Michael Kramer and the clients of Mott Capital own Apple and Netflix
Michael Kramer owns IWM Calls
For the week of May 6
I’m changing things up a just a bit for the weekend write-ups, and we can see how things go. I’m going to do the predictions articles on Saturday’s and the more macro-oriented articles on Sunday. This is a test to see how the results do on SEO. So hopefully, nobody will be to upset by it.
Russell 2000 (IWM)
Anyway, as I noted in the Friday night mid-night edition, sorry it was one of those days of constant distractions, the Russell 2000 had what I would consider being a massive breakout. The reason it is so significant is that the level of resistance at 1,590 was very intense, and acted as such multiple times over the past year. I do not think the break out should be taken lightly or ignored.
I try to emphasize this because of a significant number of people, in at least in the area’s I read and watch that still bearish on this market. I don’t how, but there are. But whatever, over time I have learned that in some cases despite all the evidence some people refuse to see the light.
I think this will be a big week for the Russell 2000, with the next minor level of resistance coming around 1640, about 2% higher than Friday close. After that, we are looking at an increase to around 1,710, about 6% higher. Ultimately that is where I think the index is heading.
The RSI as you can see has converged from multiple directions and appears to be breaking out. The RSI now has a reading of about 60, so there is plenty of room for it to rise before entering an “overbought region.”
I think we take out 1,640 this week and start our advance to 1710.
S&P 500 (SPY)
It is a big positive that the Russell is breaking out too, because it tells us the health of the market is strong, with all parts participating. That means the S&P 500 will likely be on the rise too.
Apple had a very good week and is firmly above $209, and it even retested that level of support. So I think the stock continues to move towards $217.
I kind of alluded to this last night, but I think Netflix is trending higher towards $405. With the potential of a more significant break out down the road. The pattern looks like a flag, but it is rising, so I know some will say no. Interestingly I did some searching, and it would seem that is this “rising” flag can very much be a bullish continuation pattern.
JD.com reports on May 8, and the chart looks very bullish as I have noted. It would suggest the stock rises to around $35.
Additionally, the options betting in the stock has been very bullish lately. The open interest at the $31 calls for expiration May 17 has jumped to over 30,000 contracts from just 5,000 on April 30. A buyer of those calls would need the stock to rise to around 31.90 to break even.
Roku also reports this week, and the chart has a bunch of things going on, that make me unsure. Options activity is also very muted. But that RSI looks like it breaking out of a downtrend, and that has me leaning towards the stock rising to around $70 following results.
CenturyLink also reports results, and that chart looks about as bearish as it can get. Problem is the chart suggests the stock may have even further to fall, perhaps to $10.60.
Facebook also continues to look healthy and appears as if it heading towards $204.
The chart of IQiyi is looking pretty bullish as well, with the chance for shares to rise to around $30.
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