Retirement Income Options For A Correction

Summary

  • The rotating correction theme is continuing to play out, but expanding on a hot inflation number and slightly rising long-term rates.
  • Inflation is transitory, won’t get much reaction from the Fed and will be subsiding by next year.
  • The sustainable “smart everything” world is still the place to be for most of your money, including the types of inflation hedges we want, i.e. rare earths and gold.
  • Here is a basket of great and potentially great stocks that are coming back to us after the liquidity driven, trader steered, we’re closed, now we’re reopening hype rallies.

The weekly Retirement Income Options is a simplified piece to give you actionable option ideas for this week. Make sure to read the Using Retirement Income Options and Technical Trading Basics: Using Overbought And Oversold Signals To Buy And Sell before getting started.

See buy zones and bottom fishing prices in the constantly updated VSL.

RIO

Covered Call Ideas

Some overvalued stocks to sell covered calls on if you own them. Most should also be trimmed.

Trim = sell 1/2 to 2/3 of profits. Trim heavily = sell all profits.

Covered calls should be sold 6 to 12 weeks out slightly out of the money.

All of the following stocks were in our investment universe called the Very Short List in the past years. Some are coming off permanently into the Sustainable “Smart Everything” era. 

CompanyWeekly RSI(updated 5/12/21)Trading Ideas
Toronto-Dominion (TD)83Trim, sell cc against 1/2 remaining
Invesco (IVZ) *75Trim heavily, sell cc against 2/3 remaining
Johnson Controls (JCI)74Trim, sell cc against 1/2 remaining
Steel Dynamics (STLD)83Trim, sell cc against 1/2 remaining
ManPower (MAN)78Trim, sell cc against 1/2 remaining
Robert Half (RHI)77Trim, sell cc against 1/2 remaining
Wells Fargo (WFC) *78Trim heavily, sell cc against 2/3 remaining
Google (GOOG)71Trim, sell cc against 1/2 remaining
Mosaic (MOS)70Trim, sell cc against 1/2 remaining
Applied Materials (AMAT)73Trim heavily, sell cc against 2/3 remaining
Blackrock (BLK) *74Trim heavily, sell cc against 2/3 remaining
Caterpillar (CAT)76Trim, sell cc against 1/2 remaining
Northrup Grumman (NOC)73Trim, sell cc against 1/2 remaining
General Dynamics (GD)72Trim, sell cc against 1/2 remaining
Goldman Sachs (GS)70Trim heavily, sell cc against 2/3 remaining
United Healthcare (UNH)71Trim, sell cc against 1/2 remaining
Freeport-McMoran (FCX)73Trim, sell cc against 1/2 remaining
Westrock (WRK)74Trim, sell cc against 1/2 remaining
Vulcan Materials (VMC)73Trim heavily, sell cc against 2/3 remaining
Enbridge (ENB) *73Trim heavily, sell cc against 2/3 remaining
Antero (AR) *72Trim heavily, sell cc against 2/3 remaining
Philip Morris (PM) *71Trim, sell cc against 1/2 remaining

 * not expected to be owned ever again unless massive changes to scenarios.

As I showed in last week’s Long-Term Deflation Vs. Inflationary Policy article, the S&P 500 (SPY) (VOO) had become overbought. This ALWAYS comes with some sort of correction. It could be shallow or deep, highly correlated or rotating.

My view is a rotating correction that is deep in the parts it hits at the time, while other stocks prevent the averages from getting clobbered. However, I do see the S&P reaching down into the middle 3000s almost definitely and very likely testing 3000. 

Since I also believe that inflation is temporary, i.e. transitory like the Federal Reserve said, the inflation/reflation/reopen trade is almost played out already.

Commodities tied to the emergence of the sustainable “smart everything” economy will continue to do well, but those looking towards the infrastructure bill are already pricing for perfection.

The sustainable “smart everything” trade is secular, i.e. long-term, therefore can be more assertively played. The infrastructure/reopen trade is cyclical and will tail off quicker and more severely. That is why we are trimming Freeport-McMoran (copper) and Westrock (packaging paper), but selling most Vulcan Materials (aggregates)

Cash-Secured Put Ideas

Quick chart for cash-secured puts, broader discussions below.

In many cases, you will set a GTC order and wait for volatility to do you a favor. Depending on price trend, we might need to adjust these. Always set your GTC premium price higher than the ASK to start and work your way down.

CompanyWeekly RSI(updated 4/27/21)Trading Ideas
Quidel (QDEL)38Sell $110 June @10
Exact Sciences (EXAS)36Sell $80 June @8
OnTrack (OTRK)37Sell $25 June @1
AST SpaceMobile (ASTS)39Sell $10 June @2
Teledoc (TDOC)33Sell $120 ↓ June @10 
SunRun (RUN)39Sell $40 ↓ June @8 
Jumia (JMIA)40Sell $25 ↓ June @5 
ViacomCBS (VIAC)45Sell $45 June @6 ↑
Discovery (DISCA)46Sell $40 June @3
Intel (INTC)42Sell $50 ↓ June @5
SunPower (SPWR)42Sell $25 ↓ June @8
Unity (U)41Sell $80 June @8

↓ ↑ lower or higher from last week

We are also monitoring Enphase (ENPH)Solaredge (SEDG)Paycom (PAYC), Docusign (DOCU) and Zoom (ZM) which most people can’t sell puts on due to price of the stock, and Azure (AZRE) which does not have options.

AT&T (T), Lumen Tech (LUMN) and Kinder Morgan (KMI) are still all undervalued. You can sell cash-secured puts to June just out of the money. Try to get the ASK or just above that with a GTC.

The entire clean energy space is being sold off and it is starting to be overdone. A lot of .618 Fib Retracements being hit, but as I mentioned in recent webinars, the .786 seem to be in play. Regardless, it’s time to pay attention to clean energy.

Both SunPower and Sunrun are very interesting on this correction. Consolidation has begun and that last leg down is happening. 

The Invesco Wilderhill Clean Energy ETF (PBW) is also worthwhile as discussed last week. With it you get some Enphase (ENPH) and SolarEdge (SEDG), as well as, a more diversified approach to clean energy.

Ontrack’s consolidation is on track – heh. You want to own this stock. I think it’ll get back to highs in a few years for a triple. Mental health using AI and telehealth is going to be huge globally. The sideways trend is almost perfect.

Quidel (QDEL) is a triple whammy of growth, value and oversold. It touched it’s .786 Fib Retracement and bounced off. It’s priced at about where private equity would start sniffing around for a takeover. The CEO talked about M&A. Find a way into this stock. A starter plus selling a put is a good idea.

Discovery (DISCA) and Viacom (VIAC) still have a hangover from the hedge fund implosion and are continuing to correct on market having a conniption over fake inflation. I think Discovery might have just double bottomed. Viacom broke through the .618 and could be heading to .786 area. Viacom is the dividend play and Discovery is the M&A play. I am selling the Discovery puts, but buying a starter in Viacom and selling puts as well.

Jumia Technologies is an emerging market ecommerce play with momentum. Traders are cashing in profits which has triggered a correction. It appears to be beginning the consolidation process but could have one more leg down. I am starting to scale in with a cash-secured put.

Intel (INTC) is getting very interesting. With the Nvidia (NVDA) takeover of ARM, the potential merger of Intel and AMD (AMD) becomes much more likely. That deal has been rumored for a decade, but with no competitor to Intel in the server space was outside the DOJ’s possibility window. I think that deal happens eventually. Intel’s fortress balance sheet and new business to complete with Taiwan Semi (TSM) is good, combined with AMD tech would be great. I’m looking to sell puts and scale into this dividend payer.

Tomorrow I’ll line up new charts and put out updated top 10 growth and top 10 dividend stocks I want.

Disclosure: I am/we are long T, KMI, LUMN, SPWR and more…