Dan Passarelli, CEO - Market Taker Mentoring

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In some videos last week, especially towards the end of the week, it was pointed out that this should probably be a fairly quiet week. So far, it's shaping up to be, so who knows, we could get surprised.

But the S&P 500 towards the end of the day here is looking up about a little under half a percent. It was suggested that we look for some individual opportunities.

Here's one that Dan thinks is a little bit interesting. This is a stock that Dan talked about a while back in some of our classes. It's called Vicasa [VCSA] and it's been kind of dormant for a while. Been hanging out in that two and $3 range for a couple of months. But a couple of interesting things happened over the past few days.

First of all, in the video, if we go to the news, we'll see that Openheimer adjusted the price target from seven. JMP Securities adjusted to $7 from $6.50. And even Goldman Sachs adjusted to $6 from $5.50. So that's three analyst upgrades within just a couple day period. Also it's a newer company. The quarter before last they lost like thirteen cents and this quarter they turned a profit.

For such a young company, it was a SPAC. We can see that they must have gone public right around here the end of November. For such a young company, going public to here's their first public announcement of earnings. All of a sudden, being able to turn a profit is pretty impressive. And why is that? It's basically because they can post positive earnings whenever they want. That sounds like a pretty profound statement to make about a company.

Dan watched an interview and they said that their financials were pretty solid and that they were just simply planning on reinvesting all their profits and pursuing an aggressive growth strategy. So it looks like maybe with the economy or something, they scaled back just a little bit on some of their costs and are just letting the revenue come in and ended up turning a profit here. So it's a pretty strong company. It's had a pretty strong three days and I think it's a good one to take a look at and watch.

I hope that helps.

Dan Passarelli, CEO - Market Taker Mentoring

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It's been a nice run out for the past three weeks. In the last couple weeks have been a real nailbiter as we waited for economic news, the jobs report, PPI and CPI and such and all that really major broadbased news is out.

This coming week doesn't really have a whole bunch on the calendar. There are still a few companies that will be getting into retail earnings season pretty soon, but a lot of the news is out. You know what that means. That means you're probably going to end up trading less next week. In fact, you should counter, in fact, you should try and trade less next week. Why?

Because there's not as much visibility, the VIX is significantly lower. You're probably not going to find as many trades as you found over the past couple of weeks where we've had all this wonderful volatility. It's very easy to force the issue and to do what's called overtrading and to just jump on a trade because, oh, it's good enough, I can't find anything better.

It's okay to step back and to really pick your spots and to use this period to find really just the highest quality trades and let all those other ones go. Overtrading is the enemy of all traders, so let's avoid that. And that said, hey, have a happy weekend and I hope that helps.

Dan Passarelli, CEO - Market Taker Mentoring

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Lots of questions lately about interest rates and the Fed raising them and how it affects the market and the economy and are we in a recession? When does that happen?

So let's talk a little bit about the timing of such things. First of all, when interest rates go up, what that does is it makes it more costly for businesses to borrow money. That puts a little bit of pressure on businesses and kind of cools the economy down. It doesn't happen immediately. If interest rates go up today, that might not work its way into the economics of any given corporation for some time.

In fact, it's been said that a change in interest rates can have around twelve months to take effect. So all this price action in the stock market that we're seeing where when interest rates look like they might go higher, the market sells off and vice versa. It's traders getting ahead of things.

The interest rates that we've seen over the past couple of months, the interest rate hikes that we've seen over the past couple of months really won't have its effect on the economy for another six months to a year. Now, all that said, will this lead to recession? Well, technically, we're in a recession already. The original definition of recession is two negative quarters of GDP in a row, which we've had. They've since sort of changed definition, and it's not very objectively stated anymore. It's kind of hard to talk about things when it's opinion based. Right? So we're sticking with the classic definition. Two negative quarters of GDP in a row is a recession.

There's still a bunch of other economic data. Like, we saw the job reports come out last week and so many more jobs were added. Inflation is very hot, which is a sign of an overstimulated economy. So there's still some information being parsed out. It's a very different scenario now with supply chain issues and all that. Perhaps the most important thing to get across is that these interest rate rises won't really affect the market for several months.

Six to twelve months from now is when they'll be felt. So think about that and your timing. The stock market reacts very quickly to these individual events and the news that can influence these individual events. But the actual effects on the economy move a great deal slower. So keep that in mind in your trading and investing. I hope that helps.

Dan Passarelli, CEO - Market Taker Mentoring

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The rally continues! As we used to say on the trading floor: give it the whip!

You know, big, big day today. Up 2.1% for the S&P 500 as measured by the SPY spiders ETF. And why is that?

Well, of course it's because CPI came out this morning and it came out at 8.5%, which was a little less than many economists were thinking, and it was a lot less from June's 9.1% reading.That's really good news. The key motivator for the Fed to raise interest rates is high inflation. When it cools down a little bit, that might put the brakes on some potential interest rate hikes. We'll see. There's a lot of time going forward, but this is definitely good news on that front.

Now with that said, we've talked about this in a lot of our videos lately, right? What we expected was, if inflation comes in today cooler than expected, we'd probably get a pretty good rally, which we did. And if it was going to come in hotter than expected, we probably would have sold off a fair amount.

Tomorrow we have PPI and all eyes are going to be on that. And that's going to be a little mini me version of CPI that came out today, in my opinion. I think if it comes out in line with what we saw today with CPI, a little bit cooler, rally could follow through just a little bit if for some reason it comes in hotter and there's like a divergence between CPI and PPI could sell off a little bit, but that's probably less likely.

So all eyes are definitely going to be on PPI tomorrow and the weekly unemployment figures that come out every Thursday morning. And after that a lot of the major, major news is out. There's still a lot of major news to come out, but the really major key stuff, unemployment last week, PPI, CPI this week, those are the really key things that the Fed watches. We're going to have a little bit of a hiatus from that. And so there's a possibility for a bit of a meandering market for a bit as it tries to find itself and it absorbs more information.

If we have some of the Fed governors talking, that could move the market as a whole, I would say that the biggest opportunity right now for the next week or two is probably finding individual opportunities and individual stock names and playing those as opposed to trying to figure out a direction for the market over the next couple of weeks. I hope that helps. 

Dan Passarelli, CEO - Market Taker Mentoring

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Here's the followup to yesterday's video. Dan actually recorded this right after he did yesterday's video, in anticipation of some questions. Dan mentioned yesterday that the implied volatility for NFLX is below the historical volatility.

So this is a really important concept when it comes to pricing options. The concept is that if the actual volatility of a stock is expected to stay about roughly the same as it is now, that means that the value for the implied volatility should be the same as the historical volatility. Looking at NFLX there is no reason to believe that its volatility will fall drastically. It could even go higher. So if the implied volatility is priced below the historical volatility, that means that options are cheap.

It's pretty hard to pick a direction here on Netflix looking at Dan's analysis, yours may be different, but he didn't see a particular direction here. Dan does see the potential for movement. Therefore, because options are cheap, that's why yesterday he shared that this was a really good straddle or strangle candidate.

Another question that Dan often gets is when do you use a straddle or a strangle? If the stock is right at or very close to a strike price, he will use a straddle. But, if it's between two strike prices, Dan will use a strangle because he wants to start out as close to a zero delta as possible. I hope this helps.

Dan Passarelli, CEO - Market Taker Mentoring

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It was a fairly quiet day in the market in general and in a lot of the names that we referenced in recent videos, and there's good reason for that.

Following Friday's employment figures and everything that went into that. The next big thing is to see where inflation stands when CPI and PPI are released Wednesday and Thursday of this week respectively. There's going to be a lot of wait and see and it's possible that the market can move quite a bit when that information is announced. If inflation is higher than expected, then that's just going to be coupled with Friday's employment figures that the Fed has to get even more aggressive and the market should probably sell off pretty hard.

If inflation comes in cooler than expected, as in a lower inflation number, that would just be fantastic news. We could see the market rallying pretty hard there. So how do you trade going into that? Well, one thing is that if we look, there are some stocks that have implied volatility very low.

For example, let's take a look here at Netflix: NFLX. So if you look at NFLX implied volatility just on the chart here, the implied volatility is under the historical. That means that the options are priced as if the stock is moving less than it is. So this is a really nice example where we had a breakout today. It kind of pulled back just a little bit right down here to the resistance level that it crossed above today.

It ends up being a pretty pinnacle level here, where especially coupled with the inflation figures coming out Wednesday and Thursday, NFLX can make a pretty big move higher or lower to the upside it's got all the way to fill this gap and to the downside it can certainly go and test some of the lows that it was at before. And if it crosses below the 20 day moving average, we can definitely get some follow through.

This is one of the most perfect straddle or strangle plays that we've seen in a while. Just a lot of the stars are lining up. You've got cheap volatility, you got the testing resistance level, you got the gap. So you got all the technical things just mentioned and inflation. It's a nice straddle/strangle play and I hope that helps.