Post Game: Whipsaw

Crazy day today. It looked like the S&P would be content to camp on the highs for most of the afternoon, but lo and behold the market began to sell off around 2 PM and trended lower for the remainder of the session, closing almost exactly flat after an incredibly whippy day.

As we mentioned in the mid-day update, several charts formed an identical V pattern in the first two hours of trading or so as the broader market was rocked by the jobs data and comments from both Obama and Putin regarding Syria. Our positions took quite a ride themselves. We nibbled on a momentum trade in $IMMU, but volume quickly dried up and we were stopped out for a small loss. We were able to recoup most of those losses with a nice $GMCR put option trade after there was heavy put buying in the September $80 contracts. We left some money on the table there as Green Mountain sold off in the final minutes of the session, but we’re comfortable with a scratch in realized P/L on such a volatile day.

Our live positions shaped up nicely into the bell. Home Depot $HD closed well off the highs and in the red as our put position had a volatile trading range between $.45 and $.62. The stock’s chart is becoming decidedly more bearish as it failed at the 8-day and looks ready to retest our $72.50-$71.50 bear channel. The 200-day sits at $71.68 near the base of that channel. AT&T also failed at its 8-day and closed in the middle of its trading range while our put position closed flat on the day. We didn’t get as definitive of a jobs report as we had hoped for, but we think there is enough substance there for the Fed to move ahead with an abbreviated tapering plan of, perhaps, $10 billion per month. If 10-year yields can break and hold above 3%, we think both $HD and $T have considerable downside risk.

$FCEL had a rough afternoon and closed down 3.68%. We took profits on our stock position yesterday but remain long $1 call options with an October expiry. Anything can happen, but based on the stock’s action in the past we would not be surprised to see a gap fill and possible bounce. However, we should note that the stock did not have the extreme run-up into earnings as it did in Q2, and it may allow for better price action over the coming sessions on what was a considerably stronger earnings report, in our opinion.

We initiated a new position into the close with $AAPL weekly $500 call options, a position worth just shy of 4% of our book. We had been anticipating a run-up ahead of the company’s product unveiling next Tuesday, while rumors had been swirling of a China Mobile deal that may be announced next Wednesday. Those rumors caught some traction late in the session and we initiated a position at $8.75 and bought again at $7.70 after the stock inexplicably sold off. $AAPL promptly rallied to the $499 level before closing just north of $498. The stock’s chart is building some strength and appears poised to pop, and we believe next week’s events could really set the stock in motion. $AAPL continued to run after hours and is trading north of $500 at the time of writing.

The broader market remains in a difficult spot, and today proves that it is still nearly impossible to have conviction in either direction. Headlines out of Washington will continue to drive this market for the foreseeable future, and rising tensions between the US and Russia could create additional fear in the markets. This is very much a stock-by-stock environment, which calls for prudence and profit taking where available.

We hope everyone had a profitable week. As always, feel free to engage us on Twitter at @vikingtrader14 or shoot us an e-mail at vikingtrader14@gmail.com. Have a great weekend! GO BEARS!!!!!!

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Posted on September 6, 2013, in Uncategorized. Bookmark the permalink. Leave a comment.

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