Last Tuesday did not go so well but it did tell us that we were going down so let’s pay attention today folks!
Why Tuesday? Is it just the alliteration that makes it telling or is there more to it?
Mainly it’s the alliteration but Tuesday is the day that serious trading gets going after firms get a chance to digest Monday’s action. Just be glad we’re not in Japan where the market has had 4 300 point moves in the last 6 session. The Nikkei took another firm bounce off the 50 dma of 15,450 today but that is still 1,000 points below the mid January highs.
Europe is fairly flat today as those markets tend to be more concerned about what is happening in the US so they are waiting for the slew of earnings that will be hitting the markets today including J&J and McDonalds.
Oil and Gold are both calm this morning, indicating a relaxed global situation but it has been the fear driven US markets (furthest away from the events we fear) that have been driving the prices up for the past 2 weeks – this is a very unusual pattern.
Oil in particular is so amazingly overpriced that it almost can’t be denied anymore. At $67 per barrel suppliers are drawing every last drop and loading every last ship to the brim in hopes of selling it before someone catches on to the fact that there is actually a surplus at the moment.
Imagine you can suddenly sell the water that comes out of your tap for a dollar a glass. You would scramble to run all your faucets day and night and hire people to fill every container you could buy and you would hope and pray that none of the people lining up to buy it ever cut back because now you find yourself with quite a production facility to support.
While we will not stop using oil, we are also not using four times more oil than we did in 2001 when oil was $20/bl. There is close to $20 per barrel of “fear premium” that we are paying for and, as we have said before, there are plenty of people who have a vested interest in keeping that fear alive for as long as possible.
I think that the fear factor can sustain oil for quite some time but a slowing economy, rising gulf production (25% still under repair) and either an easing of tensions or a loss of interest in tensions (90 days) will cause a correction in the oil patch so trade carefully.
Cash, cash, cash and, when in doubt, cash should be in your virtual portfolio at the moment!!!
There is a strong possibility of a false rally today. Remember, a real rally will give you days or weeks of opportunities to get on board, if it is critical that you get in right at the beginning then it isn’t a rally.
So why do I bother with picks? The idea is to research and be ready with a few plays that you want to make once the market picks a direction. You should always have at least 3 up and 3 down stocks that you are ready to enter once conditions merit a move.
For example, if oil flys up, I like COP and XOM but if it goes down I think SLB is looking overbought. In gold I like BVN over $560/oz and I sell NEM under $545.
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TXN grew profits by 34% but revenues were a little light so the stock dropped 2% in after hours. What was TXN’s main problem? They couldn’t make chips fast enough to keep up with demand. Oh my gosh! Sell, sell, sell!!! Man, people are so dumb… I will wait this out but just above the 200 dma around $31 looks like a buy to me.
If TXN can’t make chips fast enough then GLW, who makes the TV screens should be doing well too!
SNE is getting a lot of good press that should help it get back to its high of $45.70.
LVS got hammered yesterday. I wish I had noticed that the stock had snuck back up to a new high as I would have shorted this scam then. We made a bundle (325%) on it back on 11/29 when it was a short TOTD and it’s much higher now so I will be watching this morning’s action closely. http://philstocks.blogspot.com/2005/12/viva-las-vegas-but-not-lvs.html
MOT is right at the point that I called the bottom on back in December. Although I was dead on then I had a support line that gave me comfort. the stock is currently in no man’s land between the 50 and 200 dma so I will wait a little longer on this one.
DCX is next out of the box with job cuts. If this doesn’t give them upward momentum today (coupled with Ford’s announcement yesterday) then nothing will. Unlike Ford and GM, DCX is up 17% from last year with almost all of that gain coming last July. I like the $55 calls for .60 as a day trade but not if GM is crashing.
This is purely anecdotal but I use OXPS to trade and they have been so busy this week that it actually slowed the system down. ET said that options was it’s principal growth area so I have a feeling that earnings on the Thursday could be a nice surprise. This stock has been flying all quarter but are still below the radar so I like owning the stock and selling the $25 calls for $3.50 for a quick 5% gain and protection all the way down to $24, well below the 50 dma. The Jan $22.50 calls aren’t bad at $7.40 as you can sell the Feb $30s for .75 (10%) but you will be screaming in pain if earnings disappoint.
MUR is in a very private hell as about the only oil company not going up. Their woes stem from a class action lawsuit due to a massive oil spill during the hurricane down in New Orleans. Aside from taking capacity off-line, the company will be looking at hundreds of millions in clean-up costs. I have been watching this one closely since our 11/17 pick at $48 but I think we need to move on from this one.
Some game is being played with GENZ. Many nights it trades down in Europe as much as $2, only to recover in the morning. As amusing as this is, it makes it very hard for the stock to gain any real momentum.
DD will do its best to hold the Dow back today, last we heard from them they lowered the quarterly outlook and scrapped guidance. From the actual results it looks like they were being optimistic…
MCD came in-line with earnings so the stock will now be driven by the performance of the Chipotle offering Thursday (but expectations are now high). I hope you are in already because I doubt there will be any more cheap shares available.
BNI looks very good to me earnings were solid and should continue upwards. I like the April $70s for $4.60 (a $3 premium).
Today is the day we find out if Google is a bull trap or one of the strongest stocks in the history of the market. I am a long-term bull and a short-term bear on this one.
My favorite coal company, BTU is splitting for the second time in 9 months. If we are lucky it will pull back to $40 post split to give us an in.
BIIB looks like it can be an income producer if you take the Jan $35 calls for $12.50 (a $2.70 premium) and sell the Feb $45 calls for $1.70. That’s 13% in your first month. The danger in this kind of trade is that if the stock flys up, you will owe the caller money but then you can turn around and sell the March $50s so you just have to have your accounting hat on for these trades.
There was a mass fund exodus from CDIS yesterday morning, one would suspect something is up over there. There is no support all the way to $38 and the $40 puts are still in denial at $1.20 so you can sell current $40 puts for $1.20 or better while taking the March $42.50 puts for $2.75 and wipe out most of your premium while still having $1.64 of free upside!
