Testy Tuesday – 50 DMA Spectacular!
by phil - August 19th, 2014 8:06 am
You've gotta love those trend lines.
Chart people sure love them and we love chart peopel because they are SOOOOOOOO predictable and predictable behavior is behavior we can bet on and that makes us happy. Today we'll be seeing the 50-day moving averages on the Dow, the NYSE and the Russell all tested at the same time – what happens next will tell us a lot about this rally.
As I pointed out to our Members in our Live Chat Room this morning, though we may be past our bounce levels and though we are now challenging the 50 dmas, we still have 3 of 5 of our Must Hold levels red on the Big Chart – that's not too impressive. Consider what a 50-day moving average is. It means that, over the last 50 days, half the time the index has been above the line and half the time it's been below – so how impressive should it be to see the index back in the middle?
Nonetheless, Chart People believe it's some mystical symbol that gives them a rally signal and half the time they are right – so the religion of TA continues to prosper! As you can see from Dave Fry's SPY chart from yesterday, 75% of yesterday's gain came on no volume as we gapped up in the Futures and the rest of the day's trading was one of the lightest of the year.
The reason I like Dave is because he's one of the only TA people who actually pay attention to volume and this volume is total BS. Still, it's enough to stampede the retail suckers back in and God bless them because they throw money at us to sell them the things we liked when they were out of favor.
In May and June, for example, we compiled a Buy List for our Members, which had 29 trades we liked for the rest of 2014. Here's a few that we are done with already:
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Toppy Tuesday – S&P 1,950 Edition
by phil - June 10th, 2014 8:34 am
Here we go again!
As you can see from Dave Fry's S&P chart, we're back in the top of the channel on a Tuesday and I will refer you to April 1st's "Triple Top Tuesday" and December 31st's "Terminal Tuesday" – both of which were points we thought the market was topping out before.
Actually, in both cases, we did have a mild pullback, but nothing that broke the trend – so far.
Back in that December post, we were playing gold (/YG) bullish at $1,185 to finish the year, based on our premise of MORE FREE MONEY in 2014 keeping the markets afloat. We also went bullish on SHLD at $40, which is like $30 post-spit.
In the April post, it was our 3rd try at 1,880 on the S&P and we had just cashed out our Income Portfolio and I we lost $10 betting the Nasdaq would be above 4,200 at April expirations on a TQQQ spread (now 4,350 – so bad timing) but our support held and kept the damage to a minimum. We also (in the morning post) called for selling the AAPL Jan $450 puts for $5.90 to pay for those spreads and AAPL just split 7:1 so those are now the $64.29 puts at .25. 7 x .25 = $1.75 so up $4.15 (70%) already on that play.
We also had bullish trade ideas for HOV, CHL, FCX, ABX and RIG – right in the morning post! Our best play, however, was shorting the Russell Futures (/TF) at 1,180 in Member Chat at 10:53 – as that was the beginning of an $9,000 per contract pullback on that index – all the way back to 1,090 (where we went long).
As you can see from Dave's Russell chart, we're just playing a channel with our trades – it's really not that complicated. Yesterday the Russell hit 1,180 and – guess what – we shorted it again! Now you are catching on to our "secret" strategy!
Already this morning the Russell Futures are down to 1,170, which is +$1,000 per contract from 1,180 but our…
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The Buy List – 20 Great Trade Ideas for the Rest of 2014 (Members Only)
by phil - June 7th, 2014 8:24 am
What a rally!
While stocks certainly aren't "cheap" by any measure, we've been able to identify 20 that are still good values. We've been compiling this list and going over trade ideas for playing them in our Tuesday Webinars since May 13th and, of course, we've been posting them in our Live Member Chat rooms, so this is just a review to consolidate our trade ideas.
We cashed in our Long-Term Portfolio last week at what we thought was a top but so far – so wrong on that call! Since it's up 19% in just 6 months, we're not going to cry about missing the last 400-point move on the Dow (2.5%) – we'll just have to look ahead to deploying our cash again, following the same strategy that was so successful in the first half of the year, which was, essetially, our "7 Steps to Consistently Making 20-40% Annual Returns" system:
As we did in building our Long-Term Portfolio, we're not going to rush in and buy everything. We will do exactly what we did in January where, following our Fall Buy List, we simply added stocks from our list whenever they became cheap. While our Members are able to pick up our trade ideas as they are released, we don't always add them to our virtual portfolios right away. As with the first half's Long-Term Portfolio, we will track every entry and exit in both our Live Weekly Webcasts, as well as in our Live Member Chat Room and alerts will be sent to our subscribers (you can join here, Basic and Premium Members get full access).
Our picks were originally grouped by industry sectors but, for reference purposes, I'm going to list them alphabetically below – these are the original trade ideas (the Webinar dates where we discussed our picks are next to the symbol), most are still playable but some have already taken off :
ABX (5/28) we featured in our June 3rd post - obviously one I like. If you don't want to buy the stock for $15.90 (and we NEVER pay retail at PSW!), then you can sell the 2016 $15 puts for $2.05,…
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Fall-Back Thursday – Time To Get Real?
by phil - March 22nd, 2012 8:34 am
Do you REALLY think this will go on forever?
On the right is the AAPL quarterly chart but it could also be the quarterly chart of SHLD, NFLX, FOSL, STX or PCLN (Bespoke Chart), all of whom are up more than AAPL (which is up 50%) in 2012. We've discussed PCLN as one of my favorite shorts and we had a good discussion in Member chat last night comparing PCLN to EXPE, who drop the same amount of cash to the bottom line (before buybacks and dividends) but have just 1/8th of the market cap of PCLN.
Sure you can say that PCLN is twice as good as EXPE (it isn't, but you can say it) but can you say it's 4 times as good? How about 8 times? EXPE nets $500M a year – 8 times that is $4Bn – more money than the entire travel sector makes! How, exactly, will PCLN grow into that valuation? Eliminate all competition and then grow the sector by 50%? Well, that's pretty much what AAPL did but how many AAPLs can you have in one market?
THAT is the problem my friends. Aside from the macro concerns we discussed in yesterday's post, we have a sort of value mania that is driven by the very real success of one company, much the way we had a dot com boom in the late 90s driven by the very real success of just a few companies. Back then, everyone was the next QCOM, YHOO, MSFT, CSCO – whichever category you were supposed to be the best. Qualcomm, in fact, was the best performing tech stock of 1999, gaining 2,619% that year and finishing right about $100. By the end of July, 2002, they were trading at $10 but hey, what a ride!
In fact, here's the CNet story from Dec 29th, 1999 titled "Qualcomm Jumps on $1,000 Price Target" and coming on the heels of "Qualcomm to offer Net2Phone services in Eudora" it's no wonder people were super-excited! AMZN was "only" up 25% that year to $100 but Jeff Bezos was Time's Man of the Year and yes, their business has been growing at an amazing rate for the past 12 years and they have crushed their competition and dominated the sector – and gained less than 6%…
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Which Way Wednesday – Top of the Charts Edition
by phil - October 13th, 2010 4:20 am
Is it time to throw fundamentals out the window?
As we went through the Sept 21st Fed minutes in yesterday's Member chat we read some things that were AWFUL about the economy. I went through my usual exercise of parsing out the minutes and making comments for Members and it's been a long time since I had to use red highlights that often! Still the market rallied, ostensibly on the premise that the economy is SO BAD, that the Fed will have no choice but to flood the economy with newly printed Dollars so that a rising tide of currency will lift all asset ships.
The boy from Zimbabwe on the right is a multi-Trillionaire and those Trillions should be just enough to buy him a loaf of bread if he hurries to the store before they change the prices this morning. This is what is happening to our own economy, only on a smaller scale (so far). Our government, like Zimbabwe, has gotten into so much debt that they can never hope to repay it but new bills keep coming in every day so – What is a government to do?
Why print more money of course!
Now, when a bill comes in, they just crank up the presses and drop the fresh bills in an envelope. Unfortunately, after a while, the people who provide goods and services you and your government pay for begin to catch on that those bills are suddenly very easy to come by and they begin to demand more and more of them as exchange. It's a little hard to picture unless you run it into the abstract but think of it like an auction, where 5 people have $5 each to bid on 5 items. Well those items (commodities) will get somewhere between $0 and $5 from the bidders, right? Now, what happens if one of the bidders prints himself up $45 additional dollars? Now he can bid $10 on each item and the other bidders will get nothing.
That's what the top 1% are doing with commodities and other assets right now. The assets are the same assets they were last year and the year before that. There has been very little variation between supply and demand and demand has probably gone…
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September’s Dozen Update
by phil - September 25th, 2010 8:29 am
It's only been three weeks but it's time for an update!
Back on the 3rd, I had said: "Let’s take a look at a quick dozen trade ideas for short-term gains. I like all these stocks long-term too (it’s always better to play short-term where your fallback is you own the stock long-term) but we haven’t been doing much gambling lately as it’s all been boring-old hedged positions that were smart, but not really giving us that immediate satisfaction you can get from some quick, monthly gains."
And what a month it's been, a dozen stocks, about 30 different trade ideas and we're already up to our 50% and 100% goals on most of the shorter-term ones. The longer-term positions are mostly looking good and we have hedged to cover them but let's go over each postiion to make sure it's worth keeping. I already called an out on HMY as they poked through $11.50 the other day but that was a directional trade (the October $10s) that was already up 133% and one thing we're not is greedy, right?
HMY was the only trade that was a pure short-term, directional trade. Virtually every othe stock had longer components and that's where our decision-making process comes in. I went over the logic of each entry in the original post and I won't rehash it here as we'll just look over the possible trade adjustments and decide what looks good to keep and what to cash. For purposes of this discussion, we'll use this multi-chart which indicates the 20 (blue) and 50 (red) dma:
So, how worried are we? We picked these stocks based on fundamentals. As you can see, they certainly didn't have any upward momentum on Sept 3rd! It should be no surprise that they outperformed as the market rose 10% for the month but the question we have to ask now is: How comfortable do we feel about holding them through a downturn? One of the reasons we us disaster hedges and short-term hedges is that, rather than just feel compelled to cash out as we hit resistance on our positions, we now have a cushion that we can sit back and CALMLY observe how our stocks handle a market pullback.
BRCM
- Sept
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Testy Tuesday – Fed Pop or Drop?
by phil - September 21st, 2010 8:27 am
Isn't this exciting?
We popped all of our 5% levels yesterday, now all we have to do is hold them and we can start looking ahead to the 10% lines. Just 10 days ago, on Friday the 10th, we did our last multi-chart study and I said in the morning post: "I am not TA guy but If I were a bear, I’d be pretty darned concerned about the charts as it looks to me like the 20-day moving averages are registering a short-term mistake in a generally rising trend." Look at how those 20 dma's have snapped up in less than 2 weeks (blue lines are mid-points, green circles are 5% levels):
So Gold and Transports are running away with SOX falling behind. We've been playing the SOX up with USD, which is up 10% since I picked it in that Friday's post but that's been a relative underperformer for us as we nailed the bottom with a buying frenzy into the late August drop which culminated with my very bullish "September's Dozen" from the 3rd. There were actually 10 stocks and only 9 fit in the multi-chart (I dropped HMY, who already gained 15%) with way more than a dozen trade ideas for our Members to take advantage of the anticipated short-term moves. Of the 10, only IRM has been laying around but we weren't expecting a quick move on them and played a conservative April spread and took the risk on Oct $22.50 calls, which are our only loser, down 30% at .20 but I still like them if we break up from here.
The leverage you can gain with option plays is truly stunning. On BRCM, for example, the trade idea was a straight purchase of the Sept $32 calls for $1.25, BRCM topped out at $35.49 with the calls close to $3 on the 14th and they expired on Friday at $2.16, which is up 72%, even for people who didn't stop out between there and up 140% that Tuesday. That trade was a combo trade with the sale of the October $30 puts at .70 and those are down to .30 (up 57%) which are well on their way to expiring worthless for a full 100% gain. We also took an artificial buy/write that stretched from Jan to Jan 2012…
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September’s Dozen (Members Only)
by phil - September 3rd, 2010 8:15 am
Not bullish enough?
Let's take a look at a quick dozen trade ideas for short-term gains. I like all these stocks long-term too (it's always better to play short-term where your fallback is you own the stock long-term) but we haven't been doing much gambling lately as it's all been boring-old hedged positions that were smart, but not really giving us that immediate satisfaction you can get from some quick, monthly gains.
Are these trades riskier? Sure they are and they are trade ideas under the assumption that we hold our levels today and next week so no staying in them if the market sours but $75 oil and $3.40 copper and 2,200 on the Nas and 1,088 on the S&P give us some pretty easy markers to know if we're still healthy.
BRCM is my first choice, they are down $5 from the July high and just crossing over the 200 dma at $32.66, which is an excellent line to play the straight stock bullish. The 50 dma is falling at $34.69 so we want to beware that the run ends there. They are on track to earn $2.65 this year and that's a p/e of 12.3, which is crazy-low for a stock like this so a great long-term hold:
- Sept $32 calls at $1.25 have .54 in premium with 2 weeks to go so it's .05 per day to "rent" the stock.
- Oct $30 puts can be sold for .70 to fully offset the calls or by themselves or a 1/2 sale to knock down the premium.
- Jan $30/34 bull call spread at $2.15, selling 2012 $22.50 puts for $2 is net .15 on the $4 spread that's $2.71 in the money to start.
TRLG is back near it's post-crash lows. The company has been building inventory and that freaks out investors but they are also opening stores in London and Tokyo and they just made a deal in German to expand distribution with an existing partner so I don't mind a little stocking up. P/E around 10 means they are not priced for growth and teen fashion is fickle but I like the stock above the $17.50 line (now $18.75).
- Selling Apr $15 calls for $1.50 is very attractive as I'd be inclined
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TiVo Implied Volatility Jumps With Share Price Gains
by Option Review - October 23rd, 2009 4:27 pm
Today’s tickers: TIVO, ORCL, MSFT, VLO, BRCM, XLP, AMZN, MSFT & ELN
TIVO – TiVo, Inc. – Shares of the provider of technology and services for digital video recorders are soaring 8.5% higher to stand at the current price of $12.44. Investors expecting continued bullish movement in the price of the underlying purchased call options across multiple contracts. Near-term optimists picked up 6,500 calls at the November 12.5 strike for 86 cents each. Meanwhile, the higher November 15 strike had 1,600 calls coveted for about 25 cents apiece. Other traders looked to the December 12.5 strike where it seems some 5,000 calls were purchased for approximately 95 cents each. Finally, call spreads were transacted in the February 2010 contract. Investors purchased 3,000 calls at the February 12.5 strike for an average premium of 1.41 each, and sold 3,000 calls at the higher February 15 strike for about a dollar apiece. Option implied volatility on TIVO jumped 18% from an opening reading of 62% to an intraday high of 73%.
ORCL – Oracle Corp. – The software company is trading just 65 cents off the 52-week high of $22.90 today with shares up 0.25% to $22.25. Volume of 19,811 calls at the out-of-the-money November 23 strike exceeds existing open interest at that strike of 16,224 lots. The call activity appears to be the work of bullish investors buying approximately 14,500 calls for an average premium of 31 cents apiece. The December contract has also attracted the attention of option bulls. It looks like 9,000 calls were scooped up at the December 24 strike for about 40 cents each. Investors holding these contracts will profit by expiration if shares of ORCL surge 9.5% from the current price to $24.40.
MSFT – Microsoft Corp. – Investors are piling into call options on the world’s largest software maker following first-quarter earnings. The firm exceeded average analyst expectations of 32 per share by posting profits of 40 cents per share for the quarter. Shares of MSFT surged to a new 52-week of $29.20 – a 9.8% increase over the stock’s closing price – at the start of the trading day. Currently shares are slightly lower, though still up 7% to $28.44. Call options are the clear favorite with approximately 45,000 calls purchased at the November 30 strike for an average premium of 35 cents per contract. Approximately 84,400 call options traded hands at that strike…
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Human Genome Sees Modest Bullish Plays After Analyst Predicts Surge
by Option Review - August 11th, 2009 4:10 pm
Today’s tickers: HGSI, BRCM, AAP, VIX & EWC
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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...
Ilene is editor and affiliate program
coordinator for PSW.
