“Caution! Disaster! Markets on the Rise!” (TYL,SCHL)
Say it over and over again, mantra-like, because it appears that no breakwater exists to contain the ongoing tsunami of buying we see in equity markets worldwide.
Half of the planet’s biggest 35 indexes have set new record highs in 2017, the most since 2007, the year before a global meltdown wiped 50% off the value of the Dow, and other markets.
And the question is, can it continue?
The Dow has already logged better than 60 record highs year-to-date (the most since 1995), and we still have a full month to go before the book is closed.
On the economic front, there’s a lot of comforting news, too, with U.S. growth registering its best six month period in years. On the geopolitical front, however, we see less cause for calm. Whether it’s in Middle East, the Korean Peninsula or the Russian front, storms and wildfires appear to be brewing that could very quickly send investors from stocks to safer haven investments and cripple the rally altogether.
And we’ll return to storms and wildfires in a moment, right after we run down a single trade that requires your attention.
It was opened on November 16th, in a letter called GET AN EDUCATION! In that issue we recommended you buy the SCHL June 15th 45 CALL for $0.70 and sell the SCHL June 15th 30 PUT for $0.65. Total debit on the trade was a nickel.
The CALL trades at $1.35 and the PUT goes for $0.50. Sell off the first and buy back the second and you walk away with $0.80 net on five cents spent. That’s a profit of 1600% in a fortnight, and it calls for bottle of bourbon!
With apologies to Curious George, the above picture, taken from the once popular Planet of the Apes movies, depicted a post-apocalypse world that resembles scenes we’ve seen out of Houston, south Florida and Puerto Rico earlier this year.
Disasters, natural and otherwise, have been a persistent theme in 2017, and, according to statistics provided by the insurance people at Munich Re (via The Economist), it’s not just this year that the carnage has been vast; the last ten years, in fact, have seen a growing number of disastrous episodes occur.
Have a look –
With this year’s stats yet to be logged, it’s unclear if we’ll see a new record number of calamities, but it certainly feels that way, and according to reports from FEMA (the Federal Emergency Management Agency) the number of Americans applying for disaster aid in 2017 has sky rocketed.
A full 1.4% of the population – 4.7 million Americans – has registered for assistance. That compares with 480,000 in 2016 and just 180,000 in the three years prior.
That includes those who suffered fallout from three hurricanes, Harvey, Irma and Maria and wildfires in Northern California that produced 1300 degree temperatures and killed 43 people.
But there were many more, less publicized federal disasters.
Have a look here –
The above diagram shows a full fifteen disasters of at least $1 billion in damage that have been logged year-to-date.
And that’s unbelievable.
First Responders in Firing Line
Amid the panic and rush to survive, those entrusted to assist people in such trying times are increasingly reliant on technology, and the companies that produce those technologies have amassed tremendous data and feedback from first response professionals over the past few years – and from this year even more.
One such company is Tyler Technologies (NYSE:TYL), a mid-cap firm we’ve highlighted here with great success over the years, and who’s stock now looks poised to make a strong break to the upside.
And it’s no coincidence, we believe, that the push to new highs for the stock aligns perfectly with the release of their new, innovative program for first responders.
The technology is called New World CrewForce, and it’s being rolled out internationally this week to fire crews in need of portable, mobile, high functionality at times of great stress.
The technology puts users in direct contact with one another, shows each crew’s location in real time, offers ETA information to all on the network, and, because it understands spoken commands and is available as a downloadable APP, it can easily be employed on the run, aligning users with police, rescue and other first response groups, as needed.
Bidirectional data flow and communications is what Tyler bases much of its technology upon, and here, too, they’ve exploited that premise to capture a niche market they expect to be tremendously profitable.
Have a look now at the company’s weekly chart for the last three years.
What you see is a massive, bullish continuation pattern that’s now approaching its end (in red). It’s referred to as an ascending triangle and requires only a break above upper edge resistance – now at $182 – before strong technical buying ensues. The length of the pattern, now a full 25 months in the making, also speaks to the potential strength of the breakout to come. Barring a planetary collision of force factor 9, we wouldn’t be surprised to see TYL shares reach $240 by year end 2018.
We would only add that both the weekly RSI and MACD indicators (in green) are anything but overbought, adding to the potential for a sustained and meaningful rise into the immediate future.
Now have a look at the daily paste-up for the last six months –
Here, you see a stock saddled in a range, but in fairness, it was only in late July that all her moving averages unfurled. Since then, they’ve been moving higher in an effort to ‘catch up’ to price.
And that deed was accomplished, in our view, in just the last three weeks, when the all-important 137 DMA finally touched the daily share price.
With that behind us, it’s now a go.- Content protected for Normandy Executive Lounge, Option Trader Elite, Executive Lounge members only]
Many happy returns,