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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.

 

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.