Archive for April, 2007

World Record Wednesday Wrap-Up

Looks like I picked the right week to raise my targets!

As I said yesterday, it's all about Apple earnings and this, my friends, is why we don't short the Nasdaq!  The Nasdaq was the focus of our weekend discussion on the members site where I said:

  • "This is in line with what HappyTrading and I were discussing this weekend, what would constitute a Nasdaq breakout?  While you will often hear people say "Oh that’s nothing, the Nasdaq was up at 5,000 in 2000" but what they fail to remember is that it was up there for about 2 weeks (March) and quickly fell back to 4,850.  In fact the entire "spike" of the dot com bubble in tech, the entire time the Nasdaq spent above 3,000, was 13 months – fom November 1999 to November of 2000."
  • "Since we know the Nasdaq was tech heavy and companies were getting insane valuations which dragged up the index, why do we now blame Microsoft for the madness of Pets.com or Webvan?  Joe DiMaggio had a 56-game hitting streak in 1941 but he didn’t play under a black cloud for not repeating it over the next 12 years of his career.  So let’s stop treating the aberration as the norm and consider that we are, RIGHT NOW on the verge of a major breakout of all the indices, INCLUDING THE NASDAQ."

In our modern world Tech has to be the cornerstone of any real rally and just because the Nasdaq once got a little (OK, a LOT) ahead of itself, doesn't mean it's a failed index now.  100 years from now we may not be using oil but you can be damn sure we'll be using computers.  We can make diamonds now, one day gold and copper will come off a nano assembly line too.  While all of that seems very Star Trek for the average investor's time horizon it was just 1967 when Dustin Hoffman was advised that the word of the future was "Plastics" in "The Graduate." 

This film was seen by 100 Million people and any one of them who would have taken that advice and put $10,000 into "Plastics" in 1967 would be a millionaire today.  Back around Thanksgiving weekend the word on our site was "Apple" as the company came under attack on…
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Wednesday Virtual Portfolio Moves

Posted April 25, 2007 at 9:42 am | Permalink (Edit)

Almost time for my daily TSO puts… $3.50 is a great price for the $110 puts, at $3 I won’t be able to resist it. $1.50 is my magic number on the $105 puts but let’s watch VLO to hold over $69 and cancel all oil puts for now.

AMZN up 20% – puts are toast but who cares!

Posted April 25, 2007 at 9:56 am | Permalink (Edit)

AMZN spread – well the June puts will take care of themselves but the May June $45 calls are going to be a pain as we are too far in the money. I’m showing June $45s at $8.80 and May $45s at $8.20 and, if you can afford it (and I said when we set this up you needed to be able to) the proper move is to roll your caller to the $52.50s for $2.10.

Note that we already have a double off the .30 net we invested so this is a brand new gamble but you are effectively buying the June $45 for $6.40 and you have to actively roll your caller down (generally whenever the next level down gets a $1.50 premium) if we start to fall and up (same logic) if we continue to rise which is very tricky to manage.

You can also just take your money on the Junes and play a pullback of your caller as a mo play but he has no premium so you have no cushion but it might make the most sense if the market pulls back (Dow already got rejected).

Posted April 25, 2007 at 10:00 am | Permalink (Edit)

SU May $75s? Rather than DD you can roll to the $80s for $1.70 (you don’t have to roll to the same # of contracts) or the June $75s for $1. I’ve got a buy in at $1.50 on the $80s but the damn thing is diving on me already!

Posted April 25, 2007 at 10:06 am | Permalink (Edit)

AMZN Oct May is much easier as your caller lost his premium and you didn’t. You can roll him to…
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Will It Happen Wednesday?

Is today the day for 13,000?

Thanks to another round of good earnings the futures are looking bright this morning (7am), even AAI figured out how to make money this quarter and, if this becomes a trend, may be just enough to pull XAL out of the dumps.  BAB is so disgusted with the performance of the US airline industry they are leaving the NYSE, which is a real shame as I was just getting ready to short them as they attempt to overpay for Spain's Iberia Airlines.

Speaking of airlines, BA had blowout numbers, beating analysts' expectations by 10% but "only" in-line with the dreaded "whisper" number so it remains to be seen how they get treated.  Boeing's order backlog is up to $262Bn, larger than the GDP of all but 35 countries!  There are even less countries that run at a net profit and Boeing's net jumped 27% to $877M for the quarter.  Guidance is a little light as the company needs to spend a lot more to ramp up production but, on the whole, I'm very pleased with our leaps.  I would be a buyer on any dip here.

No politics during the week but the Daily Show yesterday was hysterical with George Bush debating himself, Gonzales debasing himself and John McCain defending the war – even McCain had trouble keeping a straight face trying to downplay Iraq's problems.  John Stewart made a great point about how tragic the recent shooting at Virginia Tech was and asked McCain to put that in perspective for the Iraqi people for whom 32 deaths is considered a calm day

Asia's day was not calm s the Nikkei took a 215-point dive as Japanese investors are a lot more concerned about our poor economic numbers than we are.  Still it's a pretty mild pullback and next week is a market holiday with China closed all weeks so you can't blame them for taking a little off the table…  India continued to take the lead with an 81-point gain and Hong Kong finished about flat. 

Over in Europe, the race is on to see who can pay the most for ABN with those pesky Scots coming in with a $98Bn offer to top Barclays by over 10%.  Someone seems to be making a play for British supermarket Sainsbury but Spanish property companies…
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Tuesday Top Off

Yet another record day (well, the intraday high anyway).

But did we pass our test?  I think we did because we had awful hosing data but didn't tank the market (in fact we got a huge dip at 10 and recovered nicely).

We have more awful housing data ahead tomorrow and the dreaded Fed Beige Book but WHR indicates Durable Goods Report may not be a total disaster.  AMZN rocked the after hours with a 10% gain – which will make our spread plays very interesting tomorrow!  Will it be enough to kick-start the Nasdaq?  That remains to be seen…

We also have earnings tonight and tomorrow from: AMZN, BXP, CAKE, CAJ, CRI, LFG, PNRA, RDN, STM, SUNW, TZOO (critical to airlines) and WBSN (tonight) and APD, BUD, BHI, BDX, BOBJ, CBT, CHH, CL, COP, CEG, ECA, ENI, EXC, FFIV, FNF, FCX, FSL, GENZ, GLW, GSK, HMY, HES, HMC (good TM hint), IHP, ICO, ISE, IRBT (vint), KTO, LSI, MTH, MCO, MUR, NYB, NSC, OSTK, PEP, PHM, QCOM, QI, RTN, R, SEE, SII, TASR, BA, TEX, SWK, UAUA, UIS, UPS, GRA, WLP, WEN, XLNX, XTO, ZMH so it will be surprising if anyone even notices economic data amid all these numbers.

While we didn't get stellar performance we did get a starring role from the SOX, which gained 15 for the day, amazingly just shy of a market-leading breakout.  The Transports continue to be hopeless but declining oil prices gave us a glimmer of hope ahead of our airline earnings:

 

 

Day's

Must

Comfort


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Tuesday Virtual Portfolio Moves

Posted April 24, 2007 at 9:44 am | Permalink (Edit)

CME getting killed! This is great for me as I only got as far as the puts yesterday as it plunged straight down from my play but now I am going to sell the $540 puts for no less than $12, hopefully $14 against the $520s I have ($4) and leave the trade at that as there’s no sense adding risk now.

Posted April 24, 2007 at 9:48 am | Permalink (Edit)

That’s it for IBM for me ($4.10) – what a nice save! I’m offering .75 for a few $100s, just so I don’t feel like I’m missing anything, stopping at .35. I THINK they’ll test $100 now that they’re up here but I’m not risking my $95s on it!  – NEVER GOT THE $100S.

Posted April 24, 2007 at 9:56 am | Permalink (Edit)

Out of TXN $32.50s at $2.80 but not selling against the leaps just yet – we are in such good shape now we can afford to wait a bit and see what happens around $35. The $35s are .72, which is kind of pricey but I’m not jumping in front of an 8% one-day gain. All they did so far was bounce 15% off the 10% rule, still generally bullish but I’d rather flip to the $35s and take my profits off the table.

SOX up 9 (2%) but not much action from MU and MRVL or AMAT, who I would think would have been excited about this. Even AMD is finding a few buyers below $14…

Posted April 24, 2007 at 10:02 am | Permalink (Edit)

TM – I don’t get that one but yes, we still need to have stops in and the best way to play TM is to take your buck back and pick up the $125s on the turn (now $2.78). Part of what management did at their conference yesterday was give the “law of large numbers” speech that Google once gave as they really can’t sell 10% more cars quarter after quarter. The best dip this month on the $125s was $2 so that’s a good entry but it’s a…
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Testy Tuesday Morning

good newsWe have lots of good earnings to point to but some scary economic data hitting the markets this week so it will be a great test of the markets to see what investors are really paying attention to.

Nothing pre-market but today we have Consumer Confidence (pretty good but down from last month) and Existing Home Sales (how bad will it be?).  Tomorrow is a big day with Durable Goods (should be much better), New Home Sales (if there’s no spring uptick – run away!), THE BEIGE BOOK (very big deal) and, of course, crude inventories (temperature moderated, no real driving, airlines grounded – sounds like a build).

Thursday we are hit with Initial Jobless Claims but Friday is the Big Kahuna, the GDP (1.8% expected) with the Chain Deflator and Employment Costs (both have to be up) as well as our beloved Michigan Consumer Sentiment Poll, but it’s just a revision, we already got an 85.3 from them.

Earnings are just too numerous to list but some of the biggies are:

AL – up 30%, AMGN – up 11%, BP – down 17%, BSX – down 64%, COH – up 38%, DD – up 16%, KMB – up 64%, LLL – up 17%, T – up 100%, TXN -down 12% (BTE), WHR – down 1% (but BTE), X – way up but lower guidance?

TGT reported weak sales that would probably really spook the market if it weren’t buried in everything else today and I feel psychic for taking those $60s off the table yesterday but really that’s why we have trading rules – you can’t always know what’s going to happen so we let ourselves stop out and get those profits off the table!

bad newsGM blamed the sub-prime meltdown for slow auto sales but TM is up 10% Globally and GM would do well to listen to Toyota’s statement: "Our goal has never been to sell the most cars in the world, we simply want to be the best in quality. After that, sales will take care of themselves."  Quality – who’d have thought that would work?  Certainly not US auto makers as Toyota gained 12.9% last year, passing DCX and placing the neck and neck with F.

Asian markets finished flat as rising oil prices put a damper on stocks over there but we got a good gain from the BSE, which was lagging the group. …
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Monday Virtual Portfolio Moves

Posted April 23, 2007 at 9:42 am | Permalink (Edit)

EWJ – I like it BECAUSE it’s dropping! Only if Europe closes at least flat and we hold up, otherwise we’ll just wait for a bottom.  EWJ  May $14 at .65 right now.

Posted April 23, 2007 at 10:05 am | Permalink (Edit)

Google doesn’t really have any room for upgrades, it’s a buy by about 36 out of 40 analysts. Price targets are being raised but people are having trouble believing it so it will take a clear revenue catalyst to kick it up. I think we need to use 20% of the profit trailing stops and look to move into longer (Sept) positions if we are flatlining as we can make some very good money selling until they break $500.

IBM – I just got stopped out on half my rolled $95s in fact as they just fell from $1.80 to $1.70 but that’s up .25 off my $1.45 basis so now I’m in on 50 at $1.20 with a $1.60 stop. If that stops out I’ll have a buy for 20 at $1.25 as I’d be willing to DD again at .65 (again, unless the markets tank).

Posted April 23, 2007 at 10:27 am | Permalink (Edit)
NYX – $10KP – buying back the May $100 caller for .95. Will consider selling the $95s for $2.50 but not unless I get worried. DD on June $100s at $2 is great idea but I’d rather DD at $2.50+ AFTER I get my next sale in on the May $95s, otherwise too much of a gamble. If it goes lower the move will be to DD on June and sell 1/2 the total (3) of May $90s for around $3.50 but I’m hoping not to have to as earnings are on the 26th and I think they’ll have good things to say about the merger.
VLO earnings on the 26th, high expectations for sure – if they hit it they can go to the moon with TSO, SUN and some of the integrateds. Still – taking the TSO $110 puts for $4.20 as a mo trade, stop at $3.80 (.40 tstop).


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Monday Mop-Up

We held up all right on the whole.

I cannot stress enough the value of mattress plays.  Watching the XAL kept us out of trouble all day as the airline index dragged the markets down and at 12:25 I decided the divergence wouldn't last but, rather than panic out of our positions, we took the DIA $130 puts as a cover for $1.55As I said at the time: " XAL is in a power dive and you cannot convince me that this does not matter."  We later set 20% stops on our closer calls but, when few of them actually triggered we picked up some more positions (hopefully) at the bottom and sold our DIA's for a .20 profit, which may not seem like much but as a cover it effectively reduces the basis of our exposed puts by .20 – a nice extra cushion to have.

The worst thing you can do with options is go in and out of positions (mo plays aside) as you pay a hefty commission in addition to often losing a nickel on the spread.  Our mattress plays are momentum puts on the market that are, by definition, already covered by your calls (or puts if you're a bear) and they help us ride out short-term reversals.  We would never be able to hold some of our choppy calls without some protection on the dips.

While we didn't lose a lot, we did lose our uncovered GOOG calls so we'll have to reassess that stock today.

So the markets held up pretty good despite GM blaming sub-prime for their losing leadership to TM (got 'em).  At 2:05 I said about this: "I’m not saying panic but this is the kind of talk that can cause a big pullback. Let’s not forget that GM has no credibility though but now reporters will be asking everyone what they think about this.It was the lack of a major reaction to this news that caused me to be less bullish into the close.

On the whole, our indices held up pretty well:


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Monday Morning Markets

I didn't like the Asian markets today.

The Hang Seng and the Nikkei both had strong opens and both dropped over 150 points into the close.  The Korean KOSPI and the Shanghai Composite index both made new records but are both relatively small markets.

Other Asian stocks finished roughly flat to slightly up but it seemed like surging oil prices hurt the markets as well as a "disappointing" (up 22%) report from China Mobile.  The Nikkei has their big earnings season starting this week and there was big news today that C, HBC, JPM and Standard Chartered will be able to begin accepting deposits in Yuan from Chinese citizens, a real prize in a country with a 25% personal savings rate and a population of 1.2Bn people!

Regardless of the Nikkei's troubles, IF we can keep the new oil contract under control and IF the US markets don't tank today, I'm liking the very flat EWJ (Japan Index Fund) as it has let the Nikkei get away from it in the past few weeks and the premium on the May $14 at .75 is just a dime, not a bad way to leverage a position!  EWH has tracked the Hang Seng much more closely but we can take advantage of today's pause to dip into the June $16s for .98, a .36 premium.  I like them straight up as well as the spread of owning those and selling the May $16s for .82 for a .14 spread but, if you wait, you may get  a free trade on the deal.  The danger in these trades is that Asian earnings may be a bust due to creeping inflation so be careful with these!  I lile the EWH's enough to offer to buy 10 at .90 for the $10KP and remind me to time the sell in comments.

Chinese developer Country Garden Holdings gained 35% on it's IPO with a $15Bn cap and a p/e of 29 and close to double early value estimates.   China Citic Bank raised $5.4Bn in it's IPO, setting a new mark to beat for the year but far short of ICBC's $21.9Bn raise last year.  Still, were looking at PLENTY of money still looking to go into, not just stocks, but SPECULATIVE stocks and until we see a "flight to quality"
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Weekend Reading – In Progress

Crossing Wall Street has a very interesting set of data for how were’re doing this Century (as of the 17th):

Here’s a rundown of some major indexes since December 31, 1999:

Here’s how the 10 S&P 500 Industry Sectors have fared:

   
S&P 600 Small-Cap Value…………129.84% Energy……………………………………..128.23%
S&P 600 Small-Cap………………….115.01% Financials…………………………………..52.87%
S&P 400 Mid-Cap Value……………109.02% Materials……………………………………50.94%
S&P 600 Small-Cap Growth……….98.15% Utilities……………………………………..46.96%
S&P 400 Mid-Cap………………………97.07% Staples……………………………………..34.99%
S&P 400 Mid-Cap Growth…………..84.92% Healthcare…………………………………27.57%
Dow Utilities……………………………..82.35% Industrials…………………………………20.99%
Dow Transports…………………………70.70% Discretionary……………………………….3.97%
Morgan Stanley Cyclical……………..68.33% Telecom……………………………………-48.75%
Russell 2000……………………………..64.23% Tech………………………………………..-54.70%
Morgan Stanley Consumer………….36.02%  
S&P 500 Value………………………….29.95%  
Dow………………………………………….11.10% (29.03% w/divs)  
Russell 3000………………………………8.19%  


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Kimble Charting Solutions

DAX Index Hits Two 18-Year Support Lines, Creates Large Bullish Reversal

Courtesy of Chris Kimble

Has the DAX index from Germany experience a large decline of late? Yes, it has!

Has the decline broken long-term rising support lines? Not so far!

This chart looks at the DAX index on a monthly basis over the past 25-years. Over the past 6-years, it has traded sideways inside of the blue rectangle at (1).

The decline this year saw the DAX hit two 18-year rising support lines at (2) last month, where a large bullish reversal took place.

Until broken, important support remains in play at (2), which is bullish for this key index....



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Zero Hedge

Aaand Its Gone... The Biggest Support For Asset Prices

Courtesy of ZeroHedge View original post here.

Authored by Lance Roberts via RealInvestmentAdvice.com,

Since the passage of “tax cuts,” in late 2017, the surge in corporate share buybacks has become a point of much debate. I previously wrote that stock buybacks were setting records over the past couple of years. Jeffery Marc...



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Phil's Favorites

Here's how scientists are tracking the genetic evolution of COVID-19

 

Here's how scientists are tracking the genetic evolution of COVID-19

Why do scientists care about mutations on the coronavirus? Alexandr Gnezdilov Light Painting

Niema Moshiri, University of California San Diego

When you hear the term “evolutionary tree,” you may think of Charles Darwin and the study of the relationships between different species over the span of millions of years.

While the concept of an “evolutionary tree” originated in Darwin’s “...



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Biotech/COVID-19

Here's how scientists are tracking the genetic evolution of COVID-19

 

Here's how scientists are tracking the genetic evolution of COVID-19

Why do scientists care about mutations on the coronavirus? Alexandr Gnezdilov Light Painting

Niema Moshiri, University of California San Diego

When you hear the term “evolutionary tree,” you may think of Charles Darwin and the study of the relationships between different species over the span of millions of years.

While the concept of an “evolutionary tree” originated in Darwin’s “...



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ValueWalk

Activists demand revamp of anti-redlining law

By Anna Peel. Originally published at ValueWalk.

Over 100 California Community Organizations and Leaders Call for Banking Regulators to Stop Planned Revamp of Anti-Redlining Law during COVID19 Crisis

Q1 2020 hedge fund letters, conferences and more

Worker, Housing, and Small Business advocates call on all resources to be dedicated to saving lives and responding to Coronavirus

San Francisco--Amongst an unprecedented public health crisis that threatens hundreds of thousands of lives, as small businesses are shuttered across California and the nation, and as millions file for...



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Chart School

The Big Short movie guides us to what is next for the stock market

Courtesy of Read the Ticker

There is nothing new in WallStreet, it is only the players that change. Sometimes a market player or an event gets ahead of the crowd and WallStreet has to play catch up.

Previous Post Dow 2020 Crash Watch Dow, Three strikes and your out!

It is important to understand major WallStreet players do not want to miss out on a money making moves.  







...

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Insider Scoop

Economic Data Scheduled For Friday

Courtesy of Benzinga

  • Data on nonfarm payrolls and unemployment rate for March will be released at 8:30 a.m. ET.
  • US Services Purchasing Managers' Index for March is scheduled for release at 9:45 a.m. ET.
  • The ISM's non-manufacturing index for March will be released at 10:00 a.m. ET.
  • The Baker Hughes North American rig count report for the latest week is scheduled for release at 1:00 p.m. ET.
...

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The Technical Traders

Founder of TradersWorld Magazine Issued Special Report for Free

Courtesy of Technical Traders

Larry Jacobs owner and editor of TradersWorld magazine published a free special report with his top article and market forecast to his readers yesterday.

What is really exciting is that this forecast for all assets has played out exactly as expected from the stock market crash within his time window to the gold rally, and sharp sell-off. These forecasts have just gotten started the recent moves were only the first part of his price forecasts.

There is only one article in this special supplement, click on the image or link below to download and read it today!

...

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Members' Corner

10 ways to spot online misinformation

 

10 ways to spot online misinformation

When you share information online, do it responsibly. Sitthiphong/Getty Images

Courtesy of H. Colleen Sinclair, Mississippi State University

Propagandists are already working to sow disinformation and social discord in the run-up to the November elections.

Many of their efforts have focused on social media, where people’s limited attention spans push them to ...



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Digital Currencies

While coronavirus rages, bitcoin has made a leap towards the mainstream

 

While coronavirus rages, bitcoin has made a leap towards the mainstream

Get used to it. Anastasiia Bakai

Courtesy of Iwa Salami, University of East London

Anyone holding bitcoin would have watched the market with alarm in recent weeks. The virtual currency, whose price other cryptocurrencies like ethereum and litecoin largely follow, plummeted from more than US$10,000 (£8,206) in mid-February to briefly below US$4,000 on March 13. Despite recovering to the mid-US$6,000s at the time of writin...



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Promotions

Free, Live Webinar on Stocks, Options and Trading Strategies

TODAY's LIVE webinar on stocks, options and trading strategy is open to all!

Feb. 26, 1pm EST

Click HERE to join the PSW weekly webinar at 1 pm EST.

Phil will discuss positions, COVID-19, market volatility -- the selloff -- and more! 

This week, we also have a special presentation from Mike Anton of TradeExchange.com. It's a new service that we're excited to be a part of! 

Mike will show off the TradeExchange's new platform which you can try for free.  

...

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Lee's Free Thinking

Why Blaming the Repo Market is Like Blaming the Australian Bush Fires

 

Why Blaming the Repo Market is Like Blaming the Australian Bush Fires

Courtesy of  

The repo market problem isn’t the problem. It’s a sideshow, a diversion, and a joke. It’s a symptom of the problem.

Today, I got a note from Liquidity Trader subscriber David, a professional investor, and it got me to thinking. Here’s what David wrote:

Lee,

The ‘experts’ I hear from keep saying that once 300B more in reserves have ...



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Mapping The Market

How IPOs Are Priced

Via Jean Luc 

Funny but probably true:

...

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About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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About Ilene:

Ilene is editor and affiliate program coordinator for PSW. Contact Ilene to learn about our affiliate and content sharing programs.