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Mid-Day Update: Taking Profits

Hope everyone is having a good day thus far with the S&P breaking the 1700 level once again. We’ve seen a lot of action in some of the most prominent stocks of this rally, so let’s dive right in and talk about what’s moving, what we’ve traded, and where we’re headed.

We took off a lot of positions on the open as this stealth rally became not so stealth with today’s gap up following the Larry Summers news. We took profits in $NFLX and took off our $GOOG calls at a small loss (which would’ve turned into a big loss had we held them through the day). We’ve seen a lot of whippy action in several of the technology bellwethers that have participated in what has largely been a year long rally. Faceboook $FB, Google $GOOG, LinkedIn $LNKD and Netflix $NFLX all opened the day solidly in the green, but each name has given back those early gains and are now red, though the broader market S&P has held up well. Tech has really lagged today’s rally and this morning’s up move on the open didn’t have a terribly convincing feel, particularly now that we have seen a number of names sell off.

We traded Tesla $TSLA a couple of times and probably over traded the name a little bit. We made took some profits on the open as the stock traded higher to $170, booking roughly $1.50 per share. However, we gave back some of those profits when we tried a cute short and got stopped out for a loss of $.60 cents per share. We made a nice intraday bottom play in $AAPL by getting long the $460 strike weekly calls for $2.95 and exiting at $3.18, good for 7.8% profits. We also shorted IBM at $194 versus the highs of the day. IBM has proceeded to fade today’s gap up and is putting up an ugly bear pin bar on the daily chart as we speak. 

The banks have been remarkably strong today, with Citigroup $C, Goldman Sachs $GS and $MS all up over 1.5%. The casinos are also acting well with names such as $WYNN, $LVS and $MGM holding some gains today after an extended run.

3D printing has been a very mixed bag today. $XONE is taking a whack following the expiration of its lockup period, while $DDD is more or less flat on the day. $SSYS is the industry leader as it has gained more than 3% today, though it is well off the highs.

We looked at shorting $LEN around the the $36 level but opted against it as the market was still holding up fairly well. If any of you took that trade, solid work on your part as the stock has sold off for much of the day.

We think today’s rally will provide an opportunity for some shorts, but we continue to advise prudence as we remain in an extremely strong market environment. However, this week’s events are likely to provide some volatility that could trigger a sell off both in specific names that could be affected by rising interest rates as well as in the broader market. A key level in $SPY is $170.90, the previous all-time high in the index. We failed to sustain a breakout above that level and could serve as a reversal if we fail to break above with conviction in the next session or two. It’s definitely more difficult to initiate longs today than it was on Friday, but that doesn’t mean this market is an easy short. Stay tactical, keep moving and take profits. 

Post Game – Check The Tape

That’s one way to start a month. What looked like a rip-roaring, bullish beginning for September was quickly erased by news from Washington regarding the Syrian situation. John Boehner offered the backing from the House of Representatives for President Obama’s military action in Syria, while the UN had its report from the region vetted while John Kerry and Chuck Hagel outlined a plan of action to Congress. Markets rallied some late in the session and closed off of the lows, with the S&P 500 closing at 1639.77, though well of the morning’s highs of 1651.35.

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Today was a lesson in how not to manage your trade. We identified two profitable entries, one in the morning and one in the afternoon, one long and one short, and we mismanaged the exits on each position. We took an early long in $DDD that should’ve been good for a nice gain had we been more prudent near the highs of the day. Conversely, we got long puts in the middle of Tesla’s $TSLA plummet from the highs that could have gone for a 20% gain, but we pushed the envelope thinking the broader market would continue to sell off. We lost some money on the $TSLA trade while breaking even in $DDD.

Our active positions performed fairly well today. Apple $AAPL managed to stay green all day despite the aggressive selloff, and AT&T got slammed for most of the day, closing near the lows while driving up put premiums. We also saw gains in our $TAP put position. Our focus turns to $FCEL tomorrow as the alternative energy company is set to report earnings. In case you missed it, we initiated a call position in the stock earlier today.

We held off on making any additional moves today as the market’s bounce off the lows made it difficult to have much conviction either way. Most names gave back a significant portions of early gains, and it became difficult to separate leaders from laggards at the end of the day as the market recovered from the lows. Hopefully tomorrow will provide some more direction, but we expect we will need to remain nimble in the coming days as the situation in Syria continues to play out. Once that situation clears, we must still deal with tapering and the debt ceiling, which will undoubtedly impact markets and could serve as a shot in the arm for the bears, but it is unlikely we will hear much on those topics until after Congress makes a decision on Syria.