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Back to Work

Boy am I glad I missed yesterday – what a mess!

It was a low volume down day after a holiday, easy to write off in retrospect but very painful to sit through.

Just like any good department store, the market likes to throw a sale every once in a while. The trick is to figure out if it is a real bargain or part of a “going out of business” spiral.

I made 2 trades yesterday: I shorted DHI, not because I don’t like them but because they have had a nice run-up and housing will be out of favor for a couple of days. I also went back to the well on RIMM and got the Dec. $65 put since they are back at the top of their channel and running into the 50 dma of $65.50.

After a day like yesterday we have to decide whether we still have faith in the market or not (I do) and then what opportunities we were given to get in.

I’m already committed to MSFT with Jan $27.50 calls and yesterday’s action reaffirmed my faith as they held steady on a very bad day so I am holding but I don’t think I would call the .90 price of the call a bargain yet as it could go either way.

HET (I have the Jan $65s) will be a big buy if it holds the 200 dma of $68 which it broke last Monday. Setting $68 as a floor will be a powerful indicator for the stock.

PLAY (I have the Dec $25s) is testing its 50 dma of $25, if it goes through that, expect it to head back to $27. If Apple continues up, there will be no stopping PLAY.

Very bad timing on the Valero trade so we buy out the $2 option we sold for .75 and use that to offset (a little) the $4 loss on the call and wait for oil to calm down.

I will be cautious today, we either make up yesterday’s loss and the market is Uber-Bullish or we descend further and perhaps this will be a correction week. After 4 straight up weeks, the correction could be a bitch!

Looking at very long term trends though, I think the market may be just getting started in a super rally that could take it up at least another 5% (Dow 11,500, Nasd 2,300, SPX 1,350).

GME has earnings today, they have dropped from their high of $38.19 last week for no reason whatsoever. I am hoping for a miss with a good outlook so I can grab the stock as people panic out of it. Conference call is 11 am so this will be a big trade for today.

TIVO is also giving eanings tomorrow, this can go either way but I will be looking to pick some up if it gets back to $5.

GM is back in trouble on delayed earnings. Look what that did to Taser’s stock last week!

Biggest regret is missing CME yesterday. It was downgraded by Sandler O’Neill and Keefe Bruyette to a sell and we could have shorted at $390 in the morning and picked up $20 by 2pm! Fair warning to Google fans as this is all it takes when a stock is that high.

Merk was the dog of the Dow yesterday with a whopping 5% drop to match its 11% workforce reduction. They may test $28 before people realize this company (which was at $47 last September) still makes over $5Bn a year. Expect them to buy a biotech firm in the near future.

Sacks (SKS) may be in some kind of death spiral, that makes me worry about retail in general but it may just be that they have blown it by being uniquely incompetent.

Gold, copper and Platinum are all pulling back from 25 year highs. GG is at $21.50 and still looks good, just consolidating before next move up but there may be a lower entry point coming if gold stays below $494. Remember last weeks thesis on the Arabs getting their initiation pantsing this month. MRB is still a bargain at $1.94, only up 5% since I picked it last week but also may come back a bit.

For some insane reason, you can buy TXN for $32. If this gets back to $30-31 I am going to take a very large position. Although sales are pretty flat this year, profits will be up 30% but this new chip set for video phones should be a big home run for them.

About 46 million W-CDMA phones are expected to be sold in 2005 with sales expected to grow to 90 million in 2007 and about 255 million in 2010(Forward Concepts)”

Hmm, industry leader in a market that is doubling for the next 2 consecutive years with 5x sales in 5 years… Buy Buy Buy!!!


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