Trade of the Day: JD.Com Inc (ADR) (JD)
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My indicators are giving sell signals again to kick off the month of August, which has historically been a tough month for the bulls on Wall Street.
I still feel that we are in a rolling bear market, as a lot of stocks have dropped 20% or more from their highs, even though the major indices are holding up relatively well. In just the last few weeks, we’ve seen two of the market’s favorite stocks, Facebook, Inc. (NASDAQ:FB) and Netflix, Inc. (NASDAQ:NFLX), enter their own bear markets, which is not a good sign. Those declines were widely talked about in the financial media, but many other stocks and sectors are in what I would call a stealth bear market and have received little attention.
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So while investors may have breathed a sigh of relief when the FOMC decided to hold rates steady this week, there are still a lot of other potential problems facing U.S. stocks right now. That being the case — I am looking outside the United States for today’s opportunistic bullish play: a naked put write on JD.Com Inc (ADR) (NASDAQ:JD).
Sell to open the JD Aug. 31st $32.50 put at about $0.28.
Note: There are several August expirations available for JD options. Be sure you are opening the weekly options that expire on Friday, Aug. 31, 2018.
JD.com is the Amazon.com, Inc. (NASDAQ:AMZN) of China, and looking at its stock chart, it made actually a triple-bottom. It looks to me unlikely to fall much further, even with this trade war, and that makes it an attractive play.
As an e-commerce company, it’s possible to do plenty of business outside of China, anyway…and its recent partnership with Alphabet Inc (NASDAQ:GOOGL) gives it an opportunity to do so. As long as shares remain above our $32.50 strike through Aug. 31, we’ll walk away with the full value of the put premium we collect upfront.
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Ken Trester is editor of the popular Maximum Options program. Trester has been trading options since the first exchanges opened in 1973 with a winning streak that goes back to 1984 with money-doubling average annual profits since 1990.
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