Not So FAST Fastenal Company

Amid news that Mexico and the U.S. reached a trade agreement, which boosted investor sentiment and sent stocks flying, Canadian Foreign Minister Chrystia Freeland will travel to Washington today to continue trade negotiations. “We’ll give them a chance to have a separate deal, or we could put it into this,” President Trump declared, adding that the “simplest deal is more or less already made.” “We will only sign a new NAFTA that is good for Canada and good for the middle class,” spokesman Adam Austen replied in a statement.

Let’s consider Fastenal Company (Ticker: FASTWealth Strength IndexAAPL is Extremely Up and trending Up):

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 on August 23rd.  We can combine that with the VantagePoint propriety neural index indicator moving from the GREEN to the RED on that same day.  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 weakness.  I want to play the VP continued bearish indication.

Strategy Discussion

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.  You will first want to calculate your target strike.  In order to do this, you will need three pieces of data:  current price, expiration date and the implied volatility associated with that expiration date.  For FASTWealth Strength IndexAAPL is Extremely Up and trending Up, that yields a target strike of ~$55.  You may want to consider the FASTWealth Strength IndexAAPL is Extremely Up and trending Up September 21st regular monthly expiration 55/57.5 put spread, buying it for $0.50.  The most you can lose is the premium paid and the most you can gain is the width of the spread less any premium paid.  Max risk = $0.50 and max reward = $2.00. This means that you are getting odds of 4:1.

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