I’ll tell what doesn’t matter – today’s action!
It doesn’t matter what the Dow did (new high) or the S&P (another high) or any of the other indices did today.
It doesn’t matter that the Transports broke 2,600 or that oil dropped to $58.45 (down $1.50) or gold fell to $572.
It just doesn’t matter because it’s officially earnings season!
That’s right, it’s put up or shut up time and for Dow components like AA, who put up a 19% gain in revenues and an 86% rise in profit, it just didn’t matter because it was less than analysts expected and they sold off 6% in after hours trading.
DNA put up a 58% rise in profits, which doesn’t matter when your p/e is 56 and they went down 1.8% in AH trading.
When you are at record highs, you need record earnings to support them!
One company that won’t be setting any records is LM, who took a whopping 9% dive this evening as they lowered guidance due to acquisition fees and “less-than-expected revenue.” As B4 suggested in comments, perhaps that housing bet didn’t pan out…
Tomorrow we hear from Dow component MON (expected to lose .21) and INFY (expected to earn .32 – up 23%) before the bell as traders scramble to read the tea leaves off these early reports.
We also here from my selection, GCI, as well as: HST, MTB, RI, YUM and ZZ.
I doesn’t matter if you’re a builder, unless you also have options scandals, as KBH found out today. They “only” went up 2% today while many in their sector, including, of course, TOL ran into the 5% rule after DHI said sales were off 25%.
Does it matter if North Korea conducted a second nuclear test? Word is they might have and one has to wonder how Drudge ran that story from an Australian paper a day in advance…
Bush says they will work to resolve this political opportunity right after the elections. Here’s part 2 of the N. Korea post.
===================================
It was a rough day in the oil patch as most oil stocks went up, even though crude dropped all day long. Tom confirmed SU, SLB, APC and UCO as plays that had chart support and we started buying our puts.
We’ll count this group as entered today, although we only took SLB in comments but I will log them as follows:
SU Nov $65 puts came in at just .65. Our original Nov $65 puts stopped out at $2.50 (up 25%) as they lost 20% of their profits early.
** Important note for new readers: Please read “My Trading Policies” for a general idea about entering and exiting trades. If you don’t know what rules I trade by, it doesn’t make much sense to look at my picks.
The most important rule in a choppy market is the 20% Rule:
Once a trade nets 20%, I immediately set a stop at a 15% gain. Making 15% on a short trade is a lot of money!!! Whether you make $5 or .05 per contract, 15% is still 15% and you need to be able to live with that.
SLB was one we waited for with the Nov $57.50 puts coming down to $1.80 at 11:30, they finished the day at $2.
APC Nov $40 puts came in at .85 and the stock was strong all day.
UCO Nov $50 puts came down to $1.75 on fairly flat action.
In comments we also took DVN $60 puts for .60 and .40 so we’ll call it .50 and they closed at .45.
I got the VLO $50 puts for .90 and they finished at $1.05.
The XOM $67.50 puts were irresistible at $1, now $1.15.
Credit to Zman with the unrecognized call of the day when, just after noon, he said: “Hmmm, very frustrating. I like those protective calls down here at $53.70 USO.” Sometimes you just have to go with those instincts as the sector rallied just after that!
I called an official (and wrong so far) top on the markets at 12:29 with the DIA $118 puts for .55, now .60.
All October positions should have very tight stops at this point!
Sprint opened very low but went up so fast it was a no trade, too bad as it worked well!
We closed the XOM $67.50 calls at .90 for a nickel loss, insurance well spent!
We closed the AA Nov $27.50s in comments this afternoon at $1.75 (up 84%) and (unfortunately it looks like!) let the Nov $30s ride at .65 (up 44%). It wasn’t actually greedy to hold them as it was a roll of profits but we’ll see how happy we are about it in the morning… I did not think the earnings were that bad but the AH traders disagree.
I raised the stop on the GOOG Dec $400s to $40 and the Dec $420s to $25 as the profits from these more than pay for all the dead puts we have left!
OIH $125 puts are a great example of how we stop out properly. It opened at $4 (up 33%, $1) and I set a stop at $3.80 (up 27%), which triggered right away, an hour later it was at $2.60, about where it finished the day. Even though we wanted to take new short positions, you still need to protect existing winners – regardless! We keep a stop at 20% of the highest paper profits achieved.
