given above, the purchase of a debit put spread may be one way to approach this situation.  The first thing that you want to do is calculate your target price.  In order to perform this calculation, you need three pieces of information:  current price, expiration date and the implied volatility for that expiration date.  For TMUSWealth Strength IndexTMUS is Moderately Flat and trending Down this calculation yields a target strike of ~$57.  You may want to consider the TMUSWealth Strength IndexTMUS is Moderately Flat and trending Down August 3rd weekly expiration 57/59 put spread, buying it for $0.60.  The most you lose is the premium paid and the most you can gain is the width of the spread less any premium paid.  Max risk = $0.60 and max reward = $1.40.  This means that you are getting odds of 2.33:1.

Given the trading and market environment outlined above, a trader must evaluate whether this reward/risk ratio is appropriate for his/her risk tolerance.

Position Update

Please recall last week we discussed WMT.  We highlighted a strong indication of upwards momentum. We highlighted the WMT July 20th regular expiration 87.5/88.5 call spread, buying it for $0.27.  The most you lose is the premium paid and the most you can gain is the width of the spread less any premium paid.  Max risk = $0.27 and max reward = $0.77.  This means that you are getting odds of 2.70:1.

Here’s today’s chart:

You can clearly see that WMT did indeed continue with its upward momentum.  We entered the spread for $0.27 and exited for a price of $0.45 for a great ROI of 66.67%!