Blog Archives

Summer(s) Equinox

Happy Sunday y’all. Hopefully everyone’s rooting interest in the NFL is coming up aces today, and a special shout out to all the Chicago Bears fans out there today. Jay Cutler continues to be the most mercurial quarterback in the NFL, but Martellus Bennett managed to bail him out with two more touchdowns to lead the Bears to a 31-30 victory over the hapless Christian Ponder and the largely ineffective Adrian Peterson. In all honesty, the Bears should’ve won that game by double digits, but Bad Jay and poor special teams on the opening kickoff essentially spotted Minnesota 21 points. I digress…

It seems we can’t go one weekend this month without some sort of major economic or geopolitical news item that will impact the market. This was already shaping up to be a monumental week with the Fed meeting and the potential of a reduction in monthly asset purchases, but Larry Summers decided to throw us a curveball and withdrew from the race for the Fed Chairman appointment once Ben Bernanke takes his leave. Many have speculated that Summers’ confirmation would be an arduous process as many see him as an abrasive individual, with his detractors citing his tarnished tenure as president of Harvard University – specifically, his treatment of women. Janet Yellen, believed to be a far more dovish candidate than Summers, becomes the de facto leader in the clubhouse. Donald Kohn, a former Fed vice chairman, and former Secretary of the Treasury Timothy Geithner remain popular candidates among others.

The impact of Summers decision was fairly easy to predict before futures even opened. Given his aversion to continued quantitative easing and a more hawkish stance overall, stocks would be poised to rise should Summers not receive the nomination. However, given the fact that Summers is pulling out this early, S&P futures surged on the open this evening to the all-time highs, and the bulls appear to be in full control once again. While it is  not a foregone conclusion that Yellen will be appointed (and some close to the Obama camp have stated the President would prefer to go elsewhere now that Summers, an Obama favorite, has withdrawn), we would expect even interest rate sensitive stocks to rise tomorrow as well, which does not bode well for our $HD and $T positions. Still, we should note that there is plenty of time for our theses on those names to play out. On the plus side, our long positions in $NFLX, $FCEL and $GOOG should get a nice lift. Obviously, we wish we were leaning a little longer, but we should see some nice gains Monday regardless.

Tomorrow should provide some opportunities for intraday trades at the bell. With so many events that could shake markets this week, it may be prudent to take some profits on long positions at tomorrow’s open should we sustain this rally overnight (and there is little reason to believe that we won’t). Still, it is easier to have conviction to the long side as the market has pulled off something of a stealth rally in the past week or two. We’ll be back in the morning to assess what is moving, but until then, enjoy the rest of your NFL Sundays!

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Post Game: Crossroads

Interesting day and a good start to the week. The S&P 500 was remarkably strong all day and basically moved higher all day after a brief stagnant period mid morning. Several names saw strong action (in particular, the casinos $WYNN and $LVS, two names we highlighted last week as potential breakout candidates), and we have a number of events that will occur in the coming days that will help markets. First, we should receive some definitive news from President Obama regarding the outlook for Syria both tonight and tomorrow morning. However, the market appeared to respond positively to news that Russia had called for Syria to hand over its chemical weapons, though the validity of Syria’s willingness is being questioned by US officials. Look for Obama to provide some answers there.

The biggest news for an individual name undoubtedly will be coming from Cupertino tomorrow and China on Wednesday as Apple $AAPL will certainly unveil the iPhone 5S and its less expensive cousin, the iPhone 5C. There is also talk that Apple will unveil a revamped iPad and iPad Mini, but we believe the bigger catalyst for Apple is a rumored deal with China Mobile. There is always the possibility that all of this news is already baked into the stock price, but the impact of a China Mobile deal is beyond compare. A deal would signal increased competition with Samsung in the middle-tier smartphone market, and China Mobile is far and away the largest mobile provider in the world, and while some have speculated that a cheaper iPhone will slash Apple’s margins, Tim Cook’s expertise is supply chain management, and this may be his opportunity to deliver a high margin, low cost phone that could consume market share in China away from Lenovo and Samsung. There is also the possibility that Apple has an Ace up its sleeve that no one is expecting tomorrow. While the odds of such an event transpiring are low as the street has become quite good at predicting the outcome of Apple’s showcases, the possibility remains. Beyond the headlines, the technicals have been shaping up nicely for Apple’s stock. The stock has been in a strong trend since bottoming in late June. We kept our weekly options on and remain bulls on Apple long term via stock.

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We also maintained our short on $TSLA via next week’s $155 put options. The stock failed to maintain a mid-day breakout off the lows and began to sell off once again into the end of the session. Bulls have been quick to defend this name and its difficult to have conviction to the downside after what has been a truly breathtaking run for the electric car maker. Still, we think the stock has a date with the 20 day (and that date may even come tomorrow), and that should serve as a major proving ground for the stock. $TSLA has tested the 20 day several times and has rallied well of that level in each instance. While it is difficult to fight what has been a prolonged uptrend, this is still a car company, and whether you’re a believer in fundamentals or not, there is not a car company on the planet that justifies the valuation that $TSLA is commanding right now. The stock is an incredible growth story and perhaps there is a chance they can pioneer a secular transition to electric vehicles (which I would have to believe is the long-term bull case), but the faster it ascends, the more likely the stock is due for a correction. We love Tesla and frankly would love to own one of their cars, but the market has a way of pulling the rug just when the party really starts to rock. If we get a test of the 20 day, watch the action between $155 and $157. For those of you that follow Scott Redler from T3 Live, this area could serve as one of Scott’s patented “Red Dog Reversals.” A break of that level and we could see a major sell off trigger in Tesla.

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We were pleasantly surprised by the action in $FCEL today. The stock ripped to $1.36 on solid volume after fading a substantial portion of the earnings move to $1.41 in the last couple of sessions. While we think a gap fill to $1.25 or so is still possible, the stock continued to see action after hours and tagged $1.38 on light volume. We remain long via options and think $FCEL is a tremendous long-term opportunity. Keep an eye on this one for a breakout if it can get above the earnings high of $1.41.

We stuck with our $JASO momentum long after the stock ran into some resistance around $9.40. The chart still looks strong here and could really get going over $9.50. Our taper plays didn’t do us any favors today as just about everything was green today along with the broader market. Still, $HD failed to reclaim its 8-day and $T may be forming a bear flag. We posted a more detailed look at treasury yields and how they impact big dividend names like $T earlier today, so be sure to check that out.

Make sure to check out Obama’s interview tonight while you’re watching Monday Night Football, and as always feel free to engage us on Twitter (@VikingTrader14) or shoot us an e-mail at vikingtrader14@gmail.com.

 

Mid-day Update: Tesla Under Fire, Apple Racing

Great start to the week. The S&P defended the low of the day very well this morning before grinding higher to the 1667 we sit at now. We haven’t had a whole lot of major news items to deal with in the early going, but there has been plenty of action in individual names that has created a lot of opportunities.

Our biggest gainer thus far today is our $AAPL position. Our options are trading roughly 50% higher from the close on Friday and the stock hung tough while the market was defending the lows this morning. We saw buyers consistently step in around the $504 level that gave us conviction to hold on to our options, and the stock has grinded to $507 and continues to look strong. We may take down some exposure heading into the events, but the stock looks so strong it is hard to not extend another day (at least) with our options.

$FCEL is getting a nice lift today as we remain long the stock via options. We added to our $HD put position as the stock is struggling to reclaim its 8-day EMA. Keep an eye on that one as the chart looks incredibly bearish.

We took a feeler position on another momentum/breakout candidate in JA Solar Holdings $JASO. This is a volatile stock that has traded in a huge range in 2013, but the stock is forming a rounded bottom pattern and there is huge potential for a breakout over $9.50 that could send the stock well over $10. The YTD high sits at $11.40, and there is essentially no resistance to that mark if the stock can get going. Image

We also initiated a short position in $TSLA today via next week’s $155 puts. We’ve touched on shorting Tesla a couple of times over the last few days, and today has been the first move down with some conviction in quite a while. A test of the 20 day SMA around $157.20 seems imminent if the stock cannot move higher before the end of the session. If the 20 snaps, it could be bombs away for the stock. Still, this stock has been incredibly resilient, so don’t press too much if you’re making money. It’s still well above the Ichimoku cloud and it doesn’t take much for this stock to reverse its course.

We took a question on Twitter regarding our AT&T $T position and why tapering would impact the stock so much. It’s actually a relatively simple thesis – the big dividend players hate rising interest rates. If and when the Fed begins to reduce its bond buying, we should see the 10-year yield sustain a move above 3% which crushes equities that are known as strong dividend payers. Utilities and Telecom stocks frequently attract investors with attractive dividend yields, and those names have the most to lose if treasury bond yields begin to rise. AT&T’s chart looks particularly bearish in our view, which is why we have been buying puts over the last few weeks. Here’s a chart comparing $T and $DTYL, the bullish 10-year ETF. For those who are new to fixed income, the price-yield relationship is inverse: as yields rise, prices fall. $DTYL and $T are moving virtually in lockstep.

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We’ve been preaching prudence for several days as this market remains extremely headline driven, and any news from a number of ongoing story lines could catapult the market in either direction. As we were writing, $TSLA absolutely ripped off the lows to $161 and has already retreated under $160. Markets and stocks turn quickly! Keep. Your. Head. On. A. Swivel.

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: Jobs, Obama, Putin Take Center Stage

Pretty interesting morning with plenty of action to investigate. The jobs number was just shy of abysmal, considering all the absurd downward revisions to previous numbers. The unemployment rate continues to be a fabrication as US labor participation rates are basically sitting at a generational low, and even the 169,000 jobs that were added in August were fairly flimsy. The markets have maintained the “bad news is good news” mantra that has catalyzed several legs of the 2013 rally, but we had a second piece of news that throttled markets shortly after the jobs number. Russian President Vladimir Putin injected some fear into the markets by stating that Russia would back Syria against any foreign attackers, namely the US. The S&P’s sell off from the morning’s initial highs accelerated on these comments, shaving roughly 20 points in 30 minutes. President Obama quickly issued a statement and took questions regarding the Syrian situation, reinforcing his stance that Assad’s use of chemical weapons should not be tolerated. The S&P quickly reversed off the lows and proceeded to grind higher over the next hour before settling in around 1,660, right back at the morning highs.

ImageSeveral stocks followed the broader markets V movement, with names such as $AAPL, $GMCR and $GOOG moving lower before eventually recouping early losses. In the case of $GMCR, we saw heavy put volume in the September $80 contracts that caught our eye, and we initiated a position at $1.86 that is working nicely for us at the moment. We also attempted to play a continuation trade in $IMMU that did not work out as the stock lost momentum, and we took a small loss. We’ll stick with the $GMCR trade as long as it continues to fade towards session lows, which could make for a nice day trade.

Image$FCEL has traded in a tight range for most of the day on heavy volume once again, and we are encouraged that the stock is holding its range from yesterday. We continue to see heavy (and we do mean HEAVY) $T put buying, with open interest on our October $31 contracts pushing 60,000. Those puts have appreciated today and we continue to see downside potential in the chart. $HD sold off along with the broader market and has rebounded some here in the middle of the day, although we wouldn’t be too concerned until the stock can regain its 8 day. Could be quiet here for the rest of the day, but we’ll keep our eyes peeled for any opportunities.

 

Post Game: Beware the Jobs Number

Interesting day out there despite a deep, deep lull mid-day that saw little volume across the board. With the 10-year hovering near 3% and the growing sentiment that tapering in September is a foregone conclusion, the $SPY told off a decent amount in the last hour of trading. With many calling tomorrow’s jobs number the most important ever, we took down some of our exposure to $FCEL to lock in some profits and up our cash position to allow some mobility tomorrow. We anticipate there will be far more opportunities tomorrow that can be carried over the weekend, and we welcome the volatility.

Let’s dive in, shall we? The big theme of the day was a strong sell-off in equities with interest rate exposure, including names such as $T, $HD, $LEN and $TOL. We highlighted the absurd move in $LNKD in our mid-day update, and $TSLA continued to muddle along in a tight range with light volume. The casinos looked alright today, with $WYNN leading the way up nearly 1%. $NFLX continued its flirtation with $300 while $AMZN remains within shouting distance as well.

We saw a number of small-cap names breakout including $HIMX, $RMTI and of course $FCEL. In terms of names we have a stake in, we were happy to see $T erase its gains from yesterday and boost the level of our puts. Put buying in AT&T has been heavy and the stock’s chart looks brutal. Any definitive word on tapering, and it could be curtain’s for AT&T’s stock. It is on a collision course with a major test of a two year break out channel, with support around $32.75.

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We decided to be prudent with our $FCEL position and took our stock position off for a nice profit. We still have our call options on as we think there is plenty of time for the stock to get going to higher levels, especially once we get the September option expiration out of the way.

However, we did initiate a new trade to the downside, buying the October $67.5 puts in Home Depot $HD. This stock has been on an absolute tear this year as it has been bolstered by a recovery in the housing market. However, as housing stocks have turned lower in recent weeks, $HD’s momentum has waned considerably. Given the stock’s reliance on the housing market for growth, rising rates could have a substantial bearish impact. The chart has also taken a turn for the worse since earnings. The stock has stayed above the Ichimoku cloud for the duration of 2013, testing the lower bound of the cloud just three of four times throughout the year and immediately bouncing each time. However, the stock appears to be rolling over and has broken through the cloud to the downside. The stock is hovering above support at $72.50 and could enter a key channel between $71.50 and $72.50 on tapering news.

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While we don’t necessarily believe tapering is bearish for the market overall, we think $HD and $T could be particularly exposed to rising rates, and we think these trades present compelling opportunities as risk-reward setups.

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.