Blog Archives

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. 

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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.