Friday Chart Toppers - Breaking Up Is Hard To Do!

by Phil - March 12th, 2010 8:01 am

They say that breaking up is hard to do.

Well, not for this market it seems as we make new highs on ever decreasing volumes.  While I have been very skeptical of this rally, at some point you have to give in and go with the flow.  As I said at the end of yesterday’s post, "We still have a bearish short-term stance but we will continue to watch our technicals and play the hand that’s dealt" and that’s what we did as our 9:42 Alert to members contained 2 bullish was to cover our short plays with the TNA Apr $52/53 bull call spread at .45, which finished the day at .60 (up 33%) and the DIA Apr $106 calls at $1.08, which finished the day at $1.40 (up 29%) so not bad for scrambling for covers!

That’s how we can hold our bearish positions as the tide moves against us.  As our final upside resistance levels begin to break, it may be time to break up, and not just cover, our short positions.  BUT, not until next week, when we’ll know, we’ll know that it’s true and not just some pumped up reaction to this week’s $150Bn Jobs Bill, which is really a $150Bn debt bill with 1/2 the money going to benefits extensions and $25Bn just to offset rising Medicaid costs that our states can no longer afford.  That leaves $50Bn for actual jobs or enough to put 1M people back to work at $50,000 for one year if it is used with 100% efficiency.  

We have 25M unemployed, discouraged and underemployed workers and that’s a lot bigger of a hole than a $150Bn band-aid is likely to fill.  Still, we missed the last 250 points of the run-up and we’re committed to miss 50 more (10,700) but, come next week we’ll have to follow Mr. Cramer’s advice, as he said yesterday: "Don’t be so skeptical that you write off very big, very real trends,” Cramer said, “that I still think, even from these levels, could make you a lot of money."  Let’s take a look at "these" levels then:

We’re still following the uptrending channel I drew on Tuesday’s S&P chart with the MACD line up 50% in 3 days of trading - a difficult trick to keep up.  Aside from the Jobs Bill, we’re getting a nice boost this morning from a "leak" that the supremely doveish Janet Yellen will be Obama’s pick for Vice Chairman of the Fed so yay for the markets but boy are we loving…

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Anadys Pharm-Bull Eyes Upside, Buys Call Spread

by Andrew Wilkinson - March 11th, 2010 4:57 pm

Today’s tickers: ANDS, FXI, GME, BIIB, TRA, WYN & AES

ANDS - Anadys Pharmaceuticals, Inc. – Biotechnology firm, Anadys Pharmaceuticals, enticed a long-term bullish investor to shell out option premium in order to establish a debit call spread in the September contract. ANDS-shares are trading 0.45% higher on the day to $2.19 as of 2:25 pm (ET). The optimistic options player purchased 3,000 calls at the September $2.5 strike for a premium of $0.55 apiece, marked against the sale of 3,000 calls at the higher September $5.0 strike for $0.15 each. The net cost of the call spread amounts to $0.30 per contract. The transaction positions the trader to accrue maximum potential profits of $2.20 per contract should shares of the underlying stock surge 128.3% over the current price to $5.00 by expiration day in September. Shares must rally at least 27.85% in order for the investor to break even on the trade at a share price of $2.80 each.

FXI - iShares FTSE/Xinhua China 25 Index Fund – The China exchange-traded fund, which corresponds to the price and yield performance of an underlying index invested in 25 of the largest and most liquid Chinese companies, realized a 0.95% decline in the price of its underlying shares to $41.13 this afternoon. Investors touting long-term pessimistic outlooks on the fund purchased put options in the January 2011 contract. It appears some 25,500 put options were picked up at the January 2011 $35 strike for an average premium of $2.50 apiece. Put-purchasers could be seeking downside protection on long underlying share positions. On the other hand, the contracts may have been purchased outright by extremely bearish individuals anticipating a 21% decline in shares of the FXI to $32.50 ahead of expiration. Investors in this case reel in profits should the price of the underlying fund trade below $32.50 in the next nine months to expiration day in January.

GME - GameStop Corp. – Shares of the largest retailer of video games jumped more than 5.10% during the trading session to $19.22 due to speculation the firm may be acquired. Despite the current rally in GameStop’s shares to $19.22 today, the stock still stands 41.45% below its 52-week high of $32.82 attained back on April 13, 2009. Investors taken-in by the takeover rumors purchased approximately 10,300 calls at the March $20 strike for an average premium of $0.47 per contract. The call options ready these traders to enjoy profits…

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The Oxen Report: Overnight Trade Looks to Independent Oil Producer

by David Ristau - March 11th, 2010 12:38 pm

Yesterday, we had a nice day with our Short Sale of the Day on Harbin Electric Inc. (HRBN), which was a short sale good for 2.8%. We got into Harbin in the morning at 25.60. We watched the stock sit at 25.75 for the majority of the day, but at 2 PM, HRBN started to lose buyer interest as seller interest rose. The stock plummeted down to 24.21. We exited at 24.90 for a 2.8% gain. The stock is down today to 22.50s, which is good for over 12% in gains. I hope some of you had more risk than I do and took advantage of that gain. Our Buy Pick of the Day did not meet our intraday requirements, so we did not get involved in ERX or ERY. Either way, it was a good day.

Now, we get into today’s Overnight Trade of the Day…

Overnight Trade of the Day: GMX Resources Inc. (GMXR)

Analysis: It is not typical for me to recommend an Overnight Trade in a stock that is up over 4% already the day before a company reports its earnings, but this opportunity is looking pretty stellar. I want to get involved with GMX Resources Inc. (GMXR), which is a small independent oil and natural gas producer in Texas, Louisiana, and New Mexico. The company is definitely a small player in the oil game, but I think it presents a very solid opportunity going into tomorrow for some nice gains.

The first reason that attracted me to GMXR, which is not even the best reason for investing into GMXR is that independent oil companies, as a whole, have been having pretty good quarterly reports for Q4 of 2009. 24 out of 34 of the companies that reported earnings in the past month, reported surprise EPS gains. Most of these gains were pretty outstanding, as well. GMXR’s closest competitors have done pretty well. The closest company that resembles GMXR is Panhandle Oil and Gas, who produces both oil and natural gas, is involved in the same region as GMXR, and has similar market capitilization. That company produced a surprise estimate of 1900%. Another close company did miss estimates, but it has struggled to pull profits and reduced its losses exceptionally in the past quarter. This company is Petroleum Development Corp. Overall, independent oil and gas has been surprising a lot of estimates. GMXR’s EPS estimate is to hit 0.09, which be…

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218 New Billionaires Averaged $500M in Gains Last Year - How Are You Doing?

by Phil - March 11th, 2010 8:08 am

That’s right, the new Forbes list is out where we celebrate the top .000014%!

Thanks to an unprecedented concentration of wealth, the World’s supply of Billionaires jumped 27% in 2009 and the 1,011 people in the club accumulated an AVERAGE of $500M more Dollars EACH!  Isn’t that great?  That’s $505Bn or 65% of America’s TARP spending handed over to 1,011 people who are, according to Forbes (The Capitalist’s Tool), clearly better than us. 

They sure are doing better than us as America’s 450 Billionaires added $225Bn to their bank accounts (and that’s AFTER taxes) and the saddest thing is that amount is INCLUDED in the $1.6Tn bounce of US Total Net Worth we had after losing 18% of it in 2008.  A lot of positive economic statistics are skewed by our top 1% but even the top 1% is blown away by the top 450 (0.00014%) who are sitting on $3.6Tn of our nation’s total household wealth 8% or 27M times more than the average citizen.  Wow, I guess they are better than you - better in fact than 26,999,999 of you!

As I mentioned in "The Dooh Nibor Economy (that’s "Robin Hood" backwards)," America has become a real wealth-building machine the funnels every last cent off the bottom of the pyramid and sends it straight to the top.  Those of us standing near enough to the top (the top 10%) are lucky enough to pick up enough table scraps to make us 1,000 times better than you - our bottom 90% "friends" and that is just great for walking around town but you must pity us because even we are embarrased to show up in our shoddy Armani suits when we are invited to hob-nob with the top 1% in their custom-tailored suits who don’t look at lables but at the thread-count of your sleeve. 

Even those "masters of our universe" cower in the presense of that top .00014%, who are, by definition, 26,999 times better than they are!  So don’t go thinking the people in the top 10% have it so easy - we have a whole different set of problems to deal with.  You only need to make $150,000 a year to join the top 10% club - we have to make over $2M to crack the top 1% and $2M doesn’t even pay 1/10th of the MONTHLY interest on the assets on our top 450. 

So congratulations to the Forbes winners, especially from the 462,000 of us that…

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Bearish Put Butterfly Spread Materializes on Emerging Markets Fund

by Andrew Wilkinson - March 10th, 2010 4:13 pm

Today’s tickers: EEM, GE, PXD, STI, VLO, UPS, RF, NWL, HNT & FFIV

EEM - iShares MSCI Emerging Markets Index ETF – A contrarian options trader established a large-volume bearish put butterfly spread in the June contract this afternoon even though shares of the emerging markets exchange-traded fund, which looks for investment results that correlate to the price and yield performance of the MSCI Emerging Markets index (an index designed by MSCI as an equity benchmark for international stock performance), are trading 0.65% higher to $41.47 as of 2:30 pm (ET). The massive pessimistic play yields maximum benefits to its owner if shares of the underlying stock plummet more than 15.50% from the current price to $35.00 by June expiration. The investor enacted the butterfly by purchasing 20,000 puts at the June $31 strike for a premium of $0.24 apiece [wing 1] in conjunction with the purchase of another 20,000 puts at the higher June $39 strike for $1.41 each [wing 2]. Finally, the body of the butterfly spread involved the sale of 40,000 puts at the central June $35 strike for a premium of $0.58 apiece. The net cost of the ‘fly amounts to just $0.49 per contract. Therefore, the bearish player is positioned to reel in maximum potential profits of $3.51 per contract – total net profits of $7.02 million – should shares of the underlying fund slip to $35.00 by expiration day. Shares of the EEM must surrender at least 7% of their current value by June expiration in order for the investor to breakeven at $38.51. The transaction is a very efficient way for this investor to establish a pessimistic stance on the emerging markets fund because maximum potential gains trump maximum possible losses on the position. The parameters of the butterfly spread represent a reward-to-risk ratio of more than 7-to-1.

GE - General Electric Co. – The diverse conglomerate’s shares are standing 0.30% higher on the day at $16.55 with one hour remaining in the trading session. General Electric’s shares have rebounded 6.30% in the past month since dipping to $15.57 on February 12, 2010, but one big options strategist is positioning for continued bullish momentum in the price of the underlying stock through expiration in May. The optimistic investor initiated a large-volume bullish risk reversal play by shedding 20,000 puts at the June $15 strike for an average premium of $0.37 apiece, spread against the purchase of 20,000…

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The Oxen Report: Opportunities Limited on a Neutral Wednesday

by David Ristau - March 10th, 2010 9:13 am

Yesterday was a pretty rough day for us. Both of our picks were pretty weak. The Buy Pick of the Day was the Direxion Oil Bear ETF (ERY). We got involved in the early going at 10.47 and saw it decline throughout the day. I said to sell at 10.22 in an alert towards the end of the day for a 2.4% loss. We could’ve held to the end of the day and only taken a small loss, but either way, it was a loser. Our Short Sale of the Day was about a 1% loser, as well. We got involved in Textron at 21.31, and we saw it bounce around all day, never making more than 1% for  us. It ended the day in the green but in the red for us. We sold at 21.60 for 1.3% loss. 0/2 never makes me happy, but we have made some smart picks today that are cautious and careful. Our entry ranges are very specific, and I think we should be happy. We are dipping back into the oil market because I think it is ready to make a move. It might be the downside, however, it could be going a lot higher. Inventories will tell the tale…

Let’s get into the picks…

Buy Pick of the Day: Direxion Oil and Gas Bull/Bear 3x ETF (ERX/ERY)

Analysis: We have had some trouble to start this week with our bearish positions. Yesterday, in the late afternoon, I wrote a bit of a muse talking about how we need the fundamentals to be there to make these positions come true. So, today, I am following that advice. We are going to be extra careful and picky in getting into positions. We are going to the oil market again today, but we are only going to play it if one of two things happens.

At 10:30 AM, we will get the release of the crude oil inventories. This will decide how we will approach our Buy Pick of the Day. Crude inventories came out at 4.1 million. It did not have a major effect on the oil market. Two weeks in a row, though, of big increases, especially with the market as high flying as it has been will have an effect. Therefore, if inventories are above 4.1 million, then we will want to buy ERY right away.

If inventories, however, are between 0 and 4.1 million, then we…

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