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Wednesday, May 29, 2024

Friday Outlook & TOTD – LLY

Gasoline is up 20% (.24) in 8 days, merry Christmas!

I think/hope some of this nat gas buying is on speculation and short squeezing rather than on the reality that it now costs 150% more than it did last year to heat homes.

This will not affect today’s consumer sentiment reading but will be a major market bummer if it continues into next month.

Until the report at about 9:30-9:50, expect what will either be a dead market bounce or the start of a very nice Friday rally.

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I am going to apologize to Sunoco, they may actually be a better buy than COP but Conoco has made more investments in production while SUN has focused on cutting costs on current production. While SUN may rise faster than COP, I still think COP is the stock for the future.

VLO is really primed to pop at the moment as are THE, SLB, CVX and PTEN. There is a great sale on BP today as the Kuwaiti government is selling $2Bn worth of the stock in Europe. Just like with GNW, you have to wait for the dust to settle but this will be a great buy very soon as well!

NFLX has reached a critical juncture right at $27.50. There is a lot of downward pressure on the stock but it has steadfastly refused to cross this line. They have done a great job bringing costs down and they have low churn despite their much vaunted competition.

========== Trade of the Day ==============

LLY is guiding up but, most importantly, they announced that they have no more patent expirations this decade! I really don’t think they could have said anything better outside of a cure for something popular. This coupled with the Merck collapse makes this my Trade of the Day!

I’m sorry I missed this earlier in the week but there is no time like the present. The stock dropped $1 yesterday on unfounded guidance fears so ignore the first dollar of today’s rally in the stock. We need to give them another quarter to run and also we will pay less of the jump with a longer call so I’m going for the April $50 at $5 (no more than a $2 premium) and I will look to offset it by selling the current $55 or, if we are lucky, $60 as soon as the premium hits $1 on that contract.

I will be surprised if we get more than 5% out of this stock today, which is right at $55 but if the stock closes above $54 it will be in very good technical shape.

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I also like INTC for a day trade on the $25 calls which should open around .30 – at that point the risk is low enough for me to jump in looking for .45 which covers commissions and gives me a .12 profit! It will be easy to get out for .20 as long as the stock stays above $25 but I don’t think I will hold it more than just today.

There is a rail strike in Chile that is driving up the price of copper. Look for PD and PCU to continue to run up but watch out when it gets resolved!

While NUE may be a “best of breed” steel company, I don’t see it continuing to command a sector high p/e (even though it is only 8). This whole sector tends to react badly to high energy costs so I will be watching for a short entry point.

Citigroup just announced a $490 target for GOOG (up $60, 15%) which should give it the gas to challenge $420 again. Shorting this stock continues to be financial suicide.

Good news for TXN is good news for GLW, this stock should take off after options expire and I am liking the very cheap Jan $20s at just a .40 premium.

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