3.7 C
New York
Tuesday, November 29, 2022

Subscribe

Special Report – An Inside look at PSW Picks

If you are a free article reader or basic member and you ever wondered if it's worth subscribing to our premium service I would humbly (well not so humbly) submit to you our list of Friday's featured trades.

In our member section, we discuss dozens of trade ideas every day but the ones I pick as generally recommended are set in bold type against my normal blue background so they are easily and quickly identifiable.  This system will be the backbone of the alert system we are finally rolling out in March but the fact is that NOTHING will get you information faster than being on-line live during a trading day and hearing a trade idea the moment I type it, especially for our momentum or day trades.  The advantage of hearing a trade idea in context of the conversation we have regarding the markets is something that can never be replicated by a text alert sent to your mobile phone or Email 5 minutes after the fact – yet that seems to be the backbone of most services out there

To make good calls on the market you have to have a premise and my premise all week was that we may test 8.000 or even lower but we would not stay there because the situation is fundamentally different than it was in October or November, when we fell to lows on fear and uncertainty.  There is still plenty of both in the market but there is also money – $8,000,000,000,000 worth of it that has been pumped into the market either through direct bailouts or indirect loan guarantees, rate adjustments etc. that the Fed and the Treasury have been able to push through.  $8Tn is a LOT of money – it's enough money to make 8M people millionaires.  That's right, our government has spent enough money bailing out the banks to have given 8% of all US households $1M cash – for bears to get on TV and tell you that this will not make a difference in the economy is simply ridiculous.  For analysts to get on TV and tell you that it isn't going to be inflationary is also ridiculous, which is why we've been buying gold for a month!

I said in the morning, as we looked to open down almost 200 points pre-market:  "While it is very tempting to panic today, let’s keep in perspective that, as of yesterday’s close, we have generally fallen just 5% for the month."  Our members know we don't follow many rules but the 5% rule is one of our biggies.  Having the 5% rule for the month conicide with a 50% line off the market top simply screams bounce to us.  We're not calling for any major rallies, but we do think this is a nice, investable bottom that we can make hedged entries into.

At the bottom of the morning post, I mentioned that I liked GE at $12.60, selling March $12.50 puts and calls for $2.80 to lower the net entry to $9.80.  If that is called away at $12.50, the profit is 27% on March 20th, less than 60 days away.  If the stock finishes under $12.50 on that date, a second round is put to you at $12.50 and your average basis becomes $11.15, an 11.5% discount off our $12.60 entry.  That is effectively our margin of safety on this trade so, as long as GE stays over $11, we're fine just holding it and, of course, there is the $1.24 dividend, which the company reaffirmed Friday.

That was before the bell.  Once the market gets going, as I mentioned, we discuss many trades and several trade ideas that I think are especially good are featured, I'll summarize Friday's activity as follows (note that our goal in any day trade is to make 20%):

  • 9:46 – SSO $18s at $4, now $4.80, topped out at $5 (see 1:49 comment).
  • 9:54 – DRYS at $9.44, now $10.70, topped out at $11.40.  Also picked the sale of the March $7.50 puts naked at $1.45, now $1.10.
  • 9:57 – QLD at $24.50, now $25.13.  Picked $21s at $4.45, now $4.90.  My comment on this trade was "looking for $5.25+ (would take about a $1 move up and won’t happen today most likely)."
  • 10:00 – WFR, selling naked $12.50 puts for $1.65, now .75.

The reason we sell naked puts into a drop is because it gives us an additional discount as an initial entry to a stock we like.  WFR was trading at $12.50 at the time so the net entry would have been $10.85 if we got "stuck" with it.  As it is, when you make 50% profit the first day of a trade there's really no point in waiting a month hoping to make another 50% is there?

So I was a little bullish in the morning post but the bounce off the -2.5% levels at the open made me feel good and, since those levels were easy to keep our eye on, I was happy to do some quick bargain hunting.  These are, of course, quick ideas but we also have our core list of over 40 stocks that we buy whenever the market gives us a good discount and I'll be reviewing that list for members over the course of next week as well.

  • 10:03 – LVS at $5.50, now 5.96, topped out at $6.20.  For options we look to make 20% in a day, on stocks, not taking a 5% one-day profit used to be considered greedy but, in these crazy markets, it's no crime to hold out for 10% on a day's move as long as the momentum is with you.
  • 10:16 – CAT $34 puts sold naked for $1.83, now $2.11.  Well they can't all be winners!  CAT finished at $35.66 and we did discuss the fall back of rolling to the May $25 puts, now $1.33, if we have to but the bottom line is we WANT to own CAT so we will not likely shirk if we have it put to us near our target.
  • 10:16 – SKF, selling $220s for $20, now $14.35.
  • 10:46 – I said "NYSE went below the 50% off line – that is life and death for today (5,194)."  That's not a trade but NYSE finished at 5,195 so I'm pretty proud of that!
  • At about 10:45 the market took off and went up fast.  I am not a chaser so I did not have any more highlighted trades until 12:06, when the market had pulled back from 8,056 at 11:21 to 7,995, where I was happy with the way we held up on the dip.
  • 12:06 – YRCW at $3.50, now 3.53.  Topped out at $3.71 but I love this as a long-term hold (or at least until we can get $5).
  • 12:06 – TM hedged entry at $61.50, now $62.58, sold March $60 puts and calls for $11.65 for a net $49.85 entry with a 20% profit if called away in 60 days or having the stock put to you at average $54.93, a 10.6% discount off our entry price.
  • 12:40 – XLV (repick from last week).  Hedged entry at $25.80, now $26.08, selling March $24 puts and calls for $3.25 to net $22.55/23.28 on the entry.
  • 12:40 – SLW at $6.89, now $6.84, hedged entry selling Feb $7.50 puts and calls for $1.65 for a net $5.24/6.37.  That was our most bullish spread of the day.
  • 1:01 – CCJ at $16.94, now $16.82, hedged entry selling March $15 puts and calls for $4.20 to net $12.74/13.87.
  • 1:35 – Bold comment to members:  "Again, please keep perspective that 8,066 was the LOW we were watching so getting back to there is NOT a rally.  8,217 is the 5% rule off 8,650 and that is the only number that would be considered bullish at the close."  The Dow finished at 8,077.
  • 1:45 – Bold comment to members: "QLD is rockin’ – $21s hit goal for the day so DO NOT let it blow your $1 gain if you day traded that one."
  • 1:49 – Bold comment to members: "SSO $18s up 20% on the day – another one not to let go below.  I’d say take $5 and run as you sure don’t want to hold it into the weekend if it turns down so effectively you would be forced to sell on the turn and you could get screwed out of 1/3 of the gains real fast."
  • 1:49 – Bold comment to members: "DRYS faded at $11.50 so now would be a good time to cover if you didn’t."
  • 2:01 – Bold comment to members: "Hit goal on NYSE (5,194 that I mentioned at 10:46) so be careful here, we shouldn’t have much tolerance for blowing it now.  That would be 8,066 on the Dow and 830 on the S&P and 1,475 on the Nas and 440 on the RUT."  I missed the NYSE by 1, Dow by 11, S&P finished at 831, the Nas finised at 1,477 and the RUT hit 444. 
  • 2:01 – F at $1.85, now $1.82.  This is the only auto play we like – F below $2…
  • 2:01 – GE.  As it was bold it is worth mentioning that I was off on a rant about how ridiculous it was that the stock was below $12.50 but it did finish at $12.03…  It is ridiculous.
  • 2:21 – Bold general comment to members: "That was a real relief, now is the time to balance more towards neutral (if you were taking bullish plays at the bottom) into the weekend.  The DIA Apr $83 puts I discussed with RMM earlier are a good way to cover, now $7.28 and the Feb $80 puts can be sold against for $3.05.  If we do head down, the Feb $80 puts can roll to the March $75 puts and you are $8 in the money on your net $4.13 entrry."

That was 15 "alerts" for the day.  We covered back up into the weekend and the market did fall about 100 points from 2:21 but then had a "stick save" close so we'll see what's real next week.  We did have one last bold trade idea at 3:52 when I said "GE/Jo – Wow the March $10 puts are .82!  That’s a SELLSELLSELL!!!" – In other words, selling the March $10 puts naked for .82, now .83 – the same logic as our earlier GE entry.

It was a pretty active day for making calls but we take advantage of what the market offers us.  On Tuesday we had 10 calls including:  USO at $28.50, now $32.33, 9:45 momentum trades on ultra-short SDS, QID and DXD, BK at $16.69, now $23.88, UYG at $3.20, now $3.18 (but we hedged to 2.35), USO again at 11, QLD hedged to $21.93 (the high it would be put to you at) now $25.13, UWM hedged to $13.62, now $15.90 and FXI hedged to $21.58, now 24.50.

Wednesday was a flat day with 9 bold plays and we hedged V to $37.25, now $44.32, FAS was just a day trade at $8.57, now $9.01 but hit $10 at the end of Wednesday, VZ hedged entry was at $28.65, now $30.44, YRCW at $3.47 (now $3.53), HOV at $1.62 (now $1.64), F at $2.04 (now $1.80), AAPL was a complex pre-earnings spread that's on target at the moment, USB puts were sold for a net $10.70 entry, now $14.64 and WMT March $45 puts were sold for $1.85 (now $1.81).

Thursday I called for bottom fishing our buy list into the sell-off and there were 8 additional bold calls.  GE was hedged to $11.23 ahead of earnings, AAPL Apr $80 puts were rolled to $85 puts for $2 on the run up – that spread is now $2.13 – not much but every bit helps.  DDM $24s at $3.85 (now $4.05), TIE at $6.75 (now $7.12) – several plays were made on this as it hit our buy spot, BAC spread that pays big above $6, now $6.17,  DRYS hedged at $7.84 for March (now $10.70).  After hours on GOOG beat I mentioned the Qs at $28.80 but we killed that even on Friday, happy to get out. 

So that's 42 bold featured calls in 4 trading days.  I know many premium services where that would be a whole year's worth and I don't know of any others at all who can get through a choppy week like this one with just 7 of those trades even a penny in the red (over 80% correct calls).  By having a variety of calls and solid hedging strategies, we do not have hundreds of people stampeding into the same positions like other services and, of course, the focus of our daily discussions is strategy and position management – I simply try to point out what I see as good looking trades as they come up but the vast majority of our trades are basic hedged entries and spreads that do not have to be day traded – it's just that the day and momentum trades, by nature, demand more day-to-day attention as opposed to, for example, BA, which we last hedged at $42.43 and is right on target for February expiration or CEG, which is right on target with our Feb $25 sales or the other stocks from our Buy List (sorry – members only!), which are in their second month of generally good behavior.

We are never short of good ideas at PSW and, in addition to my trade ideas, Peter D (who specializes in strangles and other fairly conservative strategies) and other members contribute great ideas on a regular basis.  I subscribe to and have subscribed to many, many services and there is no group anywhere that compares to the gang at PSW.  I have said in the past I'm just a captain setting the general direction of the ship with my daily overview and calls but there are layers upon layers of good things going on below deck and, if you are one of the over 5,000 people who read my daily columns but don't subscribe  – why not give us a try?  We even have a free sample memberhsip where you can read delayed content to get a really good idea of what goes on behind the curtain!

That's my 2009 advertising pitch.  Go to http://www.philstockworld.com/subscribe/ and join the fun.

Thanks,

– Phil

 

13 COMMENTS

Subscribe
Notify of
13 Comments
Inline Feedbacks
View all comments

A sign of the apocalypse …

I have been a member of Phil’s site for three years and counting, and my advice is that all investing takes time.  There are o shortcuts, no secret way to riches.  Same with Phil’s site- you need time and patience to start benefitting fully from his advice.  But it is often spot on and also very useful, especially to me as I try to keep a level head in this turbulent stock market environment.

Good Morning Phil, Jordan, & all

Asia Markets :    Monday, January 26, 2009
(The following is from WSJ; please cross check with other sources to confirm.)   

Nikkei Average*                    7682.14     -63.11    -0.81%
Hang Seng* *                     12578.60     -79.39    -0.63%
China: DJ Shanghai* *          223.87        -0.98    -0.44%
Seoul Composite* *            1093.40       -22.83    -2.05%
Bombay Sensex* *               8674.35    -139.49    -1.58%
Baltic Dry Index              980.00    35.00    3.45%

*at Close
**All the major markets across Asia, excluding Japan, were closed on Monday, with most celebrating the Lunar New Year. Trading in Australia and India was also off due to national holidays. Data from Friday close (Jan 23, 2009)

Tokyo Stocks Closer Lower in Holiday-Thinned Trade

(All the major markets across Asia, excluding Japan, were closed on Monday, with most celebrating the Lunar New Year. Trading in Australia and India was also off due to national holidays.)

Japanese stocks finished lower Monday. Tokyo was the only major Asian market open amid a slew of regional holidays, as investors braced for key earning results this week from Sony, Honda and other major names.

Japan’s Nikkei closed 0.8 percent lower, to hit a nearly three-month closing low with fear about earnings fanned by a profit warning from Komatsu and exporters down as the dollar pared gains against the yen. But losses were slowed as investors snapped up battered shipping firms on the view that they’d been oversold and hopes that Chinese imports might be picking up, while drug firms and other defensive shares rose.

Battered by the global slump, Japan’s big exporters have been slashing production, earnings forecasts and jobs, and stock prices have fallen accordingly. Investors will be watching for new earnings downgrades for the fiscal year, which runs through March.

Sony, which last week projected its first annual net loss in 14 years, reports fiscal third quarter results Thursday, followed by Honda Motor on Friday.But Nomura Holdings, which reports Tuesday, jumped 3.1 percent on hopes that Japan’s top brokerage finished writing off costs related to its purchase of failed U.S. investment bank Lehman Brothers’ operations in Asia, Europe and the Middle East. The issue rose despite weekend news reports that third quarter losses at Japan’s top brokerage could total a worse-than-expected 300 billion yen ($3.4 billion) for the October-December period.

Australia’s market, closed for Australia Day, will reopen Tuesday, as will trading in India, which was observing Republic Day.

Markets in Singapore and South Korea will reopen Wednesday, and Hong Kong’s markets will reopen Thursday. Trading in mainland China and Taiwan will be closed all week and resume Feb. 2.

Euro Shares Extend Gains, Boosted by Banks

European shares extended gains early on Monday, led by Barclays, which soared 54.3 percent after it said it did not need to raise fresh funds, and that it had seen a good start to 2009.

The FTSEurofirst 300 index of top European shares was up 1.3 percent. Financials added most points to the index and were the biggest sectoral gainer, with ING gaining 22.2 percent after it said it would tap into 22 billion euros of Dutch state loan guarantees.

BNP Paribas, Societe Generale and Lloyds were all up between 7.2 and 18.3 percent. Barclays leapt 27 percent after it said it did not need to raise fresh funds, and that it had seen a good start to 2009 with high customer activity. HSBC added most points to the pan-European index, trading 2.4 percent higher, while BNP Paribas rose 6 percent after saying it saw a fourth-quarter loss of around 1.4 billion euros ($1.81 billion).

Bank stocks have slid 20 percent this year on funding concerns and fears of nationalization and, despite Monday’s bounce, analysts said that there was plenty of pain ahead.

Though the Barclays statement is remarkably perky, banks are still going to find themselves in difficulty and are moving inexorably towards government control, this could be through a suspension of shares and a split into clearing banks and separately capitalized investment banks, " said Justin Urquhart Stewart, investment director at Seven Investment Management.

Dutch electronics giant Philips Electronics rose 7.7 percent after it posted its first quarterly loss since 2003 but said it would accelerate its restructuring, shedding about 6,000 jobs.

Sanofi-Aventis lost 2.9 percent, GDF Suez slipped 1.9 percent, France Telecom fell 1.8 percent and Nestle 0.8 percent.

The FTSEurofirst 300 is already down 9 percent so far this year, driven by the big losses in bank shares, after losing 45 percent in 2008.

Nomura said in a research note that a range of European companies was set to benefit from government stimulus programs across the world. It picked Siemens and ABB as possible gainers, and said that EDP and Iberdrola could benefit from their exposure to renewables and spending on the U.S. power grid.

Across Europe, Britain’s FTSE was up 0.7 percent, Germany’s DAX flat and France’s CAC up 0.2 percent.

CNBC Breaking News : Pfizer Confirms It Will Buy Wyeth for about $68 Billion in Cash and Stock, Will Cut Dividend to 16 Cents a Share (Story Developing)

Oil Rises Above $46, Paring Earlier Losses

An International Monetary Fund official said on Sunday the agency would cut its 2009 global growth forecast again, this time to between 1-1.5 percent from a previous estimate of 2.2 percent, as economic conditions deteriorate.Oil demand is closely tied to economic growth and many economists now predict a fall in energy use this year as recession hits most of the largest developed economies.

Oil rose above $46 on Monday, paring earlier losses as forecasts of a deepening global economic downturn and a stronger dollar outweighed evidence that OPEC oil producers are reducing output.

U.S. light crude [ 46.81    0.34  (+0.73%)] for March delivery fell $1.22 to a low of $45.25 before recovering to trade higher on the day.

The contract rose $2.80, or 6.41 percent, to $46.47 a barrel on Friday, crowning a rebound in the front-month contract from below $33 a barrel a week ago.

London Brent crude [ 48.85    0.48  (+0.99%)] rose.

The market was fairly thin in Asian trading, due to holidays that shut most of the region’s big trading centers except Japan, but was expected to pick up later.Analysts said oil was also again moving inversely to the dollar, which rose nearly 1 percent against the euro to almost the six-week high it hit on Friday as weak British and euro zone data led investors to take refuge in the greenback.

The main driver of oil’s sharp $2 rally on Friday was evidence of OPEC making good on most of its pledged 2.2 million barrel a day (bpd) production cut this month, with oil consultant Petrologistics estimating OPEC output would fall by 1.55 million barrels per day in January.

But worries about the health of the global economy and its impact on world energy demand halted the rally.

Crude oil speculators on the New York Mercantile Exchange trimmed new long positions in the week to Jan. 20, according to U.S. Commodity Futures Trading Commission data.

Euro, Pound Pressured on Economy, Bank Worries

The euro and sterling remained under pressure on Monday as concerns about the global economy and banking sector problems prompted investors to seek dollars and yen as they were perceived as safer assets.

The euro fell back near six-week lows against the dollar on ongoing concerns about the banking system and sterling hovered near 23-year lows as a Bank of England policymaker said interest rates should fall toward zero. But losses were trimmed as European share prices reversed early losses to trade 0.5 percent higher.

Sterling briefly trimmed some early losses as shares in Barclays rose nearly 30 percent after it said on Monday that its projected 2008 pretax profit of more than 5.3 billion pounds ($7.3 billion) would include the impact of 8 billion pounds in gross writedowns.

The euro [ 1.2941    -0.0031  (-0.24%)    ] was down against the dollar.

Against the yen, the euro [115.66    0.49  (+0.43%)   ] was flat, reversing early losses. The single currency hit a seven-year trough of 112.08 yen last week.

Sterling [ 1.3807    0.0014  (+0.1%)   ] was down versus the dollar. The pound had hit a 23-year trough of $1.3500 on Friday.

The euro [ 0.9369    -0.0034  (-0.36%)   ] was up slightly against the pound.

The dollar [89.33    0.57  (+0.64%)    ] rose versus the yen as dealers trimmed short dollar positions against the yen ahead of the United States Federal Reserve’s two-day policy meeting ending Wednesday.

Lawrence Summers, head of the National Economic Council and President Barack Obama’s top economic adviser, said on Sunday that more money may be needed to stabilize the financial system.

Gold climbs above $900/oz on haven appeal

Gold climbed above $900 an ounce to its strongest level in more than three months in Europe on Monday, lifted by interest in bullion as a haven from risk. Gold was $905.90/907.90 an ounce at 1046 GMT, up from $898.10 in New York late on Friday. Earlier in the session the precious metal hit $907.40, its highest since Oct 10.

Gold priced in sterling hit a record 661.55 pounds, while euro-priced gold remained near the all-time high it hit on Friday, as fears over the global economic slowdown and volatility in other asset prices spurred buying.

Demand for physical gold both from investors in smaller products such as coins and bars and from exchange-traded funds remains firm.The world’s largest gold-backed ETF, New York’s SPDR Gold Trust GLD, which issues securities backed by physical stocks of the precious metal, said its holdings rose 1.6 percent to an all-time high of 832.57 tonnes on Friday.

 Asian precious metals trading is likely to be muted by the closure of the Shanghai Gold Exchange on Monday due to the Lunar New Year holiday.

On the supply side, AIM-listed gold miner Peter Hambro Mining said its 2008 attributable gold production was up 36 percent at 393,600 ounces, and that it expects its 2009 production to be 460,000-510,000 ounces.

Among other precious metals, silver rose in line with gold to $12.03/12.11 an ounce from $11.92.
Platinum firmed to $965/970 an ounce from $955.50 an ounce in New York late on Friday.
Palladium eased to $191.50/196.50 an ounce from $195.00.
 

Stay Connected

159,636FansLike
407,692FollowersFollow
2,130SubscribersSubscribe

Latest Articles

13
0
Would love your thoughts, please comment.x
()
x