Archive for 2007

Google Earnings Play

My thanks to Happy Trading for these charts:

Google has recently entered into a period of lower volatility, coupled with low volume.

Have people lost interest in Google or is the stock wound up like a coiled spring ready to explode?

The long-range chart does indeed look interesting and a graph of the numbers bears out my logic, that this is an unusually low period of volatility for what we are used to thinking of as a very volatile stock:

 

 

 

 

 

 

Delta

 

Date

Open

High

Low

Var

Close

Prior

Avg Vol

Apr-07 458


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Smart Virtual Portfolio Management II

Options Sage submits:

Last week’s article discussed smart virtual portfolio management with respect to a $10K virtual portfolio.  In this week’s article we will consider a fairly conservative managment strategy, using options to enhance returns in a $200K virtual portfolio as promised last week and next week we will look into a million dollar virtual portfolio.

The Simplicity of Stocks

Making money trading stocks is (or at least, should, in theory be) much simpler than making money trading options!  Making money trading stocks simply involves being correct with respect to direction.  You also have the luxury of time on your side should the stock fail to move as expected initially – you can always resort to trusting that your fundamental due diligence will trump any short-term technical analysis failings. 

Making money with options, on the other hand, requires that you are correct with respect to direction AND TIME.  Take the LCRAF Jan ‘08 $30s for $1.05 OptionsXpress calls for example that we mentioned last week – up a healthy 38% since the 4/6 close for the week before earnings!  If the stock had stayed flat for many months those calls would have suffered from time-decay continually eating away at the $1.05 of premium.  So much so, in fact, that even if the stock did move bullish close to expiration, a much more substantial move would have been required to overcome the effects of time-decay erosion on the option premium and turn a profit. 

We also have to factor in another risk variable, implied volatility.  Research in Motion traded as high as $148 prior to its earnings report this week and, with a P/E of 59, Phil reasoned that if the stock didn’t report stellar numbers and forecasts, a correction was in the offing.  Phil accumulated long put options at $130 for less than $1.  As the stock dropped all the way to the low $130s in after hours trading following the report, it would have been easy to presume that those long puts would be making tons
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Weekly Wrap-Up

That was not a bad week!

I ended up bullish last weekend and, other than a quick cover on Wednesday, we had little reason to change our stance for the week.  Of course changing my stance and selling the TSO puts on Monday accounted for 3/4 of the week's spectacular gains but that is the whole purpose behind the portioning strategy we use and I have decided to try to rewrite a more in-depth section, with more examples for the member section.

Sage put in a couple of hedged trades for the $10K Virtual Portfolio in our educational post and the up and down consolidating movement of the market made it a perfect week for them.  DNDN pulled back off it's highs (as predicted) and there were many opportunities to work in but we stuck with the position we already had.  OXPS was entered as an naked leap with the Jan '08 $30s opening at $1.30 and finishing the week up 17%.  NYX went down a little more than we wanted, opening at $97 and dropping to $93.50 by Friday as we sold the May $100s for $3.75 (now $2.50) against our June $100s at $5.50 (now $4).

These plays take patience but we need that now as our impatient attempt to make money on the oil plays went badly as did our MRK cover play.  This leaves the $10K Virtual Portfolio with just $2,945 in cash and $6,813 in positions, dropping us down to $9,758 and we will have to get lucky to get out of  this week with our $10,000 intact.

Monday was a so-so day but our dollar was heading down the drain and oil and gold took a very unfortunate lead for the week.  I have said in the past many times that stocks are a commodity too and, at first, they will rise with the rest but, ultimately, we end up facing a trade-off between runaway inflation and lower corporate profits that can get ugly fast.   Monday was the day we threw in the towel and went long (sort of) on TSO by selling the $110 puts.  Unfortunately, this option is not available to most $10KP players but it worked out great in the STP. 

Also Monday's general instruction to members bears repeating as this goes for any time we are within 2…
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IMess – And Now, A Spanking by Our Sponsors

What a surprise! 

You CAN go too far in this country… 

I was in a bad mood in last week's wrap up as I saw the WSJ moving into the Criminal Narrators Boosting Crude camp and I said then that, to find the motivation behind this nonsense we need to "just follow the money."  This week THE MONEY gave us a real demonstration of it's power by removing a major US political broadcaster for saying the wrong thing.

I'm no Imus fan and I don't think what he said was in the least bit defensible but, for MSNBC (same umbrella as CNBC) to dump him the second a few sponsors pull their cash, only  accomplishes putting a great big "Ethics for Sale" sign on the network.  Had they suspended or fired him immediately, that would be different but this was purely a dollar driven decision.  The man put out the pictured album years ago and, for goodness sake, he wears a cowboy hat in the studio, not exactly the outfit of choice at the Million Man March, and this was certainly not his first time making a racist comment.

Even his OFFICIAL MSNBC biography contains the the statement: "He has been a guest of Charlie Rose, David Letterman, and of particular note, Larry King, in shameless, mutual ass-kissing marathons."  So suddenly we're shocked about words???

What Imus actually said, in context, is printed in this article.  That happened on April 4th in the morning.  The comment, which was cruel and demeaning to the Rutgers Women's Basketball team was picked up by they local papers and, the next morning (4/5) WNBC (same umbrella) said:

  • WNBC.com, the NBC affiliate in New York, reported Imus' April 5 comments in an article the same day, which quoted a Rutgers spokesperson saying, "We agree with Mr. Imus that this was, in his own words, an 'idiot comment.' We are very proud of the success of the Rutgers women's basketball team. Coach [C. Vivian] Stringer and the Rutgers players are outstanding ambassadors for this great institution."

The same day, MSNBC said:

  • MSNBC released a statement that asserted, "While simulcast by MSNBC, 'Imus in the Morning' is not a production of the cable network and is produced by WFAN Radio." It added, "As Imus makes


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Wednesday Virtual Portfolio Moves

Posted April 11, 2007 at 9:56 am | Permalink (Edit)
RIG will make money this year no matter what happens and are way down from last May’s high of $90. Aug $85s are $5 and let you sell May $85s for $2.25 but only if you have to (maybe a $1.75 sell stop).
If TSO is worth $110 then VLO is worth $90 – it’s a totally superior company in every category and it’s silly to think they won’t be shipping gasoline out west to make and extra $10 per barrel on the crack. VLO is up at it’s highs but that certainly never bothered TSO and there’s a day trade on the $67.50s for $1 but the Jun $70s at $2.35 would do well on a breakout.

HAL is down from $40 this time last year so the May $32.50s are a reasonable gamble at $1.25

Posted April 11, 2007 at 10:08 am | Permalink (Edit)

GFI – LOL, stick around long enough and anything can happen. Which reminds me, we should look at GDX, which has nice $1 brackets to sell into so I’m going to take some Jan ‘09 $43s for $7 and sell the May $43s for $1.20 or better, no less than $1 (.20 Tstop)

Posted April 11, 2007 at 10:43 am | Permalink (Edit)

Mattress – absolutely but you’re a bit late. DIA May $125s up a dime at $1.55, if we need level 2 we trigger a buy of 1/2 the number of $124 puts at $1.50 and set a $1.75 stop on the $125s and then pretty much repeat that cycle on the way down with .25 trailing stops.

Posted April 11, 2007 at 10:46 am | Permalink (Edit)

Oh I can’t wait for DIA May $124 puts, going to pick up some at $130 with $1.20 stop. XXX

Posted April 11, 2007 at 10:48 am | Permalink (Edit)

$10KP BIDU selling the Apr $100 for $2 on that remaining open position – good idea Daveo

Posted April 11, 2007 at 11:07 am


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TGIF!

Let's get out of this crazy week!

If we are LUCKY the Dow will finish the week where it started, above 12,500.  12,500 is a very big number – one year ago we thought 11,500 was a top when we took a power dive in may all the way to 10,700, where we hung out until July.  Here we are, 17% above that level, having pulled back 250 points (2%) from our high around 12,750.  The 250 points we've lost represents around a 10% retracement from the July run and a 500 point gain from our recent 33% pullback.

Let's keep in mind I've been looking for a REAL pullback, to around 11,500 and if 12,000 holds through June, we could be really off to the races.  Nonetheless, I have had little interest in buying things this week and that's usually a bearish sign.  I just have a very queasy feeling about the overall economy and the commodity rally that is propping up the markets is based on a declining dollar, not growing demand.  Brent crude is approaching $70 because it is made in Europe while the WTIC we track on the NYMEX is our local blend.  The more oil we import, the more it costs and we imported A LOT with petroleum import prices jumping 9% last month.

How long can we keep our heads in the sand about this?

[chart]The market hung its hat on the fact that import prices EX-ENERGY rose "just" .2% last month which is really a neat way to keep score as those energy number just go up and down so much that you should just throw them out.  We are in year 4 of throwing out "volatile" energy costs as oil has gone from $35 to $45 to $55 to $65 – when exactly does that down part come in?

While consumers may be willing to spend like drunken sailors on shore leave our corporate masters are not quite so free with their checkbooks and capital spending is dropping off considerably.  "If there's something that keeps me up at night, it's the potential of corporate America really pulling back," said Nariman Behravesh of forecasting firm Global Insight. "We had expected 5%-to-6% growth in capital spending in the first half of 2007, but now that's
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Thursday Wrap-Up

Darn, I always miss the fun days!

Today is a great example of why we love mattress plays – it is so much easier to cover and stop out of one position than to furiously buy and sell dozens of stocks whenever we have a dip.  Today’s action was so nice and smooth, even my auto stops worked out just fine.

I’m not too excited, basically we are right back to where we were Wednesday morning but it sure beats the alternative doesn’t it?  March sales gave us a nice boost as consumer spending marches on no matter what happens in the world.  SOX and Nasdaq had a huge day while the bankers continued to be weak, this will be a nice change of leadership if it sticks but we really need these commodities to calm down a bit.

Oil is back over to almost $64 despite 39M barrels being lopped of the front 3 months delivery.  The score is now: May 183M, June 245M and July 108M.  183M barrels is still a lot but it was an amazing display of pricing power as the May contract, despite a net loss of 58M barrels (20%) in one day, managed to gain $1.84, significantly more than the months were people were adding barreles.  It really is fun to watch but not if you’re short on oil – then it’s just frustrating!

Our RIMM $130 puts were frustrating if you ignored rule #1 and didn’t sell at the open.  The .60 puts we’ve been buying for over a week shot up to $1.85 at the open but quickly fell back to $1.55 (where my stops triggered) and ended the day at .90, despite making no great recovery – a very textbook example of why we ALWAYS sell into the initial excitement!

The transports picked a funny day to get going but they did stop dead at the 50 dma so we’ll have to wait and see what happens there but we got a little greener and tha’t all that counts:


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Thursday Morning

I’m going to be missing things today but here’s what I see at 7am:

Asia:  Sell off very mild but indices finished at day’s low.  Concerns are that US will drag down global growth and Japan already had a steep drop (5.2%) in machinery orders, which is serious because machinery orders are 15% of their GDP.

Europe: Nestle is buying Gerber for $5.5Bn but no excitement otherwise as Europe is drifting down ahead of our open.

US: We are failing critical levels today so let’s initiate another round matress plays if we lose 2 more levels.  There’s really no market moving news so we’ll just have to see which way the wind blows today:

 

Day’s

Break

50

62%

Break

Index

Current

Move

Down

DMA

Fib Level

Up

Dow 12,484 -89 12,400 1,245 12,528 12,650
Transports 2,792 -20 2,736 2,817 2,889 2,983
S&P 1,438 -9 1,410 1,426 1,427 1,460
NYSE 9,413 -55 9,250 9,250 9,218 9,465
Nasdaq 2,459 -18 2,400 2,440 2,454 2,500
SOX 471 -5 470 472 477 490
Russell 808 -6 790 798 803 820
Hang Seng 20,380 -69 19,400 19,941 20,192 20,600
Nikkei 17,540 -129 17,200 17,417 17,617 18,000
BSE (India) 13,113 -69 12,750 13,425 13,814 14,200
DAX 7,117 -36 6,700 6,818 6,830 7,100
CAC 40 5,717 -36 5,500 5,597 5,601 5,780
FTSE 6,385 -28 6,200 6,298 6,297 6,450

I don’t have a lot of hope for the markets as oil insists on heading higher, up .60 in Europe.  Slowing economy and rising oil prices is really not a good combination and we can expect a violent reaction to negative retail sales numbers today so let’s watch out for that.

It’s interesting that gold can’t break $680 with all this going on and oil is having trouble at $62.50 and those are the things that are giving me hope but the dollar is just so pathetic I’m not sure I see a catalyst for a turnaround.

Be careful out there today!





Wednesday Wrap-Up

Ouch!  That was unpleasant…

That was our first down day since March 28th and it seems like a lot of people were simply shocked that such a thing could actually happen.  I predicted this morning that the Fed would kill the market as the positive reaction to their last meeting was way off base and the minutes today proved they had, not just a hawkish stance but did everything but title the minutes "Stagflation American Style."

Way back on March 15th I said: "It seems to be a little of both because both the Philadelphia and New York Feds reported sharp drops in manufacturing activity in March.  The Philly Fed fell to .02 from .06 vs. an expected gain to 4.2 – and that was the good one!  The NY Fed reported an activity level of 1.85, down from 24.35 in February and WAYYY below the 17 that was expected.  The bank said Thursday in its Empire State Manufacturing Survey that "conditions for New York manufacturers were flat in March.  Measures of new orders, shipments, unfilled orders and employment fell, while prices paid and the average employee workweek increased." (see also Stagflation)." but the markets did not share my concerns at the time and took off, making me look like Chicken Little.

An illustration of both states, a dead and living cat. According to quantum theory, after an hour the cat is in a quantum superposition of coexisting alive and dead states.  Yet when we look in the box we expect to only see one of the states, not a mixture of them.I couldn't let it go on the 17th and I went on: "We had an open chat session during the day on Seeking Alpha as our server was down, worth looking at if you’re not a regular member.  On Thursday night I warned that the famous "ex-food and energy" reading of the PPI and CPI were ludicrous and that the very foul stench of stagflation was in the air.  This weekend the word is starting to pop up a lot in the press and I predict an upcoming  "super spike" of the word in the Google trends indexNotice who is most worried about stagflation:  New York, San Francisco (Banks and VC’s), Washington (policy makers) and Chicago (traders).  My job is just to keep
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Which Way Wednesday?

Let’s strap ourselves in and get ready for some fun!

AA earnings were pretty good yesterday and, if we can make it past the Fed minutes, we should be in pretty good shape.  There’s just some trade numbers tomorrow and no one expects them to be good and Friday we get the PPI, which was so bad last month (1.3%, core .4%) that it will be hard to for it to get worse.  Also Friday we get Michigan Consumer sentiment, which may come in BTE based on the Chicago Fed report and the recent jobs growth but the whole poll is based on calling just 500 people in Michigan so you have to take these "market moving events" with a grain of salt.

Speaking of manipulating the media.  Since Michigan is down to just 20 papers in the entire state (and some of those may be under the same publishing umbrella anyway) how hard would it really be to get a positive or negative headline into the papers to influence this heavily relied upon poll?  The last reading was 88.4, which means consumers are 11.6% less confident than they were in 1964 (the benchmark).  Of course who would be powerful enough to get his hands on the confidential release dates to pull off such an evil scheme?

Last week we talked about the outstanding consumer confidence in Asia, where shopping in Hong Kong is up 11% over last year.  You’d go shopping too if your stock market looked like thisAsia posted yet another fine day and our markets have a lot of catching up to do as we are roughly 40% behind over the past year.  Are Asian companies really that much better than American companies?  Companies like Canon, TDK and LG Phillips (and I bet you thought at least one was American) are kicking the butts of EK, IMN and HAR (I know, but it’s a stretch just to find American companies who make stuff!).

[chrysler]Europe’s economy was old and tired before this country was born yet they seem to have done quite well for themselves lately, despite all that free health care they just seem to toss around like it’s some kind of basic human right or something…  DCX says they will meet with bidders next week but haven’t invited Tracinda, indicating $4.5Bn is not enough for Chrysler, this should be good news for GM, who can pretend they…
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Phil's Favorites

Overpriced tech IPOs sell grand visions but aren't worth their valuations

 

Overpriced tech IPOs sell grand visions but aren't worth their valuations

rblfmr / Shutterstock.com

Courtesy of John Colley, Warwick Business School, University of Warwick

The year of the tech IPO is 2019. Uber went public on May 10 with a US$82.4 billion valuation. Fellow ride-sharing app Lyft floated in March with a U$24 billion valuation and Pinterest had a US$10 billion IPO in April...



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Zero Hedge

Futures Slides As Trade Tensions Escalate

Courtesy of ZeroHedge. View original post here.

S&P futures were lower on Wednesday as investors sought safety in bonds, the Japanese yen and Swiss franc in muted trade amid renewed worries over the U.S.-China spat after reports Washington is considering cutting off the flow of American technology to as many as five Chinese companies including Hangzhou Hikvision Digital Technology, the world's largest supplier of video surveillance products, expanding the US crackdown on China beyond Huawei to include world leaders in video surveillance. The dollar and 10Y yield were unchanged ahead of today's FOMC Minutes.

...



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Kimble Charting Solutions

Emerging Markets About To Submerge If 3-Year Support Breaks?

Courtesy of Chris Kimble.

Are Emerging Markets about to “Submerge” and head a good deal lower? What they do at (3) will go a long way in answering this question!

Emerging Markets ETF (EEM) has been lagging the broad market for the past 15-months. They hit their 50% retracement level of the last year’s highs and lows and falling resistance at (2) recently. The weakness of last has EEM trading below its 200-MA line.

EEM has spent the majority of the past 3-years inside of rising channel (1), which reflects that this trend remains up. The weakness of late has it testing the bo...



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Insider Scoop

Amgen To Buy Danish Collaborator Nuevolution For $167M

Courtesy of Benzinga.

Amgen, Inc. (NASDAQ: AMGN) took a logical step forward in buying a preclinical biotech it has been collaborating with since 2016. 

What Happened

Amgen announced Wednesday an agreement to buy Copenhagen-based Nuevolution for $167 million.

Th...



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Chart School

Weekly Market Recap May 18, 2019

Courtesy of Blain.

China – U.S. trade talk continued to dominate the week.   A heavy selloff Monday was followed by 3 up days, with Friday moderately down.

On Monday, Chinese officials announced retaliatory tariffs against the U.S., hitting $60 billion in annual exports to China with new or expanded duties that could reach 25%.

Then on Wednesday:

The Trump administration plans to delay a decision on instituting new tariffs on car and auto part imports for up to six months, according to media reports.

...

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Digital Currencies

Cryptocurrencies are finally going mainstream - the battle is on to bring them under global control

 

Cryptocurrencies are finally going mainstream – the battle is on to bring them under global control

The high seas are getting lower. dianemeise

Courtesy of Iwa Salami, University of East London

The 21st-century revolutionaries who have dominated cryptocurrencies are having to move over. Mainstream financial institutions are adopting these assets and the blockchain technology that enables them, in what ...



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Biotech

DNA as you've never seen it before, thanks to a new nanotechnology imaging method

Reminder: We are available to chat with Members, comments are found below each post.

 

DNA as you've never seen it before, thanks to a new nanotechnology imaging method

A map of DNA with the double helix colored blue, the landmarks in green, and the start points for copying the molecule in red. David Gilbert/Kyle Klein, CC BY-ND

Courtesy of David M. Gilbert, Florida State University

...



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ValueWalk

More Examples Of "Typical Tesla "wise-guy scamminess"

By Jacob Wolinsky. Originally published at ValueWalk.

Stanphyl Capital’s letter to investors for the month of March 2019.

rawpixel / Pixabay

Friends and Fellow Investors:

For March 2019 the fund was up approximately 5.5% net of all fees and expenses. By way of comparison, the S&P 500 was up approximately 1.9% while the Russell 2000 was down approximately 2.1%. Year-to-date 2019 the fund is up approximately 12.8% while the S&P 500 is up approximately 13.6% and the ...



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Members' Corner

Despacito - How to Make Money the Old-Fashioned Way - SLOWLY!

Are you ready to retire?  

For most people, the purpose of investing is to build up enough wealth to allow you to retire.  In general, that's usually enough money to reliably generate a year's worth of your average income, each year into your retirement so that that, plus you Social Security, should be enough to pay your bills without having to draw down on your principle.

Unfortunately, as the last decade has shown us, we can't count on bonds to pay us more than 3% and the average return from the stock market over the past 20 years has been erratic - to say the least - with 4 negative years (2000, 2001, 2002 and 2008) and 14 positives, though mostly in the 10% range on the positives.  A string of losses like we had from 2000-02 could easily wipe out a decades worth of gains.

Still, the stock market has been better over the last 10 (7%) an...



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Mapping The Market

It's Not Capitalism, it's Crony Capitalism

A good start from :

It's Not Capitalism, it's Crony Capitalism

Excerpt:

The threat to America is this: we have abandoned our core philosophy. Our first principle of this nation as a meritocracy, a free-market economy, where competition drives economic decision-making. In its place, we have allowed a malignancy to fester, a virulent pus-filled bastardized form of economics so corrosive in nature, so dangerously pestilent, that it presents an extinction-level threat to America – both the actual nation and the “idea” of America.

This all-encompassing mutant corruption saps men’s souls, crushes opportunities, and destroys economic mobility. Its a Smash & Grab system of ill-gotten re...



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OpTrader

Swing trading portfolio - week of September 11th, 2017

Reminder: OpTrader is available to chat with Members, comments are found below each post.

 

This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...



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Promotions

Free eBook - "My Top Strategies for 2017"

 

 

Here's a free ebook for you to check out! 

Phil has a chapter in a newly-released eBook that we think you’ll enjoy.

In My Top Strategies for 2017, Phil's chapter is Secret Santa’s Inflation Hedges for 2017.

This chapter isn’t about risk or leverage. Phil present a few smart, practical ideas you can use as a hedge against inflation as well as hedging strategies designed to assist you in staying ahead of the markets.

Some other great content in this free eBook includes:

 

·       How 2017 Will Affect Oil, the US Dollar and the European Union

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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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