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What’s on the Investing Menu Today? (FXI,AAPL,USFD,SHAK)

Posted on September 12, 2019

It’s the food we eat, friends, that determines our state of mind and the solidity of our thinking.  That old saw, ‘you are what you eat’ is absolutely true, and medical science is finally catching up with all the old wives out there who knew this wisdom from the get-go.

So if you want to ingest crap, well, you can count not only on your body losing its togetherness, but your brain, too.  You can also expect your behavior to become as erratic as your thinking.  And when you end up in the state correctional facility, eating far worse fare than you were used to on the outside… well, you can pretty much count on an extended stay.

We’re going to discuss the world’s biggest jailor in just a moment – and offer you a sound money-making idea along the way – but first we have a number of trades to shut down.

And we start with this –

On August 20th we penned a letter called Food Fight! that urged you to buy the USFD April 17th 45 CALL for $1.35 and sell the SHAK March 20th 140 CALL for $1.30.  Total debit on the trade was a nickel.

And today…?

The USFD CALL sells for $2.50 and the SHAK for $1.95.  Sell off the former and buy back the latter, and you net $0.50 on a nickel spent.  That’s a 1000% victory in less than a month.

And that’s Grand Prix winnings, bro.

Next on the docket was our missive from just a week ago, Chocolate Salad, Please… With a Side of Lamb.  There, we recommended you sell an AAPL September 18th (2020) 170 PUT for $7.50 and buy an AAPL September 18th (2020) 260 CALL for $7.75.  Total debit on the bet was $0.25.

And today things look downright groovy.

For starters, the CALL now goes for $9.75 while the PUT trades for $7.90.

Sell off the former and buy back the latter and you haul in a full $1.85 from just a quarter laid down.

That’s a one week take of 640%.

Like mocha pudding on a Jiminy-Straw sundae!

And Now Down to the Business of Getting Rich and Creamy!

The world’s biggest jailor, of course, is the United States – if you rely on official statistics.

But the true incarceration champions don’t participate in the world’s data gathering efforts – no doubt, due to the shame and embarrassment they feel over crimes committed in this realm over the last half century.  After all, work camps and death camps and camps to detain religious and political dissidents, where the forced harvesting of organs, torture and other brutal, state-sponsored activities are daily committed, are not yet the taste of the civilized world.

China, friends, is where we turn our attention today, because China IS commodities [and jails].

Yes, they have a growing manufacturing base and a fast developing high-tech sector, along with a swelling middle class.  But China’s economy still lives and dies with its ‘stuff’, imported, exported or domestically consumed.

Now look at a chart –

This is a daily chart of the iShares China Large Cap ETF (NYSE:FXI) for the last two years.

And it offers a few important takeaways –

  • First, the RSI oversold read at the beginning of August likely marks a bottom for the latest downtrend (in green),
  • In addition, the triple bottom (in blue) at FXI 38 offers increasingly strong support for the stock, and
  • Three waves lower – NOT yet complete – indicates we’re closing in on an endgame for this bear move (in red).

However…

  • We also have strong overhead resistance from the third trendline lower at 43 and falling, and
  • We have three moving averages declining between 41 and 43.50 applying additional downward pressure on price,

Such that…

FXI is likely stuck in a range for the near term between 38 and 43.

And the way we see it, for at least a month.

So we’re playing it as follows –

A Jew and His Gold recommends you consider selling three (3) FXI October 25th 42.50 CALLs for $0.61 each and three (3) FXI October 25th 38.50 PUTs for $0.14 each.  Total credit on the trade is $2.25.

Many happy returns,

Matt McAbby

 

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