Are we going to have a major breakdown or will today confirm the overall strength of the markets? Isn’t it funny that a technical day like this coincides with so many major earnings reports?
As I review the picks I’ve been looking at I have to admit I am somehow still bullish on the whole. I think earnings look good and an end to Fed tightening or a drop in oil can really bring us up to new highs. We get Fed minutes today so it will be interesting to see what they’re thinking.
Asia had a big recovery today, more than erasing yesterday’s losses. Europe is mixed to weak again while the Euro is up 2% since last week.
Oil hit $72 in Europe before pulling back a touch. Even the Wall Street Journal now agrees with me and says that the disconnect between the oversupply of oil and the speculative run-up in prices can’t continue. Essentially, either one of the many feared supply disruptions have to occur or “prices could quickly drop $20 a barrel or more, OPEC officials said.”
“More and more people are going to recognize that the fundamentals just aren’t there to support these prices,” said John Gault, an adviser to the energy industry with Geneva-based firm Nalcosa.”
http://online.wsj.com/article/SB114532452352528310.html?mod=hps_us_pageone
Did I sell my gold too soon or was my timing impeccable? At $618 I decided I had made quite enough money (350% on my ABX $30s from Thursday) and I didn’t want to leave both them and my XOM $62.50s open overnight in case World peace broke out or something. I still have
BVN $25s and also Jun $30s, which are already at .70 (up 30% from 4/15) as it is way behind the sector.
$620 should be tough resistance (for a few days at least) I also figure if gold goes to $630 there will be plenty of things to buy!
In the pre-market it looks like a good call so far with XOM up .40 and ABX up just .10…
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Holy Cow! You think things can’t get worse for SYMC (5/9) and then the IRS comes knocking! It seems Veritas was audited and found deficient in 2000 and 2001 so the new owner has to fork over taxes, penalties and interest of $1 Billion!!! The stock dropped right into the 5% rule today.
30,000 DELL April $30 calls were bought yesterday for .15 and I’m not sure what they’re expecting as earnings were in February, maybe just the fact that the last 3 times Dell dipped below $29 it was quickly followed by $1+ gains. I’ll go with the flow if I can still get them for .20.
Check out PPDI which posted nice numbers but what got my interest was that 6% of their earnings were options expenses that buyers were happy to “look past.” This will be something we need to keep our eye on as techs start reporting.
I am officially crying foul as TGT (5/15) is now down 5% from WMT since 3/15. Same store sales are up 10% even with the very late Easter although the earnings target for Q1 is an insane .63 (15% over last year). I like the bounce it took yesterday enough to pick up a few Jul $52.50s for $1.95 but I’d rather wait for strength and pay a little more than get burned.
DHI reports this morning, I wish I saw that as the May $35s are just .95 and I am so sure they’ll surprise people. DHI will get a double whammy as building permits and housing starts come out today as well. /// Update – now it’s 6:40 and DHI did indeed report a 20% increase over last year’s record profits but this is in-line so it will be interesting to see the reaction.
If we are lucky MER will report my favorite kind of earnings, the kind that sound bad but are really good! The firm took a $1.2Bn charge in the quarter in an accounting change but should have great underlying strength. No matter how good the numbers are, the accounting charge will make the quarter look worse than it is. May $80s for $1.60 are the way to play this.
UNH soundly beat (+5%) all estimates and boosted estimates for the year but will anything be rewarded in this market? In a perfect world I love the May $55s for 1.20 that we picked up yesterday but the market makes me very nervous at the moment. This stock is currently underperforming the HMO index by 15% for the year.
If UNH really takes off then WLP (4/26) is another beaten down stock in the sector with the May $75s at $1.20 making a nice play. AET (4/27) may have a hard time at the 50 dma of $50 but if it breaks up it could fly so the May $50s for .95 are a fair gamble.
After driving the stock from $18 to $62 and surviving the “finger food” scandal, the CEO of Wendy’s left in a huff yesterday over spinning off assets to please meddling investors. WEN (4/27) is close to a double since last Jan so a downward reaction can gather momentum so let’s keep an eye on the 50 dma of $60.50 for a signal to play the May $60 puts, currently at $1.20. Only if it heads down as investors may take the opposite tact and will welcome the chance to spin off the company’s great assets. Burger King’s CEO also left recently so maybe these two crazy kids can get together and start a new chain?
BNI is raising prices with a fuel surcharge of about 16% on shipments. CNI (4/20) looks most ready to pop in the group and I’m looking for a beat over .53 estimates so I like the May $50s for fun at .15 and the Jul $47.50s for $2.
According to the WSJ, GIS and BUD are doubling their Internet advertising budgets this year and many other major companies are increasing spending so, aside from my obvious bullishness on Yahoo and Google, I think AQNT is a good play. Aquantive is an on-line advertising specialist and big companies like to work with established firms. Jun $25s are not bad at $1.70 but lets wait to see how it handles the 50 dma it is resting on and also for Yahoo and Google since a miss there will kill this stock.
I like the risk/reward of the XLNX Jun $25s for $2.15 if TXN has a good report and the semis start making a comeback.
PBG knocked it out of the ballpark yet again with a huge beat but nothing has moved this stock since a 50% power run that ended in April ’04 when earnings were 20% lower. If you don’t mind the tedium, the Sept $30s for $2.70 carry just a $1 premium.
JNJ earnings were pretty good but Pharma sales were down 2%, bad for the sector. I’m going to place a small bet on the May $60s for .35. If they had $57.50s I would have played them yesterday but with this spread it was less risky to just wait.
Want to make 12% in 6 months? Buy Apple for $64.81 and sell the October $67.50s for $7.28. This protects you all the way down to a price not seen since last October and gives you all summer to catch up if things go against you. Of course you will be kicking yourself if it goes to $100 but it’s still a nice return! I like the spread of a 2:1 ratio of $67.50s for $1.05 and $62.50 puts for $1 as I will be very surprised if they miss tomorrow.
TZOO did so well that EXPE should get a boost and the May $20s are just .60.
