Blog Archives

Post Game: William Tell

The Summers Rally has come and gone. Given the events of today’s session, it’s difficult to know where we are headed. It was not difficult to fade this rally as the market’s reaction to the news that the hawkish Summers was out of the race for the Fed chairmanship was completely overdone, particularly given what we believe are misconstrued differences between Summers and the de facto front runner Janet Yellen. We made some money playing today’s bounce both ways, and it certainly feels like this market is teetering a little bit after we had virtually no conviction in this morning’s rally.

Before we continue with the post game, we’d like to extend our most heartfelt condolences to those affected by the tragedy at the Navy Yard in our nation’s capital today. There is a time and place to debate how and why tragedies such as these continue to plague both America and the entire world, but for now let us simply honor the fallen and give thanks for all we have been blessed with in this life.

Today’s aptly titled post game simply must lead off with a discussion of Apple, whose blunders in the last week have cost the one-time Wall Street darling roughly $60 per share in market value. Many were caught up in today’s onslaught trying to shoot the falling apple (William Tell puns), only to be washed out during the session’s prolonged selloff. Today we were able to capitalize on the mid-day lull in the stock that allowed us to scalp some gains in weekly call options. We were also able to capitalize on the late day sell off by utilizing weekly put options as $AAPL slid below $450. While there are those that felt the move to the $470 level was overdone, the downward momentum has shown no signs of abating, and the company continues to bewilder the Street with the seemingly misplaced iPhone 5C and no data regarding iPhone preorders. Our bull case for Apple was shot once we saw the pricing of the 5C, which essentially eliminated the possibility of a China Mobile deal anytime soon. We have no choice but to seriously question whether Apple’s growth days are over, as the smartphone market’s consolidation has been incredibly quick. For those of you that look to play Apple on an intraday or swing basis, you have to lean short here until the stock shows a serious change in its course of action. We engaged a few members on StockTwits tonight about whether we would lean long or short overnight. However, with the market in the position its in and the aggressive selloff in Apple, you simply cannot let a long or short bias get in the way of making money. While we think there is more downside in Apple to come, you need to let the trend dictate your behavior when your timeframe is short. Countertrend trading is virtually impossible to execute on a consistent, profitable basis, so if you’re playing Apple long in this downtrend, be nimble, use stops and TAKE PROFITS.

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$AAPL is in a world of hurt and is perched on its 100-day moving average. It barely held that level today and an open below that level tomorrow could trigger a major flush to the gap area around $434-$435. Again, this looks like an incredibly compelling short candidate in the short term, as investors will likely race to the exits as momentum picks up to the downside (much like we saw today). If Apple can somehow consolidate at this level and form a base, perhaps the story changes. With that said, it’s hard to have much conviction to the upside, if any.

As we stated before, US equities are in a precarious position, particularly given the slow grind down we saw today that literally spanned the entire session. $SPY posted what many call a black candle, as the market essentially opened on the highs and never advanced beyond that mark. If the bulls want to stay in control of this market, they need to see some consolidation at this level before taking out today’s highs. An open below today’s close could lead to increased selling pressure and a fill of today’s gap up, which could invigorate the bears who will undoubtedly be calling today’s market action an “island reversal.”

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We have just three positions on heading into tomorrow’s pivotal session and the next iteration of “The Most Important Fed Meeting Ever.” We think there are certainly going to be setups that look good in both directions for stocks, but we continue to preach selectivity and profit taking as the market definitely feels like it is in no man’s land. Keep an eye on the tech names for a possible correction, as they have lagged the market the last few days and several names showed weakness today including $TSLA, $NFLX, $LNKD, $GOOG and $FB. Most of these names are in no man’s land and don’t represent convincing buying or short selling opportunities based on where they closed today. Watch for names like these to either hold or break through key levels before initiating positions in either direction, particularly when we have a number of headlines coming our way in the next few days that could alter the market landscape.

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Post Game: Strong Like Bull

Long and strong! It’s good to be back writing for VT after a 24 hours hiatus thanks to some unexpected life events. But all is well, and hopefully y’all have had a profitable period as this market just will not fade. Let’s dive in to the recent action.

We tweeted out this morning that we sold our position in Apple $AAPL. The events from the last 24 hours were nothing short of dreadful. We were actually moderately impressed with the 5S and 5C, but GOOD LORD Tim Cook is not doing himself any favors. He continues to drop the ball in China as the company has effectively priced itself out of the middle market with the 5C. The phone looks totally puzzling now as we have a hard time believing it will find enough traction in the North American market. We peeled our long stock position off at $475 pre-market and we aren’t too eager to get back in. We scalped a few bucks on an option trade after the stock rallied off the lows, but that rally was faded over the course of the session.

We also let go a couple of losers in $TSLA and $TAP. We actually recouped some of our lost premium on our $TSLA calls, but we lost half of a small position in $TAP puts. Timing is everything in trading, and size does matter here, too.

Our book is very lean now and we have plenty of flexibility. We picked up $GOOG calls for next week at $495. It looks like $AAPL capital (rhyme! sort of) was being rolled up into Google and Facebook today, and we actually like both names, but we chose to put some capital into Google as Facebook passed its all-time high today. The chart looks pretty strong and the 890 straddle is implying at $19 move by the end of next week, which could make for some nice gains. Google closed on the dead highs today just above a key resistance level. Look for continuation to $900-$905 in the coming sessions, followed by potential continuation to the all time highs.

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Another stock we initiated a position in is Biogen $BIIB. This stock has been in a bit of a holding pattern over the last 3 months, but it has been building a nice rounded bottom and broke out today in the last hour of trading. We initiated a long at $232.39 and are looking for continuation in the coming sessions. The stock made its way into the gap above $234.70 and has room to run to the $240 level where the YTD highs sit.

We didn’t get a chance to write about it yesterday, but we hope some of you caught our note in yesterday’s morning post about Netflix $NFLX. We signaled that $NFLX could surge if it sustained the morning gap up and made it to $299, and that’s exactly what it did as it move straight up throughout the session yesterday. If you were long, hopefully you were prudent and took profits yesterday, though the stock did put a decent tail on today’s bar.

We initiated two put positions on unusual option activity in Assured Guaranty Municipal Holdings $AGO. For those of you that are unfamiliar with $AGO, the company is a municipal bond insurer and has been getting whacked since earnings and the Detroit bankruptcy announcement. The bears stepped in big time in the latter half of the session, buying up puts with both October and April expiration hand over fist. The stock got thumped in the latter part of the session and volatility spiked, creating some nice value in our puts.

Lastly, we also shorted $BEN via short stock as it tested the bottom of the Ichimoku cloud and could not break through. The stock rallied into the bell, which we obviously don’t like, but we’ll keep an eye on it. Our stop is tight just above the lower portion of the stock’s gap at $48.50.

The market has been on an incredible run as the S&P has rallied 7 consecutive sessions, making it a bit of a precarious spot for shorter term traders. It’s still hard to get aggressively short and we’ve seen high short interest names like $TSLA shake off the bears. Keep your eyes peeled for short candidates, but don’t lean too hard that way until the market stops raging higher.

We’ll be out of the office on Friday, but we should be back to our usual pattern of three posts a day tomorrow and next week. Feel free to shoot us questions on Twitter @vikingtrader14 or via e-mail at vikingtrader14@gmail.com.

This Looks Familiar

Good morning y’all, hope everyone enjoyed the weekend. A little late with our preview today as someone may have been celebrating  an anniversary a little too much last night and was responsible for today’s morning post. This week is shaping up to have a similar feel to last week as the same news events will likely be driving the markets for most of the week, starting with President Barack Obama’s pre-recorded address airing tonight on the major networks. Charlie Rose conducted an interview with President Bashar al-Assad in which he adamantly denied use of chemical weapons, stating that the weapons were used against his own forces. The situation remains a pressure cooker that could have catastrophic repercussions if handled incorrectly, which means volatility could return to the market at any point stemming from related news. Speculation over Fed tapering will likely continue as well, which we would welcome with open arms for our $T and $HD positions.

In the meantime, we appear headed for a higher open as S&P futures have traded in a tight range over night but are sitting up 3-4 points. Apple $AAPL is trending up in premarket action as the run-up into the company’s events tomorrow and Wednesday has begun in earnest. Look for continuation throughout the session today as the stock looks ready to break out, but there is the stigma that Apple’s events have become “buy the rumor, sell the news” situations, so take profits and trail with stops if you’re long stock. We remain long via both stock and options, and we may look to take off a portion of our options position today if the stock really surges.

Molex $MOLX is making news this morning on reports that the company is being bought out for $38.50 per share by Koch Industries, a premium of roughly 30%. The stock is halted and we’ve placed a large, low-ball limit bid in the stock as a lottery ticket, but we have no expectation of getting filled. Blackberry is also trading up over 4% in the pre-market as speculation continues over a possible buyout of the Canadian smartphone maker. While a takeover does seem imminent, these events are so hard to predict and there will likely be several head fakes in the stock before a deal is announced. Finally, Facebook $FB is up once again on another upgrade and $50 price target from Sterne Agee. Zuckerberg continues to count his billions.

One name we will be watching closely this week is Tesla $TSLA. The stock has begun to move sideways and is flirting with a breakdown below its 8 day moving average. Any short in Tesla must be tactical as the stock remains on an incredible trajectory with a strong chart, but opportunities to the short side may present themselves if the stock cannot resume upward momentum.

We’ll take a deeper dive in our mid-day update into some other names – one of us is a little behind this morning. Good luck out there today everyone, stay tactical and profitable!

Mid-day Update: Snoozefest

Very little activity in the markets today as we have sat in a pretty tight range for much of the morning after the S&P leaped to the 1659 area before settling in around 1656 to churn. The ADP report was solid albeit somewhat light compared to estimates, and the 10-year is hovering just below 3% as murmurs of tapering in September have crept back into the markets.

Not a whole lot of major individual movers out there, though we are seeing interest rate sensitive names taking a hit, including housing related stocks such as $HD, $TOL and $LEN, while our favorite taper play $T is getting whacked today after rallying hard yesterday. Our puts are trading back near the $.30 range. $LNKD rallied extremely hard off of the opening lows and would have made a very lucrative intraday swing trade, but we can’t catch them all. $AAPL is taking it on the nose some today, while $FB surged on the open and has held its gains most of the day.

One idea that we’ve been toying with of late is getting short $TSLA via puts. We probably wouldn’t initiate this position any time soon because the stock still has an air of invincibility surrounding it, and it has not shown a commitment to any prolonged sell off in the past. Still, the rumored addition of $TSLA to the buy list at Goldman Sachs (a report that has been heavily disputed with some Sachers calling it a miscommunication) has us thinking. Apple’s meteoric rise was met by ludicrous price targets and upgrades upon upgrades. The firm’s valuation is beyond absurd, but we wouldn’t seriously consider it until we had another round of earnings from the firm, at least. We are utterly infatuated with the cars ourselves, and we think the company has done a remarkable job in the early innings of bringing the electric car to the mass market. But at some point, the company has to start delivering real earnings, and there are still major hurdles to the electric car catching on, including the institution of charging stations and a more affordable model with the same appeal of Tesla’s current upscale model. Nothing to act on just yet (because the stock could surge to $200 at the drop of a hat), but it may be time to question whether the company can keep its foot on the gas (puns!).

$FCEL has had decent price action today and has traded in a fairly tight range on heavy volume. The stock met major resistance at the high of the day as September options holders put a lid on today’s rally. We may look to peel off either our stock or option position at some point today, but we would be content with standing pat if need be. Nonetheless, a big winner for us on the day.

We’re currently bidding on $EJ February calls after seeing some unusual buying activity in the $12 strike, and we may play a few earnings names today, including Smith and Wesson $SWHC, likely to the long side.

Mid-day Update: A Day Late

Hope everyone is having a profitable Wednesday. Today feels like what yesterday should have been if not for the Syria news that caused stocks to pare most of their gains on the day. Markets are up nearly 1% today with the Nasdaq leading the way most of the day. $SPY has been camped near $166 for much of the last hour or two, and it seems to be running into decent resistance at this level intraday. We took a small short position via $166 weekly puts for a cost of $.88 with a $SPY contingent stop just above the high of the day at $166.05. Our downside targets should the market roll over are roughly $165.59 and $165.38. Given the uncertainty regarding Syria and pending news from Washington regarding our course of action in the region, we believe this position presents a low-risk, high-reward set up should we get some definitive statements from political leaders.

As for our other positions, we have seen our $T and $TAP puts slide a bit as those stocks have risen with the broader market, but $AAPL has shown commitment today and is holding up well. $TSLA has been in the spotlight as well after Goldman did a complete 180 on its stance on the firm, initiating a buy rating after panning the stock roughly $70 ago (it wouldn’t surprise us to see Goldman dump $TSLA shares as a result, but that’s purely speculation. Wouldn’t be the first time they’ve done something like that, though). Some tech bellwethers have languished some today, including both $FB and $TSLA (despite the upgrade), while $NFLX and $AMZN have been fairly strong. $LNKD tried to rally after selling off following the announcement of its new equity offering, but it could not break out.

$SPY is selling off as I write – gotta go monitor our positions. Best of luck this afternoon, everyone.

All’s Quiet

Good morning y’all. It’s been a quiet morning in the markets as S&P futures have traded in a tight range, staying flat to down 2 points or so for most of the overnight session. International markets are mixed, with European indices showing red virtually across the board while some Asian indices are advancing, including the Nikkei. US weekly mortgage application data came in light with applications falling -.4% versus a more than 2% rise last week, though there seems to be little reaction to those numbers in US markets. We also saw Australian GDP posted slightly better-than-expected growth in the second quarter, an economy that has been in disrepair.

There isn’t a ton of company news out there this morning. LinkedIn $LNKD made some news with a $1 billion equity offering after the bell yesterday, and Apple $AAPL sent out invitations for its September 10th unveiling of the iPhone 5S and 5C, and the stock is ripping near $500 this morning after it was unable to sustain its rally yesterday. In the meantime, we will be curious to see the new products Samsung has to offer at today’s event, including what is believed to be the company’s foray into the smart watch market. Early chatter is that this device may have been rushed to market in an effort to be the first mover in the space ahead of Apple, but that remains to be seen.

It will important once again to be nimble today as the market has shown an unwillingness to commit to a general direction in recent sessions. $FCEL reports earnings after the bell, which we will be watching closely as we expect record revenues and potential breakeven on the bottom line as the street is calling for EPS of -$.03. Keep an eye on names that have held strong in recent sessions including technology bellwethers such as $FB, $NFLX, the 3D printers ($DDD in particular), the casinos, and perhaps $GOOG, which reclaimed its 8 EMA yesterday but has looked particularly weak since earnings.