It wil be tricky today but retail sales are coming in high (as I predicted) and that should give the markets a huge boost. Whether or not they hold it will be the question of the day.
Remember, we are watching the AMEX today for direction, all the other indices are below resistance where any up move is good. The markets need to show us something if they want to have our cash though….
Bernanke makes his first statement tomorrow so no one is very inclined to commit until they can figure out which way he may be going. Oddly, after 20 years of Greenspan, no one could figure him out so I don’t really see the point but traders like to think they know what they are doing.
Asia is rebounding, I was going to say that I don’t know how those investors can take it but then I realized the Dow is actually no better!
http://stockcharts.com/gallery/?$NIKK
http://stockcharts.com/gallery/?djia
I was making some notes over the weekend (if you want the stream of consciousness, check my 2/11 6:48 am post comments) while reading oil reports and blogging about (I know, I need to get a life) and I noticed the following:
- NY cash markets for gas are at the lowest level since 11/15
- Heating oil is being held on trucks in Houston as there is no storage left in the NE
- Oil is being sent back to Europe from NY
- Japan gasoline has dropped 26% because US cancelled huge orders
I concluded that oil was on it’s way to $60.65 on Monday if there was no storm (there was) but since the storm turned out to be a brief event, we are heading right to that level today. That is the 200 dma kids, below that we are in uncharted territory that may just lead all the way down to $54-$55 range before the month ends.
Chief investment strategist at Raymond James just told CNBC “I have no idea how to value Google.” Wow! That is a real sign of market confusion because they are one of the few analysts I actually respect…
The only thing that looks scarier than Google’s daily chart is it’s weekly chart but the max pain theory of options expiration says it will settle at $385, that would be a heck of a trick between now and Friday!
http://stockcharts.com/gallery/?goog
Quote of the day: “The company isn’t run for the long-term value of our shareholders but for the long-term value of our end users.” Google CEO Eric Schmidt said during an interview published in this week’s Time magazine.
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We need to try to remember that TASR was a $30 stock in 2004 so that we are not so shocked when it goes from $9 to $10. It’s had a bumpy ride since our 1/25 pick but is looking very solid now. Own the stock and sell the March $10s for $1.40, a .80 (8%) premium that protects you down to the 200 dma of $9.
So much for TGT leading retailers up, they are knocking a half percent of estimates for the quarter “because of the snowstorm.” I will buy on a dip.
I’m liking URBN into 3/9 earnings. The Mar $27.50s are high at $1.10 but could pay well. Smart play is to take the Sep $25s for $5 and sell the Mar $27.50s for a quick 20%.
SHLD $1.20 calls are a nice momentum gamble at $1.20 but a big gamble. I’m initiating positions on Jan ’08 $130 calls at $23.80 and selling Mar $130 calls for $1.70. I’m going to cover with Jan ’07 $105 puts for $9.40 and sell the Mar $105 puts for .90. My goal is to get my cost basis on the puts below $5.
DELL is right for a spread of the Mar $32.50s for .80 and the Mar $30 puts for .47 before earnings. Last earnings were a miss that caused a $3 drop and the stock has run up 10% in the past week so we can expect a snap one way or the other. Funds have been bailing all month.
Someone remind me to buy SKX on a pullback…
JAKK had my favorite kind of earnings – looks like a miss, is actually a big beat. We missed this yesterday but I like the Mar $25 calls if you can get them for less than .50 on a knee jerk pullback.
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If oil breaks below $60.50, even just a little, then we are really heading further down. Inventory will provide no relief and the traders already tried telling everyone it’s going to get really cold next week and that didn’t work. As we discussed, OPEC overplayed the fear card and lost their leverage so we may actually start referring to the oil scare of 2005 the way we refer to the energy crisis of 1979 – just a blip that quickly reversed.
That being said, I cannot warn you enough of the danger of trading oil stocks in an options expiration week. Trust nothing! The market is manipulated like crazy by real pros who live to steal your money. Just like this morning where XOM is being jammed up in pre market even as oil is in free fall in Europe.
So these are my favorite remaining short candidates following the Valero rule to the letter! The Feb puts are day trades unless oil finishes below $60 and even then, don’t be greedy – one rattle of an Iranian sabre and you can have a worthless coupon!
OXY $85 puts for .75, the Mar $90 puts at $5.40
KMG $95 puts for $.60, the Mar $95 puts for $2.70 are a good price.
IMO Mar $95 puts for $1.90
BHI $70 puts for $1.70
SLB (very dangerous) $115 puts for $1
RDC Mar $40 puts for $1.75
TSO Mar $65 puts for $5.60
RIG Mar $80 puts for $4.80 – might be too late, they missed earnings today! Should stop at $75, maybe get the $75 puts for $5 instead.
DO $80 puts for $1.85 – in sympathy with RIG
HYDL $75 puts for $1.70
XOM $60 puts for .95 or $60 calls for .50 or both (these are very low premium calls that are as liquid as stock, great for momentum trades either way). For $1.40 you get to control XOM through the inventory reports into option expiration. Do not be greedy, the stock will very likely finish at $60.10 on Friday, you are playing the swings only.
********** Trade of the Day – FMD **********
I think the reintroduction of the 30 year note can only help them down the road and rising short-term rates provide a nice bonus so I’m going to ease into the Mar $30s for $6.10 (a .40 premium) although a conservative investor would do well to own the stock and sell the Jun $35s for $4.20, returning 10% in 4 months.
Another interesting hedge move would be to take the Sep $35s for $5.70 and sell the Mar $35s for $2.25. You can get a 20%+ return between $34 and $38 with protection down to the 50 dma of $33 and little chance of loss if it rockets.
