UNLOAD THE CLIP: The Jews Make 10,767% in Two Flippin’ Weeks! And Where Were You, Lilly…? (LLY, DIA, FAS, TPOR/DUSL)

Before we get to today’s masterwork of financial creativity, we have to address three trades.

Straight to it!

The first is our TPOR/DUSL venture that was partially closed HERE but still has options open, both long and short.

To sum, we’ve got to set a single STOP buy order at 32 on TPOR.  That’s where we have a short CALL still open.

Important: should the CALL get triggered, you’ll have to reset a STOP sell order on the shares at the same level (32) in order to keep the trade square.  And if that order gets filled, a new STOP buy must again be opened at 32.  Ad infinitum.

An open STOP must remain at 32 until the trade is closed or we advise otherwise.

Next, our BITO initiative is up over 1000% and can be closed immediately for a huge whack of cash – if you decide to do so.

That is, if you went in with multiple units and feel it’s best to cash out – in whole or in part – we’ll cheer you on.

That said, it does appear that the stock still has some legs, so we are NOT exiting as yet.

That could be wise; it could be foolish; only time will tell.

“We might get rich, you know, we might get busted…”

Finally, we’re closing our FAS trade that was opened on July 18^th in a letter called No Joke: Leveraged Banking Action Gives Us a Possible 33,233%.

There, we urged you to buy the FAS August 19^th 75/85 CALL spread for $1.63 and sell the FAS August 19^th 51 PUT for $1.60.  Total debit was $0.03.  We also recommended a STOP sell on the shares at 51 to avoid any runaway loss.

And now…?

We’re terminating.

The 75/85 CALL spread can be closed for $3.60 (5.10/1.50) and the 51 PUT repurchased for $0.34.

Get it done and you NET $3.23 on just three cents spent!

And that’s a two week haul of 10,767%.

Remember to CXL your STOP.

And congrats to Robin and Jared, who made a BIG sortie of this one.

And now we move to today’s action on Eli Lilly and Co. (NYSE:LLY), who are set to announce earnings this Thursday (August 4^th).

Analysts are expecting reduced earnings on slightly higher revenues when the storm lands.

And here are the key fundamentals –

• P/E is a drug-addled 48.92, while Forward P/E is 34.70, well higher than that of her peer group at just 12.60.  Expectations are extraordinarily high.
• Dividend Yield is 1.19%,
• Price to Book is a stoned 31.92, and
• Debt to Equity is eight miles high at 1.77.
• Earnings fell this last year by 9.80%,
• And it’s solely on the basis of a single strong quarter that we believe the stock is still situated where it is (in the ionosphere).

Look now at the daily chart –

Technically, we have –

1. Two overbought RSI readings from March/April that put the spook into the bulls (circled, in red).
2. How do we know?  Because both RSI and MACD started diverging negatively against price – and continue to do so (in green).  This is a sign of a bearish takeover of the trade.
3. Price-wise, we see a pot-roast gain of 45% in just over four months…
4. That culminated in a diamond-top (in blue).  This is a pattern that very often signals the end of the line – if it holds.  It can also morph into something else, and we’ll be watching closely to see if that’s the case.
5. If it is the top, then the first stop lower is $312, where a gap lies waiting to be filled (in red).
6. Below that, simple Fibonacci retracement calculations offer support at 293 and 272, toward which the rising MAs are now trending (and should arrive within the next week).

But our goal is not to play LLY solo; rather, we plan to match her against the Dow Industrials.

Have a look at how that pairing fares here –

The two traded in tandem until the end of February, after which they went their separate ways.

LLY got giddy, and the Dow went yow!

But now we see a window for the two to begin closing the existing gap, and we’re playing it as follows (with the SPDR Dow Jones Industrial ETF)–

A Jew and His Money recommends you consider selling the LLY October 21^st 370 CALL for $5.35 and buying the DIA October 21^st 340 CALL for $5.45.  Total debit on the trade is a dime.  Set a STOP buy on LLY at 370 to avoid any runaway loss.

Rationale: the long DIA CALL is only 3.4% out-of-the-money, while the short LLY CALL is 12% OTM.

And those seem like important and favorable considerations.

Particularly since LLY is showing signs of a top.

Beyond that, know that the possibility exists to go long/short here without using options – and if you have the guns to do so, you may want to consider it.  Just be sure you use STOPs, placing them according to your maximum pain levels.  DIA trades at $328.66, while LLY sells for $329.69.  One lot of each (long/short) would give you a credit of $1.03.

May the good Lord do as He sees fit, and may we find favor in His eyes.

With kind regards,

Hugh L. O’Haynew

Follow @HughLOHaynew