We're gearing up for a tough week of trading, given the uncertainty around the Presidential elections. So it's important that we exercise caution.
The plans that both potential presidents have for the future look very different and we can expect the markets to react accordingly.
One key, for those of us looking to trade this week, is to reduce our position sizes. Traders can consider cutting their position sizes in half, or limiting them to as little as 10% their normal size.
Another key is to trade stocks that show relative strength— which is why we share two such picks in All-Access today.
When yesterday's market leaders become laggards (think AAPL, TSLA, etc.), it is important to shift our focus to stocks with relative strength.
Today's watchlist will focus primarily on stocks which are not going down with the market:
Daseke (DSKE)
Daseke is a transportation company fleet management, logistics, trucking and open-decks transportation services in North America
DSKE reported strong earnings on Friday, EPS of $0.22 on $375.8M revenues vs. -$0.03 on $357M consensus
The management of the company cautioned investors that the Q2 and Q3 are historically stronger than Q1 and Q4 due to seasonality of the business
The stock closed higher 26.59% on the day. While investing in a trucking company is not exciting, the stock is displaying relative strength which means there might be an opportunity for a trade.
Here's a plan for a potential trade in DSKE:
Buy Zone: $7.1
Profit Zone: $8.25 for half, $10 for the rest
Stop Zone: $6.5
O2Micro International (OIIM)
O2Micro International produces circuits for power management and computer security applications
OIIM reported earnings on Friday, marking the company's first profitable quarter. EPS came in at $0.1 on $22.2M revenues
The strong results were attributed to the strong demand from more OEM manufacturers choosing O2Micro integrated circuits inside their products ranging from TV's and Monitors, cordless tools and appliances, to solutions for personal transportation such as e-bikes and scooters
The stock closed higher 18.23% on the day. Similar to the previous idea, this might not be the most exciting stock you will ever trade. However, the relative strength of the stock makes it worth a look on the long side while the market is churning and burning
For those of us traders planning to get long in the market this week, it's critical to set up our calls options correctly.
The good news with buying calls, as well as buying puts, is that we can only lose what we put into the trade. And there's a way to trade options that can limit our downside.
Once the stock surpasses what I call the "breakeven point," profit potential is unlimited.
As always, it's easier said than done— which is why I recently put together a little video where I literally draw out what the process looks like.
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