Wow again!
What a nice day that was… Even oil at $64.21 didn’t stop this train, that is certainly saying something!
I got into ABX as gold went over my $530 target but all our picks were up substantially today.
Let’s just get the reviews out of the way by saying that even I am amazed by how well my picks did this week. We have to avoid getting all giddy at these amazing stock heights but I am really looking forward to next weeks action!
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TOTD IBM continues up in the after hours, the Feb $85s we picked up for just $1.65 at the open (I have no idea why it was so cheap) went up to $2.25 at the close for a very nice 35% 8 hr profit! You know I hate to be greedy but we have until February so I say put a $2 stop on this one and just see what happens.
If I put on my hedge fund hat for a moment I would point out that you can sell the Jan $85s for $1.60 which will give you a free ride into 1/20 expiration where you have no risk at all. The call buyers are giving you a $1.65 premium so even if the stock closes at $90, you still make $1.65 but you would probably have to sell the Feb to pay off your caller. This is what you do if you are a hedger, lock in your gains, even if you cap the top. Of course if the stock only hits $85 on the 20th and then makes a move up in February you will feel like Carl Ichan….
IBM looks very solid at this point, this is a big breakout on strength for Big Blue and will be a big help in keeping the DOW up next week.
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YHOO did do better than GOOG today but you sure couldn’t have gone wrong picking either one. Even Google’s big end of day sell-off couldn’t put a dent in the $14 gain it ended the day with. For the record, the YHOO Jan ’07 $30s gained $1.60 for the day (13%) while the GOOG March $500s picked up $5.60 (50%) already. The $410 puts lost $3.50 so the net on the spread was 10% for the day – certainly not an awful thing to do with your money in a day!
GOOG is trying to really annoy Microsoft by releasing a “Google Pack” of software, most of which is a collection of previously released computer tools. This pack includes Microsoft browser challenger Firefox (which I use) and a non-AOL messaging system. I think it is a little premature for this David to go on the attack against industry Goliaths – I also think that public perception will be of Goliath vs. Goliath and nobody will cry for Google when they get a bloody nose in this battle.
My take on Google’s long awaited announcement is underwhelmed. The TV offerings are “me too” and way too expensive but there was a change of policy in which “Jennifer Feikin, director of Google Video, said its service would be distinct from some rivals in offering both high-end commercial video content and videos submitted by individuals.” This is a nice way of saying porn! Expect a bumpy start with lots of screaming and yelling in congress but the Japanese have a multi-billion dollar portable porn industry already and if Google is brave enough to ride this out, it could be the $10Bn idea they needed to justify this new price level.
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Our oil picks were on fire today but so was everything else except home builders which we warned you about on Thursday.
My worst pick of the week was saying that SNDK might be overbought at $65, it’s up another $10 since Tuesday. I still think this is just CES hype but even at 50% up in 2 weeks the stock still has a strong chart.
Speaking of warnings, MSFT continues to drag the Nasdaq after bouncing hard off its 50 dma of $27. It will take some very positive news for this stock to make it to $27.50 but the fundamentals are there for a good 2006 story despite all the noises that Google is somehow going to supplant them (not this decade).
GME was my call of the month in December. Way back on 11/30 I said “GME – will be a buy at $30, bad gaming outlook is a gift here.” The stock bottomed at $30 on 12/19 and has gone straight up to $38.50 since – a very nice 25% return! At this point I set a .50 trailing stop, no sense being greedy here.
MOT picked up 3.4% today, a significant move for them. If they break $25 on volume, we will be looking at significant new highs.
GM is in a technical turnaround with fund money pouring in so no shorting for now. This was one of my new year’s predictions and is one of my signs of a very big market rally.
When I said BBY would pop today, I didn’t think it would go up another 8%! My stop on this one is $46 but I’ll be looking to take it to $50 before getting out.
DOW did well today and is closely reacting to natural gas pricing: http://finance.yahoo.com/q/bc?s=DOW&t=5d&l=on&z=m&q=l&c=ngs
ATI and TIE had great days today so apparently they can both go up at the same time.
SYMC gave us no reason to sell today with another 4% gain. My stop is now $18.50. MFE looks weaker but may just be consolidating so $28.25 is a good stop there.
TASR made another big move today and held up nicely. The Jun $5s we picked on 12/7 are now $2.70 for a very nice 67% gain! Not a place to be greedy, set a stop at $2.50 – you can always get back in on this one.
I was hoping for more of a pullback but LNUX is on the move again and may look good for a trade next week if it can break over $2 on good volume.
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All in all, this was an amazing week to start the year with. The indexes have already done better this week than they did for all of last year!
We need to avoid “irrational exuberance” but also be on the lookout for another week of great opportunities.
Have a great weekend,
– Phil
