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. 

Advertisements

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.

Image

 

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.

Image

 

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!

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.

Image

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: 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.

Image

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: 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.

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.

Image

 

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.