בס״ד

BIG WINS: 265% and 196%! Then We Cannibalize the Car Parts People! (LKQ, GNRC, APPS)

Posted on June 16, 2021

Two trades to close today before we move to today’s offering.

And we start with GNRC.

The trade’s details can be found HERE, and can be summed as follows – we’re sitting on a NET credit of $7.10 with a short August 250 PUT still open.

And we say it’s time to buy it back.

It goes for $1.80.

After the repurchase, our take is a NET $5.30 on $2.70 spent.

And that’s a very cool 196%.

Our APPS trade, whose details are available HERE, has us $10.16 in the black and holding two short June 18th 70 CALLs.

Those CALLs go for $1.70 each today, and we’re recommending you buy them back for a total NET return of $6.76.

And that, on an initial outlay of just $2.55.

And that’s a blockbuster 265%, friends.

This Week’s Trade…

We’re going after big game this week in LKQ Corp. (NASDAQ:LKQ), global sellers of every sort of part, used and new, your car might desire.

The trade is speculative, so for those who don’t appreciate that sort of thing, it’s time to put her in PARK.

For those who want to venture almost nothing for a potentially big payday, however, consider the following charts.

First, the daily –

Technically, we have –

  1. A short-term double-top just below 52 (in blue),
  2. A gap that requires filling down to 46.25 (in purple),
  3. An overbought RSI indication (in red), that engendered
  4. Significant divergence against price from both RSI and MACD (in green).
  5. And daily support that arrives with the rising MAs at 42 and 36.

The weekly, too, offers ample evidence that a top may now be in place.

Have a look –

The weekly technical picture is dominated by –

  1. A lengthy RSI overbought tenure in May that’s now declining (in green),
  2. Along with a MACD indicator that’s presently rolling over,
  3. Declining volume (in black), and
  4. A break below a seven month rising wedge (in red), all of which point to a turn of the tide in favor of the bears.
  5. The bunched mid- and long-term weekly MAs in the 32-33 range should act as a magnet on prices, and though we may not ultimately retrace to that level, price will have a hard time rising further until it makes a strong gesture southward.
  6. Simple Fibonacci calculations see possible retracements to either 37 (more likely, because it also aligns with daily support) or 28.

And it’s for all the foregoing that we now offer you the following SPECULATIVE trade –

A Jew and His Money recommends you consider the sale of the LKQ August 20th 47.50/50.00 CALL spread* for a credit of $0.95 ($3.10/$2.15) and the purchase of the LKQ August 20th 42.50 PUT for the same $0.95.  Net zero premium is the result.

[*Sell the 47.50 CALL and buy the 50.00 CALL.]

Rationale: The trade pays for itself, with the short CALL spread covering the long PUT to the penny.

That means our risk on the trade is precisely $2.50 (the difference between the CALL spread strikes).

Our potential gain on the trade is unlimited, though we have to decline to $42.50 before we start seeing any scratch.

Between 47.50 and 42.50, we’re in a dead zone – no gain/no loss.  But we have to get to that 47.50 to get out of trouble – meaning a decline of some 3% from today’s price.

And that’s what makes the trade speculative.

We believe a drop is likely – at least to 42.50 and possibly lower.  The speed at which it arrives at that level, however, will determine just how profitable we are.

Faith, friends, in the Al-mighty G-d of Israel, Who neither slumbers nor sleeps!

And many happy returns,

Matt McAbby

 

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