Back on track for the first week of June

Morning Traders! We are Munny Tree. Helping you get to the top of the best climbing tree in the neighborhood.

The first week of June got us back on track as we licked our wounds from May. Right now momentum is shifting in our direction, but this week has some major economic news that could rock the boat in a big way. We will be looking to manage our existing positions, and enter into new ones, carefully and creatively. Here’s what we are tracking for the week:

• Economic News this week

• Roaring Kitty is back!

• Managing positions

• What we are watching in the markets this week

Last Week’s Performance

Last week started the month off on a great note, up over 2.5% for the week🚀🚀. We doubled the S&P 500. There is a lot of reason to believe we can continue this trend in the month but the big hurdle we have to get past is Wednesday when both CPI and the Fed meeting is scheduled. Here’s how things are looking so far this month:

• Last week, beat the S&P 500 by 2x

• This quarter we are up 5.38%, which is over 3x better than the S&P 500

• This year we are up 25.8%, over 2x better than the S&P

Lets see if we can do even better this month!

Economic News This Week

Big Wednesday this week for economic news. We get the double whammy 👊👊 of CPI for the month releasing in the morning and the FOMC meeting and Powell press conference in the afternoon. My plan is to pop some popcorn and watch the chaos. There are few scenarios we think are possible:

Base case (99% chance) — interest rates aren’t changing

• CPI comes out in the morning hot (market falls), then Powell comes out and reiterates that the Fed isn’t doing anything any time soon

• CPI comes out in the morning low - inflation comes down a bit (market gets all excited), then Powell comes out and ruins it by reiterating that the Fed isn’t doing anything any time soon

• CPI comes in as expected (market ranges), then Powell comes out and reiterates that the Fed isn’t doing anything any time soon

Notice how in all scenarios Powell reiterates they aren’t doing anything any time soon? That’s because they aren’t. Virtually all banks have now pushed their interest rate cuts to the fall or later. There’s just been too much good economic data out there. So there isn’t much reason to cut interest rates when:

• Jobs are still being created above expectations

• Wages are growing faster than inflation

• GDP keeps humming along

• The European Central Bank just cut rates. Why does this matter? If the Fed holds rates steady then the dollar should strengthen relative to the Euro. This will make imports cheaper, which could slightly lower inflation in the USA. So indirectly the ECB is helping the Fed keep rates higher for longer. Your welcome…?

Roaring Kitty comes back with a Purr

See what we did there with that pun?…. okay we’ll stop now

While we don’t participate in the meme stock craze with our strategies, it’s still fun to follow and watch. But his live stream was…a bit of a let down. Didn’t really offer anything new. And the stock fell pretty hard (sorry for any holders). My guess is he’s propping up his call options, which are all still profitable at the time of this writing.

This is a stock traders version of Real Housewives and I for one am here for it 🤘

Managing Trades / Positions

With choppy waters and less volatility for summer we are going to get back to managing our trades a bit more creatively. We haven’t done as much of this recently because trends have been a bit easier to spot. For those newer to the group, here’s what that means:

• We still buy and sell our positions based on the same criteria and momentum based strategy.

• We will start adding layers to these positions, usually with options, to protect our profits, provide some upside, or limit our downside losses.

An example of what that might look like:

We own MBLY which we bought at $30.50. It fell pretty hard after we bought it and has since come back up to about our acquisition price. Because of that, and with the options pricing and volatility we can now add a “collar” to this position.

For example we own 100 shares of MBLY. We then…

• Buy a put $30 Put at 6/21 expiration

• Sell a $35 Call at 6/21 expiration

Most brokers will let you do this as a single spread if you already own the stock. If we do that our profit / loss chart looks like this:

So what are we looking at here?

• Our max loss now is only 2.8%📉 , even if it falls to $0.

• And our max profit is now 14%📈 if the stock hits $35.

• This is very attractive to us because it dramatically limits our losses but still provides good upside. The max profit : max loss ratio 5:1 💰

• Downside is we limit our profit potential. If the stock goes to $50 we still only make 14%. But that is a downside we happily take to dramatically limit our losses.

There are other strategies we might utilize for other positions. We won’t do this for everything we own, just when we see opportunities to do so that have such a strong profit - loss ratio.

What we are watching this week

Managing our existing portfolio:

• KYMR: We made some progress last week. The position is only down 11% now and momentum continues to look positive. We will keep a close eye on this

• MBLY: The end of last week was huge for MBLY. We are now positive on the position. There is an opportunity for a collar strategy to protect and almost ensure this ends profitably.

• MLCO: Up almost 10%. There is some positive momentum picking up. Momentum is stalling so we will keep a close eye on this to decide if we sell and capture our profits or if there is an opportunity to manage this for more upside

• RIVN: Up over 10% now. We are looking at $12 as an exit opportunity but it may push past that. With CPI and the Fed we may be selling to capture our profits. If there is an opportunity to manage this for protection and more upside then we will take it.

Here’s what we are watching this week (in order of most likely to acquire):

Happy trading! Look out for alerts on new buy / sell position during the week.