Abandon ship!
Exxon disappointed and although the reason is they tanked profits by throwing a ton of costs into the quarter to deflect congressional criticism the net effect is the stock goes down and drags the markets with it.
Asian markets were up today but Europe is way off already and our futures market looks really bad. Bernanke speaks this morning and may say something to reassure the markets but, if he doesn’t, we may see greater than 1% drops today across the board.
As I said earlier in the week, it’s a very bad sign when good earnings go unrewarded and now some poor reports from XOM, BAY, DCX and CBS are going to incur the wrath of the bears.
We need to watch the technicals: Dow 11.300, Nasdaq 2,300, S&P 1,300 – if we hold these today it will be a good sign but if any one fails, we could be in for a big downturn.
Commodities will be off today as China’s rise in rates signals that they are serious about slowing their own growth. Oil is trading down towards $71 in Europe and if we cross down to the $70s there are plenty of great short plays to make in oil.
Credit to Vic who held firm to shorting oil yesterday in comments and is very, very right today!
Cash, cash, cash today as I would rather watch the morning carnage from the sidelines until we get a good test of the technicals.
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For the following oil plays, follow the entire Valero Rule which means XOM, VLO and either the OGX or OIH should all be heading down to take a short position and you need to have an itchy trigger finger!
In a vaccuum I would be buying all these companies on the pullback as XOM earns 10% of it’s stock price every year in net profits. When oil was $30 a barrel, they earned 7% – that’s a good company no matter what! This is purely a play on companies that were pumped up on speculation and hopefully there will be momentum to the downside but be very careful..
SLB is one of the most overpriced oil companies, trading at 135% over last year’s price. $65 puts are .95 and the stock was at $60 just 2 weeks ago.
CVX (tomorrow) has held up well so far but today, at least, they will get worried down. The $60 puts are expensive at $1.30 so I would rather take a gamble on a disaster and buy the $55 puts for .10 just looking for .25 if I’m lucky.
OIS (5/4) is trading at the top of their range and the $40 puts are reasonably priced at $1.20.
RDSA is way over extended at $69 so I like the $65 puts for .20.
TDW is way above it’s moving averages so I like the $55 puts for .85.
UPL is unlikely to catch a break as the sector moves down so $60 puts for $1.15 are good but need to be sold quickly as it is unlikely to fall that far.
THE (5/4) has the ability to suffer drastic corrections and the $45 puts for $1.35 reflect that but I still like it as a momentum play.
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PD is very hard to read as there are strange charges for “Copper Price Protection” which drives them into a miss. This is no small thing as it is $1.64/share in charges on earnings of $1.68! It seems that management was hedging and got taken to the cleaners as the runaway price of copper caught them by surprise. There is no way to know if this is a one-time event or if that was just the portion of losses they have chosen to write off this quarter so I’m staying far away from this one but I will consider a buy if this is cleared up in the conference call.
Gold is down five whole dollars so of course the mining stocks will panic. The ABX $30s were $1.46 yesterday and could be a real bargain today. The Jun $32.50s for .85 are a more relaxing play.
NEM already had spectacular earnings yet will open down 2% today on a .6% drop in gold prices and the stock is trading almost 10% lower than it did when gold was at $575 on 2/1. Jan $60s are only $6.90 (maybe $6 today) and you can sell current $65s for .40 (I don’t reccommend selling the $60s for $1.48 as I really feel gold is continuing up but it’s a nice cautious play).
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