Testing Tuesday

Well, that was interesting!

On the whole, the 50 dmas held on all the indices (although I couldn’t believe the NYSE tested 8,000). Only the Nasdaq didn’t hold it’s mark and only off by a bit at 2,268. If we make an allowance for TXN’s little drop and the chippies taking a dive – It’s not so bad!

Fear, panic, doom, gloom – analysts pulling out charts with red arrows pointing down – this smells like a rally to me!!! I am not kidding, although I will still be trading very cautiously, I think we may get a great day tomorrow, especially if nothing bad happens in the Middle East.

We’ve been wanting to test the 50 dmas for some time now and how odd is it that every index did it today? Huge sell-off in oil, housing, chips, retail… (in fact 3 out of 4 stocks were down today) and all we get is a little drop? Even the Dow tested, up and down 60 pts twice today.

While we are not going to expect a rally tomorrow, if we can just roll along these resistance lines and consolidate for a week or so, we could be setting a major floor at this level. On the other hand, we may punch through all this tomorrow on the way to a 5% drop!

Exciting isn’t it?

Oil performed as expected today and shame on you if you didn’t get the hint from VLO to sell before it all started coming back. I was frantically dumping my oil put around 2:30 as they had all made more than enough money for me to happily take them off the table the second VLO flinched. XOM confirmed the move with a sharp turn as well.
http://finance.yahoo.com/q/bc?t=1d&l=on&z=m&q=l&p=&a=&c=&s=xom

If all goes well we can reenter oil shorts tomorrow but there is no reason to leave this to chance overnight.

GOOG is dropping in the aftermarket as they inadvertantly included a slide in their presentation that was for internal use only and, in doing so, gave an actual projection for AdSense revenue! Aside from making the CFO look dumb (again), the projection is for $3Bn in growth this year which is lighter than analysts were expecting (see my live comments where I pointed this out at the time). I’m not that smart though, I sold my puts today 8-(

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I want to start off by apologizing to Daniel, who made a great call on CTX in last night’s comments that I totally forgot about. CTX dropped 4% today and was only saved by the 5% rule around 1pm. Great call and thanks for the suggestions!

BA was very strong today, one of the things that gave me hope, but its suppliers (AIR, TIE, ATI, BEAV) got hammered, this may shape up to a great opportunity if things turn up.

BRG finally caught on today and quickly dropped 2.2%. Keep your eye on the more volatile CHK for a signal on this one.

CHS was a great one, pushing straight down to its own 200 dma leaving the $40 put at $1.25 (up 50%).

UPS did go up a point, better than FDX, but CLDN is in even worse shape than I thought, dropping 6.2% just today! Transports were weak all day so UPS is doubly strong.

BOOM pulled back to $31, a great entry if we turn back up tomorrow.

I redeemed myself with CME, the $420 puts finished the day at $8 (up 60%) but were a clean double this afternoon if you weren’t greedy.

RIMM was another good one for most of the day. At one point the $80 puts were $1.90 (up 60%) but the stock came back in the afternoon and erased half the gains.

SIRI looks like it will be held under $5 through options expiration, this is good if you’re selling them!

BTU continued down today and the Apr $50 puts ran up to $5 and I took it.

SU bounced off the 50 dma so I sold the $75 puts for $3 (up 200% in two days!).

OII dropped another 3% today and the Apr $55 puts made a double at $4.10!

TSO $65 puts flew to $6.20 but I sold mine at $5.70 for a clean double.

Now CRDN got the pullback I wanted! Down 7.4% today, very glad I sold the calls… We’ll keep an eye on this if the options get nice and cheap.

COF got hammered again and the Jun $85 puts moved to $2.70 (up 35%).

BIIB is halted pending the FDA decision so I’m sweating that one out.

AMD came in a little fast for me but we will see how it handles the 50 dma tomorrow.

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Our trades of the day were stellar if you got out at 2:30 like you should have and pretty good either way:

CVX $55 puts finished at .75 (up 50%) but were $1.
XOM $60 puts ended at .90, up just 20%, way off its best.
COP $60 puts finished at $1.40 (up 60%)
BTU $47.50 puts ended at $1.95 (up 85%)
ACI was a big winner as I was dead on about it being artificially supported at $75, the $75 puts were worth the investment, finishing at $3.40 (up 70%).
PBR was another train wreck and the $90 puts landed at $4.80 (up 120%).

I got out of all my puts with another car’s worth of profits and took a SU $75 call to protect my lone remaining position (SUN $75 puts), we will see what happens in the morning.

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Sometimes I make a trade and forget about it if it’s long term. That happened with 2/14 TOTD FMD which I finally sold today when I noticed it had more than doubled.

The original trade was:

“For some reason, 40% of the float of FMD is shorted, possibly in anticipation of a bad quarter that certainly never came and concerns that the company would be hit with defaults due to the change in the bankruptcy law (they weren’t). The student loan company had a 50% increase in Q2 revenue and a 40% increase in profits and are on pace for a huge year.”

“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.”