We sold off today, as I expected last night. However, we did bounce back pretty well into the close, making a bad day look less bad. The motivators for the selloff were the sell-the-news reaction to the victory of Scott Brown last night and the tightening news out of China. Both are a big deal fundamentally. Earnings came fast and furious today, and that continues tomorrow night. On the whole, the reactions today were pretty good.
I put a few trades on today. I'm now long RGR through common stock. I couldn't bring myself to buy into the RGR option chain. It's too thin for me. The fact that it has an options chain will allow me to sell covered calls and still buy puts for further downside protection (the purchase of common stock, sale of a covered call, and purchase of a put is called a collar). I generally prefer to buy options instead of common stock because options, when used properly, are inherently less risky, but I will make exceptions from time to time.
I also closed the sell leg of the FUQI call spread by buying back the February $22.50 calls I sold. I sold them for $1 each and bought them back for $0.25 this morning, netting a profit of $0.75. However, the trade is overall still a losing position, as the February $20 calls are still in my portfolio. If it fails to hold today's lows around $19 (which coincides with the 200-day EMA), then FUQI's heading back towards the previous low around $17. As it is, the breakout above the 50-day EMA is looking like a failed breakout.
CEU and JST are continuing to pull back, but these are so darn thin that I find them hard to buy. Also, neither is optionable, which greatly diminishes my margin of safety (if you're brainwashed into the conventional thinking about options, that statement probably just blew your mind).
I'm liking the action in IACI, CBI, SPAR, and ROST here. They're consolidating nicely. I'm kind of stuck in the CBI call spread because I sold calls way too early.
Away from the regular watchlist, I did a little buying in my 401k today. I have a massive cash position there because of some heavy selling I did late last year (my weekly charts are all still bullish, but I was feeling greedy and wanted to lock in profits). I will probably do a little more tomorrow on this pullback. I bought a little in my $IEE index fund (or EFA, if you prefer ETFs) and a little in my emerging markets fund, TEEMX. I'm now back at 4% in each of these. Tomorrow, I'll put a little more cash to work in SGIIX because I didn't today, which is my blended foreign fund, to take that one back to 4%. I believe the domestic indices have a bit further to fall, so that's why I didn't go after any of those today.
Position: Long CBI, FUQI, RGR, $IEE index fund, SGIIX, TEEMX
Disclaimer: This is not a recommendation and is presented for informational purposes only.
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