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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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. 

Manic Monday

Good morning y’all. Well, not much has changed overnight as S&P futures continued to hover near the 1700 level. The buzz around a Janet Yellen appointment as Federal Reserve Chairman continues to grow, and some talking heads are speculating that we’ll get some direction from the White House in the next 72 hours as to who the next Chairman will be.

Interest rates will obviously be in focus quite a bit this week with discussions about not only the Fed Chairmanship, but also the September Fed meeting where the T-word will undoubtedly be uttered quite a bit. We’ve seen the 10-year knock on the door of 3% in the last two weeks before retreating in recent sessions to roughly 2.8%. Yields could take another hit today as the presumed hawkish candidate Larry Summers withdrew his name from the Chairmanship race yesterday, though we believe the market is overselling just how dovish Janet Yellen is (and, for that matter, just how hawkish Summers is).

On to the markets: There will be green. Just about everything that has traded at least one share this morning is in the green, and our longs are no exception. We peeled off our $DDD long last Friday for a nice one-day gain, but that 3-D printer is poised to move higher this morning. Our current longs $GOOG, $NFLX, and $FCEL all appear poised for a higher open.  $NFLX has held up particularly well all year, and could be poised to break out this week above this year’s (and last week’s) high of roughly $315. The stock had a nice reversal off of the 8-day EMA on Thursday that could’ve provided entries and bounced again off of that level on Friday and sustained its gains.

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Google looks strong this morning as well with the stock tagging $897. While the chart isn’t as strong as $NFLX, the stock provided another potential entry on Friday as it reversed off of the 8-day EMA as well. Look for a move over $898-$900 to send the stock to the $909-$913 level. If the stock can get through there, look for it to make a run at all-time highs once again.

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Keep an eye on $TSLA, as the stock held up above its 20-day moving average despite being under some pressure last week from the shorts. The stock is moving higher this morning (duh) and could take another run at all-time highs if it gets continuation. The bulls have been calling the last few days a consolidation, while the bears are saying the stock is out of gas. Let the market decide for you, then act. Don’t let your opinion get in the way of momentum.

 

Watch out for the broader market to hold or begin to cede its gains in early trading. If stocks hold up, we could see a continuation move higher throughout the session and into tomorrow. However, with all of the economic news on deck this week, it may be prudent to take some profits to avoid any negative reaction coming out of the Fed meeting or rumblings of an appointment of a new Fed Chairman. Still, Monday appears to be a profitable day for those of you who leaned long today.

Happy trading!

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!

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.

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.