Balloons Away!!! Earnings Season has begun!
Alcoa kicked off earnings season by reporting a $303M drop in net income on a 7% sales decline to $7.38Bn. But who cares about that?! What we should care about is what earnings season means for us and how we should play it.
In anticipation of much greater stock volatility among those stocks reporting and potentially the market itself, we decided to steer clear of the gambler’s gambit. This is our affectionate name for earnings, which lures many traders to a land of losses by promising great returns on straddles and strangles in the event that big stock movements materialize. Instead of succumbing to the temptation of risking hard-earned profits – and they have been hard-earned this past quarter as we look to boost our winning record to 87.5% on closed trades this April expiration for trades issued from January to March – on volatile stocks, we have switched course slightly and taken comfort by placing trades on iShares such as the FXI. Last week’s issued trade is working out very well so far!
This week we had hoped to get filled on an EEM position, but the gap up today meant the credits we had searched for disappeared before we had an opportunity to get a fill so we’re going to hope for a pullback and see if we can’t get a fill on a trade this week as originally planned. While a pullback is very possible in EEM over the next few weeks, we do believe the longer term outlook is very promising. We’re not going to chase any trades until the EEM pulls back and offers us a more attractive entry point.
DD is one of the few stocks that we have really liked for sometime given that it doesn’t move in a very volatile fashion for the most part, but it does keep chugging higher and pullbacks like today’s tend to be nice opportunities to get back on board the bull-train.
We’re watching Apple closely again. Have talked about how to strategically play Apple last Thursday, we’re waiting for a pullback now. Note how dangerous it is to chase any of these stocks on up-days. Apple was up as high as $159.69 at its peak today, yet closed at $155.89! Apple has a real habit of trying to sucker in desperate bulls who missed out on big runs and punishing weak holders with crushing corrections and sharp declines. Just a little patience is all that’s needed to score big returns and this chart is still simply perfect. Usually after a big run-up somebody starts a rumor so let’s hope for one that will drop the stock price down to the $150 region at which point we can pile in yet again.
FCX is another stock that has demonstrated tremendous strength of late and is one we are keeping a very close eye on. We’re also looking for a pullback on FCX as an opportunity to load up on some bullish positions.
It was a relatively non-descript day in the markets. Some churning is a positive over the next few weeks. As we mentioned last week, the light at the end of the tunnel can be seen. Let’s just hope for a final pullback so we can scoop up some better prices for the bull run we’ve been waiting for in May.
Have a fantastic week!
