by Phil Davis - December 17th, 2006 8:00 am
Note to members:
As an experiment, I will be going more into detail as to my thought process based on the "Give a fish – Teach to fish" philosophy as my goal here is to build a robust community of sharp traders who can help each other spot market opportunities.
That means that I will have a lot of maybes here and things I am watching develop so always feel free to ask me later if I still like a trade or if things are developing the way I want. On the big site, I couldn’t do stuff like that because I would get accused of being "wishy washy" or whatever but reality is that I watch things for days, weeks, months… years sometimes before I think it’s actually the right moment for a trade (see "The Man Who Planted Trees").
If this confuses more people than it helps I’ll reconsider, so let me know!
Great article by Shlomo Greenberg in Seeking Alpha on CHKP! I’m very sorry I missed this one as they were a hell of a bargain in August at $17. At the moment, I have to agree with C, who initiated them at neutral on Friday as the company took a sharp turn off a 33% gain and is more likely to give up 1/3 of that gian, to $20 before consolidating for another move up.
I like the April $20 puts for .45 as a conrarian play (but not if the stock or the broad market is moving up) and I think we should keep our eye open for maybe $1.20 or less as a nice entry (10%) on the April $22.50s but, with 7,333 open contracts already, I would be selling way before we get to April! If the stock moves up quickly, they might make a fun spread with the Jan $22.50s, which can be sold for .55.
So the move is to open a small position in the April $20 puts in anticipation of protecting the $22.50s when they get cheap. With a small entry on the puts, if it gets away from us, we don’t care (well, we always care a little) but if the stock drops and gives us a shot at the $22.50s for a buck we can DD on the $20 puts (perhaps a .70 average entry) giving us a cheap…
by Phil Davis - December 16th, 2006 6:47 pm
Well it’s been a crazy week!
Getting the new site up and running was harder than I thought but we are in very good shape now and got off to a real bang with a huge week for picks.
Luckily we got the macro picture right for the most part and that guided us through a scary early part of the week. My suggestion that we just let the US dollar burn (inflate) to fuel the market rally was my most controversial article since "Inflation Nation" article earlier in the month – I guess people really don’t like inflation…
Still I was confident enough in our heroic team of Super Banker and Chair Man (of the Fed) as they headed off to China to do nothing (which is just what the markets wanted) other than maintain the status quo (we buy stuff – they buy dollars) and put on a show for the international press corp!
We wisely took some Flight Insurance before departing and our insurance picks did just what they were supposed to do, they went up when the rest of the market stalled early in the week. Our stock of the year selection, BRK.A in fact, gained $5,700 since Sunday’s mention while junior selection BRK.B added 6.7% for the week!
Monday I said "There is almost no point trading today" and there wasn’t - but we did get some nice entries on calls as we kept the faith! We had a flawed forecast from Forrester that scared people out of tech. My premise on Monday that 213K open oil contracts were far too many played out at the end of the week (down to 101K at yesterday’s close) but crude finished up for the week anyway.
Tuesday I predicted a "gauntlet" of economic news and recommended "patience Daniel-san." But perhaps we should have given more weight to the brewing IRS crackdown on options shenanigans. We dismissed Tuesday’s quick dip as an air pocket – attempting to force us to eject so the markets could take off without us and we did not buy it! The Manufacturer’s report was our confirmation that things looked better than they seemed.
by Phil Davis - December 16th, 2006 5:29 am
The IPhone is coming, the IPhone is coming, the IPhone is coming! …On Monday???
Well, according to Gizmodo who, I am certain, are just looking for publicity. This is starting to remind me of when Dean Kamen told us that "IT" would revolutionize transportation, reshape cities, resolve the energy crisis etc. and everyone speculated on everything "IT" could possibly be, from properly recounting the Florida ballots to cold fusion but, in the end, it turned out to be a scooter that very rich people can play polo on!
While I don’t think the IPhone will turn out to be a Segway-sized disappointment, I’m very concerned that I won’t be able to play polo on it and, with expectations running as high as they are it had better at least cure cancer!
One cool thing that is in the works from Apple is a patent they filed earlier in the year to embed "microscopic image sensors" in an LCD screen, effecively turning your monitor or, more importantly, your phone’s screen, into a camera – allowing for true face-to-face communications!
And have you ever wondered why Apple insists on keeping that huge amount of space at the bottom half of their laptops? Well here’s the embedded docking station they filed a patent on!
Now if that were a cell-capable IPod you could get web access anywhere in the world…. Interesting!
January launch on "all" providers, both CDMA and GSM
Extremely small form factor
Two battery design (with single charger) — one for playing music, the other for phone functions
Flash memory: 4GB for $249, 8GB for $449
Apparently the Apple guys are not up on the KISS rule of product design but we’ll see how this all meshes together. Surely the fear of Apple has been holding down Motorola, who have already shifted their marketing focus to the lower end, ceding the high ground to a product that doesn’t exist yet from their former (or maybe still)…
by Phil Davis - December 15th, 2006 9:28 am
This is a terrible time for a weekend!
We finally got the party started, on Monday we strapped in for a rough ride, on Tuesday I had to tell the kids to calm down and wait for the launch while that nasty Fed went away, we ejected the whiners, we calculated our new trajectory (now that we had removed the excess mass), rolled our problems into next month, and yesterday, we fired up the engines and boldly set off where no market had gone before!
Who could have predicted that? Oh yeah, I did (pat, pat).
So we should end the week with a bang (hopefully not the bad kind!) as the markets have slingshotted into orbit and are heading straight to the moon! Inflation remains very tame with the CPI unchanged from last month but down to 2.6% for the year from a 2.9% peak in August.
If we can just ignore keep ignoring our amazing deficit for another month, we may safely enter a much higher orbit with our sites firmly on the 15,000 level for next year. This image sums up my premise for the week quite nicely:
Private Note: By the way, I forget what day it was but I finally told Tom the Trader he was no longer welcome as I found his ridiculous panic mongering to be detrimental during what I considered to be a mild pullback. I hope you guys don’t mind as he is only the second person I have ever done that to (the first was AA man, for profanity and general idiocy).
While I value contrary opinions, having some guy come on and BS about how right he is (absolutely untrue if you check his record) and then telling you to buy puts on everything and pointing to every little downward wiggle as more reason to bail was just too much for me to allow as I do feel some responsibility to all the newbies who read us and take that sort of thing seriously….
Well Asia seems happy about it with pretty strong gains across the board as Japan is having a “soft landing” of their own and India picked up another 127 points as the Hang Seng seems determined to leave them all in the dust.
by Phil Davis - December 15th, 2006 7:30 am
VLO has certainly take a turn for the worse of late, currently trading at exactly 0% higher than it was last Dec 14th.
Yet fellow Group members XOM, CVX and COP are up around 30% over that time with the vast majority of that gain coming since October 1st.
Looking at our partial group chart, we can see what a fantastic leading indicator Valero was on the way to the bottom in February:
- It turned nicely and gave us a great heads up to go long on 2/16
- It then gave us a perfect top signal on 4/25
- Another good bottom as it led the way on 6/21
- A clear double top as it gapped down on 8/10
- Followed MUCH later by the rest of the goup who all bottomed in late October.
While Valero clearly made a weak Fibonnaci 33% retracement of the 45% rule (it was up 25% on 8/2, down 15% on 9/25, the majors have gone hog wild during the stock rally.
by Phil Davis - December 14th, 2006 6:36 pm
Whoo-hoo! What a day!
First of all – welcome to my new site! I’m really happy to be here and I hope you will be too. I’m going to lay out some ground rules, which I will make up as I go along and change as I see fit but at least we can get started.
- Never talk about stock club! This is for us, these trades are for us, some of these trades will not work with too many people in them so sharing is not caring (for the other members).
- You will always hear it here first! From this moment forward – all posts start here. I am going to experiment with posting unfinished posts here and you guys need to let me know if you like it or hate it but I am done with a lot of stuff hours before you see it on the main site so I thought it might help.
- Participate! This is a dictatorial democracy – that means I always want to hear what you have to say before I do whatever I want. There are no dumb questions, only dumb people (wait, scratch that – reverse it, thanks).
- Have Fun! I’m going to have fun so you may as well to. If there is anything I can do to make this site better let me know – you are a guest in my house and I want all of you to feel like family. If you are reading this you are one of my original readers and that means a lot to me – we’re going to do something that’s never been done before and it’s going to take time and effort but why can’t we have a good time AND make money AND help people?
From now on we will only publicize certain picks (I promised Seeking Alpha 2-4 picks a day) but will keep the comments (for 3-5 days, not sure yet) and spreadsheets (always) to ourselves. There will be lots of private columns that track sectors but, most importantly, we will try to help you identify what kind of investor you are and what strategy will work best for you.
I’ve never done this before so don’t just humor me, ask questions, request topics, give us your opinion so we can build this thing together. I’m very proud to have gotten this far after just one year…
by Phil Davis - December 14th, 2006 9:23 am
Last Thursday was not good.
Yesterday was not good either. It wasn’t bad – it just wasn’t good. Something has to perk up tech, especially the semis or it may be time to lighten up again into the holidays. Today may be the critical day as the VIX crashes and we set a direction ahead of the inevitable rebound after options expiration.
That’s the other big factor, options expire tomorrow and you can see a lot of stocks flat-lining into expiration and we can’t trust any movement we see this week so be very careful out there!
As of 7am, oil was up a full dollar in European trading. Sen. Tim Johnson (D – SD) is in critical conditionand should he be forced to step down the Republican Governor, Mike Rounds, gets to appoint his successor and swing the Senate back to the Republicans!
OPEC did nothing but pledged to cut another 500Kbd in February, so let’s keep an eye on the March and April contracts to see how real the traders think this is. I will likely take this one last opportunity to double down Jan oil puts – if it ever stops going up!
Our prayers go out to Senator Johnson, who is just 59 but seems to have had a stroke – he is listed in critical condition after emergency surgery.
Asian markets were up across the board with India recovering 305 more points and saving my market of the year prediction (at least this week). The Hang Seng erased yesterday’s drop entirely as Chinese leaders seemed intent on making a public showingof telling Paulson and Bernanke who was really the boss while privately releasing “work plans for various government agencies to tackle tensions between the two countries.”
“We have had the genuine feeling that some American friends are not only having limited knowledge of, but harbouring much misunderstanding about the reality in China,” VP Wu told Paulson and other senior Washington policy-makers at the start of their two-day meeting in Beijing. “This is not conducive to the sound development of our bilateral relations.”
Europe was flat this morning, BP has been advised there will be formal charges related to price fixing in a widening investigation.
by Phil Davis - December 14th, 2006 6:56 am
So low, it seems that I’m not even going to discuss the non-movement of the indices other than the SOX (the HORROR) who are assassinating the Nasdaq. Actually, the Nasdaq was amazing against a 1.23% SOX drop but I don’t see them keeping that up for very long – one has to snap soon.
Just be warned that the last time volatility bled this low was Thanksgiving weekend and we got a heck of a drop(300 pts) as the VIX came back up.
Oil didn’t do much either today (up .35) which you would think is surprising against a 4.3M barrel draw that was 3x analysts estimates but as long as we hold $61.69 through Friday, I’m happy.
I’m going to wait to hear what OPEC has to say but I am going to blow the whistle on the myth of Chinese demand this weekend (sneak peek in comments the other day) as this is the most overused excuse since hurricanes to pump up the price of oil!
I do have to say WOW to oil pumpers though. It takes a lot of guts to shove 21M additional barrels into February at $61.99 when March is Just $62.92, having fallen from $66.50 in just 8 sessions!
The dollar closed flat and gold gained a buck so there was not much point for showing up for anything today!
At this point I feel like I was robbed taking a .15 gain on the first half of my DALRQ Jan ’08 $2.50s, now .80 (up .75!).
HD May $40s finished the day at $2.25 (up .30).
HPQ Jan $40s came in at just a buck.
LVS had a rough day, giving up 3 more dollars. The Jan $95 puts are now $6.20 (up 30%) and I’m taking them off at the first sign of trouble and looking to enter the Feb $80 puts so I can take half off the table.
I hope I was right about GSF giving me a top on the OIH. We initiated the Apr $140 puts for $6.40, hoping to sell the Jan $140 puts for $5.50 or more.
OII went nowhere, despite the huge morning rise in crude – very interesting! The Apr $40 puts finished even at $1.60.
by - December 13th, 2006 4:20 pm
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by Phil Davis - December 13th, 2006 9:18 am
See Trader Mike’s Nasdaq chart on the previous post to get an idea of what’s going on in the market today.
I’m still bullish but the Hang Seng disagrees with me but India recovered 186 out of 800 points and the Nikkei posted a small gain despite the fact that the BOJ is almost certain to leave rates flat in order to prop up the dollar.
This hurts our MTU Jan ’08 $10s, but they are way up at $3.50 (up 25%) and we only just got them so I’m going to give it a little slack.
I think the general consensus in Hong Kong is that they’re not sure what’s going to happen this week but with two of the world’s most powerful bankers en route, they are pretty sure they are going to get screwed somehow…
Obviously our lower trade deficit lowered their trade surplus somewhat, so that’s kind of a drag as well.
Also of note in Asia is HD signing an agreement to buy Homeway, China’s DIY shop with 6 stores in 12 cities. It’s not about the company they bought, it’s about the fact that China’s letting them in! HD May $40s are $1.95and it’s a good entry but I was waiting for them to come down to $37. With this news a small entry is called for but it is very possible we’ll be taking the bulk of our entry lower. BBY may make a China announcement as well ahead of Paulson’s visit, we have 2 positions in that one…
Europe is in a pretty good mood this morning and they are exercising their economic might to further crack down on industrial pollution with some strict restrictions on chemicals used in manufacturing as well as cracking down on price gouging by energy companies. This may have a very nasty side effect of damaging the global natural gas cartel as the EU has been after Germany for some time to free up that market. Formal charges have been filed against Germany!
“Other countries charged are: Austria, Belgium, the Czech Republic, Estonia, France, Greece, Ireland, Italy, Lithuania, Latvia, Poland, Spain, Sweden, Slovakia and the U.K. with violations, ranging from setting electricity prices so low that new entrants can’t compete, to not enforcing orders aimed at separating energy supplies and network operations.” This is like the the US government…