Weekly Review:
We had a couple days of bounce, but then it was straight back down until the last hour on Friday. The real dip-buyers continue to be MIA, but many domestic indices are approaching their 200-day EMAs (and many foreign indices have broken their 200-day EMAs).
Weekly Preview:
Earnings continue to slow, as many of the big names have already reported. As with last week, we're still oversold, perhaps more so, and a bounce is probably coming (again). This correction is a good thing.
Earnings season keeps going this week. Here's a breakdown of the ones I'm watching day by day. Note that when I say, "For [blank] morning," I mean the stock reports earnings either after the close the previous day or before the open on that day.
Monday: BWP, CVS, HAR, HAS, HS, L, LO, MCY, NTE, GOLD, NDAQ,
Tuesday: ADCT, ANDE, AINV, AEC, ATML, AXS, CPT, CRL, CMP, ERTS, ESLR, FWRD, GFA, HIG, HIMX, IUSA, LNCR, LNC, NUAN, OMI, PIKE, SLRY, SWI, TCK, TMRK, PFG, TRID, VMC, ACM, AGCO, AGU, ANR, BIIB, BJS, CAM, CE, CHD, CTSH, CGEN, CVH, CYNO, EOG, IACI, ITUB, KUB, MLM, TAP, NYX, PHM, TIN, KO, UBS, VSH,
Wednesday: ASEI, BIDU, CPST, CERN, LGF, NTGR, DIS, XL, MT, BHP, BSX, BHS, CCE, CSC, SCOR, DF, DISCK, ELN, EQIX, FORR, ICE, ID, LNCE, LVLT, MMC, OMC, SNY, SNI, S, NYT, WYN
Thursday: ATVI, AMKR, STV, CLB, XRAY, ELON, RE, LFT, MAS, PRE, PAA, PRU, ALL, VALE, AKNS, ALU, ARE, ALXN, AN, BWA, CS, DVA, DYP, ECA, EXPE, FLIR, GPI, JASO, LH, MFC, MAR, MFE, OZM, PTEN, PEP, PM, SKYW, STO, STRA, THS, VFC, VIA, WWE,
Friday: A, ACL, AB, BJRI, NILE, BWLD, CEPH, CMG, CSTR, BGC, IPAS, TUNE, MOH, NED, PNRA, PNSN, PRAA, RNWK, STMP, CAKE, DUK, IR, NAT, PDS, SAAB, UPL,
Monday: PAAS,
For a preview of this week's major economic announcements, I'll send you here. Michael McDonough does a better job of summing this stuff up than I could. Since this is a stock-picking blog versus an economics blog, I typically won't talk about this kind of stuff. Also, for a better preview of the week's market-related events, I'd recommend going here. TheStreet.com typically has a good weekly preview article for more stock-related events.
Position: None
Disclaimer: This is not a recommendation and is presented for informational purposes only.
Links in the post: http://fiateconomics.com/ , http://www.thestreet.com/
Saturday, February 6, 2010
Daily View Friday 5 February 2010...
Friday was a whole bunch of ugly until the final hour, when a rumour of a Greek bailout hit the wires and caused a massive short squeeze, allowing the market to largely undo the damage done earlier in the day, and in some cases, close green. I am not surprised at all by this, and let me explain why. In short-term downtrends, like what we've been in for the past few weeks, the bears tend to cover their shorts on Friday afternoon to lock in profits ahead of the weekend. This is pretty common knowledge on the Street. This reduces downside pressure on the market and actually puts upside pressure on it as the shorts cover. But, to bring in actual buyers, not just short-covering, you have to give them a catalyst. What better catalyst than a rumour pertaining to a solution to one of the market's recent major worries (Greece, which the smart crowd has known for months was a problem even though it just hit the headlines in the past couple weeks, but I digress)? This rumour sparks actual buying. It's a bit too perfect to be a coincidence, and I have no doubt someone strategically leaked the rumour at just the right time to the media. It happens ALL THE TIME on the Street. Check out this video from Jim Cramer about a similar matter he made several years ago.
I closed my CBI calls today. It broke below support, as I feared it would yesterday due to the increased volume on yesterday's downdraft.
ROST has a little uptrend going, and I'm liking a buy in this one.
We're seeing some big breakdowns, as well. EME, FUQI, JST, JTX, and NEU all broke down. My FUQI calls are pretty much worthless, of course.
The shorts are all working, and TSL just rallied back nicely. This could be shorted here. CHRW, EJ, NTES, QCOM, and R also appear to have further downside. ARO and GFRE also look like they could be shorted here.
I'm going to clean out the watchlist a bit this weekend.
Position: Long CBI, FUQI
Disclaimer: This is not a recommendation and is presented for informational purposes only.
Links in the post: http://www.youtube.com/watch?v=HRa0B34jMOQ
I closed my CBI calls today. It broke below support, as I feared it would yesterday due to the increased volume on yesterday's downdraft.
ROST has a little uptrend going, and I'm liking a buy in this one.
We're seeing some big breakdowns, as well. EME, FUQI, JST, JTX, and NEU all broke down. My FUQI calls are pretty much worthless, of course.
The shorts are all working, and TSL just rallied back nicely. This could be shorted here. CHRW, EJ, NTES, QCOM, and R also appear to have further downside. ARO and GFRE also look like they could be shorted here.
I'm going to clean out the watchlist a bit this weekend.
Position: Long CBI, FUQI
Disclaimer: This is not a recommendation and is presented for informational purposes only.
Links in the post: http://www.youtube.com/watch?v=HRa0B34jMOQ
Thursday, February 4, 2010
Daily View Thursday 4 February 2010...
The ugly came back today with a vengeance. We started the day with a big gap-down open on the indices and we never looked back, as we have now pretty much fully erased the oversold bounce from earlier this week. Volume picked up today as we took out last week's lows. There's absolutely nothing good I can say about today's action.
We're learning now just how much of a disaster the European Union really is. We saw it today in the earnings report of STD. Tomorrow, we have the big annual jobs report on tap. You know, the one that may have underestimated job losses in the past year by about a million or so. :-p Stupid birth/death model, but I digress. The market is clearly not expecting anything good there, either.
We're getting more and more oversold as we approach various support levels. The action definitely got ugly today, but if there's even a slight upside surprise tomorrow morning, we could have a snap back higher.
I made no trades today because I was in meetings most of the day. CBI is now a bit disconcerting to me, though. It bounced a bit this week, which I expected because the volume on its first selloff leg really wasn't that fierce. Today, however, marked a noticeable surge in volume as it sold off. That said, it held the 50-day EMA. CBI is holding tough. If it drops below this week's lows, however, I'll sell and take my loss.
Pretty much every short I mentioned dropped hard today. Too bad I wasn't in any of them. That's the thing about shorting versus going long. When you short, the declines are much quicker and much more vicious once they start, whereas going long usually entails a gradual grind higher. It makes sense if we think about the emotions involved. Either way, it's fear. When a stock is rising, one fears missing the profit, but when a stock is dropping, one fears the loss of capital. Obviously, the latter's going to be a more powerful fear because in that case, you lose money versus in the former where you simply don't win money. Losing is not the same as not winning. It's the way our minds are wired generally. So, the downdrafts set in much quicker and are much more violent. That means I have to be a bit more willing to be anticipatory with my shorts, rather than reactionary. Shorting isn't simply the inverse of going long.
I'm actually pondering a format change for the blog and my general approach. In a nutshell, I've realized that I have trouble trying to watch so many stocks for short timeframe trades and I've realized that I have an easier time if I focus on the indices. It narrows down my universe for daytrading and short timeframe trades, which is very important for me because I have a tendency to try to watch everything and subsequently miss everything. So, I'm considering shifting my focus on short-term stuff more towards the indices and picking stocks more from a longer-term perspective. That was part of the original goal of the blog, anyway. I'll probably shift it to picking a new longer-term stock play each week while updating daily about the current picks and the action in the indices. So, the watchlist will probably be pretty well cleaned out and rebuilt again.
Position: Long CBI
Disclaimer: This is not a recommendation and is presented for informational purposes only.
We're learning now just how much of a disaster the European Union really is. We saw it today in the earnings report of STD. Tomorrow, we have the big annual jobs report on tap. You know, the one that may have underestimated job losses in the past year by about a million or so. :-p Stupid birth/death model, but I digress. The market is clearly not expecting anything good there, either.
We're getting more and more oversold as we approach various support levels. The action definitely got ugly today, but if there's even a slight upside surprise tomorrow morning, we could have a snap back higher.
I made no trades today because I was in meetings most of the day. CBI is now a bit disconcerting to me, though. It bounced a bit this week, which I expected because the volume on its first selloff leg really wasn't that fierce. Today, however, marked a noticeable surge in volume as it sold off. That said, it held the 50-day EMA. CBI is holding tough. If it drops below this week's lows, however, I'll sell and take my loss.
Pretty much every short I mentioned dropped hard today. Too bad I wasn't in any of them. That's the thing about shorting versus going long. When you short, the declines are much quicker and much more vicious once they start, whereas going long usually entails a gradual grind higher. It makes sense if we think about the emotions involved. Either way, it's fear. When a stock is rising, one fears missing the profit, but when a stock is dropping, one fears the loss of capital. Obviously, the latter's going to be a more powerful fear because in that case, you lose money versus in the former where you simply don't win money. Losing is not the same as not winning. It's the way our minds are wired generally. So, the downdrafts set in much quicker and are much more violent. That means I have to be a bit more willing to be anticipatory with my shorts, rather than reactionary. Shorting isn't simply the inverse of going long.
I'm actually pondering a format change for the blog and my general approach. In a nutshell, I've realized that I have trouble trying to watch so many stocks for short timeframe trades and I've realized that I have an easier time if I focus on the indices. It narrows down my universe for daytrading and short timeframe trades, which is very important for me because I have a tendency to try to watch everything and subsequently miss everything. So, I'm considering shifting my focus on short-term stuff more towards the indices and picking stocks more from a longer-term perspective. That was part of the original goal of the blog, anyway. I'll probably shift it to picking a new longer-term stock play each week while updating daily about the current picks and the action in the indices. So, the watchlist will probably be pretty well cleaned out and rebuilt again.
Position: Long CBI
Disclaimer: This is not a recommendation and is presented for informational purposes only.
Wednesday, February 3, 2010
CHRW and R (Short)...
I've got a pair of shorts tonight. Normally, I wouldn't combine two picks in the same post, but I am here. The reason is both are truckers and both have similar charts and both reported earnings today. CH Robinson Worldwide and Ryder both disappointed the markets today with their earnings and both look destined to fall. In the short term, I believe CHRW has better downside, but in the long term, I believe R has better downside. So, I'd be inclined to end up taking a combined full normal position size for me, but divided in half between these two. If a position for you is normally 10% of your portfolio, I'd commit 5% to both names to reach 10%, for example.
The technical setup is pretty straightforward here. We have two stocks who broke their 200-day EMAs on heavy volume and left gaps behind. Furthermore, we have two stocks who broke down out of multi-month bases, leaving a lot of overhead resistance behind. These are decisive breakdowns, and I expect any effort to rally will be met with aggressive selling and shorting. Transports in particular are a good place to look to short if you are bearish on the economy and/or expect a double-dip scenario to play out (which I am and I do). Even if you disagree with that and have your portfolio positioned accordingly, a short in either or both of these through puts would provide a nice hedge.
As for the options, I'm looking for a multi-month decline, so I'm willing to go a bit further out in time, but I also believe there will be a more immediate decline following a little relief rally. So, in CHRW, I'm looking at some more near-dated contracts, say a put spread involving the purchase o the February $55 puts and sale of the February $50 puts. Going a bit further out in time, I'm looking at creating another call spread involving the May $55 puts and the aforementioned February $50 puts. I'll of course look to enter the buy leg on the rally and enter the sell legs on the drop. R is a bit trickier because its chain has wider bid/ask spreads. I think R is going to get some strong support around $30, so I'd be inclined to sell puts around the $30 strike. For instance, I'd consider buying the May $4o puts and then looking to sell the May $30 puts.
Position: None
Disclaimer: This is not a recommendation and is presented for informational purposes only.
The technical setup is pretty straightforward here. We have two stocks who broke their 200-day EMAs on heavy volume and left gaps behind. Furthermore, we have two stocks who broke down out of multi-month bases, leaving a lot of overhead resistance behind. These are decisive breakdowns, and I expect any effort to rally will be met with aggressive selling and shorting. Transports in particular are a good place to look to short if you are bearish on the economy and/or expect a double-dip scenario to play out (which I am and I do). Even if you disagree with that and have your portfolio positioned accordingly, a short in either or both of these through puts would provide a nice hedge.
As for the options, I'm looking for a multi-month decline, so I'm willing to go a bit further out in time, but I also believe there will be a more immediate decline following a little relief rally. So, in CHRW, I'm looking at some more near-dated contracts, say a put spread involving the purchase o the February $55 puts and sale of the February $50 puts. Going a bit further out in time, I'm looking at creating another call spread involving the May $55 puts and the aforementioned February $50 puts. I'll of course look to enter the buy leg on the rally and enter the sell legs on the drop. R is a bit trickier because its chain has wider bid/ask spreads. I think R is going to get some strong support around $30, so I'd be inclined to sell puts around the $30 strike. For instance, I'd consider buying the May $4o puts and then looking to sell the May $30 puts.
Position: None
Disclaimer: This is not a recommendation and is presented for informational purposes only.
Daily View Wednesday 3 February 2010...
The bounce continued today, but across the board, volume was pretty anemic. Honestly, it was a rather boring trading day. The market seemed to be in wait-and-see mode regarding many things, ranging from CSCO's earnings tonight (it's trading up a couple percent in the aftermarket, but nothing crazy) to news on Europe and China to news out of the US (jobs report on Friday).
No trades today. I was tempted on both the long (IACI, JTX, SPAR) and short (EJ, NTES, TSL) sides, but did nothing on either side.
Position: None
Disclaimer: This is not a recommendation and is presented for informational purposes only.
No trades today. I was tempted on both the long (IACI, JTX, SPAR) and short (EJ, NTES, TSL) sides, but did nothing on either side.
Position: None
Disclaimer: This is not a recommendation and is presented for informational purposes only.
Tuesday, February 2, 2010
Daily View Tuesday 2 February 2010 (Groundhog Day edition)...
Happy Groundhog Day. The critter saw his darn shadow today, so six more weeks of winter. Boo. Maybe the forecast helped the market today because the market rallied again today. Who knows? Since the market seems to be tied to oil, maybe the forecast for more winter propped oil. I have no idea, but the rally continued. Volume was mixed compared to yesterday, lower on some indices and higher on others. We'll have to see if the rally continues, as we're now approaching resistance at several 50-day EMAs. The bears are in charge until we've reclaimed those levels. We saw a lot of this in the second half of 2009. Whenever the market was on the brink of technical breakdown, the bulls saved the day and powered higher. Conventional technical analysis says these V-shaped bounces should not be trusted, but the pattern established over the past six months says otherwise. In essence, the exception has now become the rule unless proven otherwise.
No trades today in any account.
Again, I'm liking what I see in CBI on the long side. I'm also liking EME holding support like it has. This one is looking worthy of a nibble on the long side for a starter. IACI and SPAR are looking good, too.
On the short side, EJ's rallying a bit for me, and I'm liking that. Same with TSL. These are the lowest-risk short setups right now.
Position: Long CBI
Disclaimer: This is not a recommendation and is presented for informational purposes only.
No trades today in any account.
Again, I'm liking what I see in CBI on the long side. I'm also liking EME holding support like it has. This one is looking worthy of a nibble on the long side for a starter. IACI and SPAR are looking good, too.
On the short side, EJ's rallying a bit for me, and I'm liking that. Same with TSL. These are the lowest-risk short setups right now.
Position: Long CBI
Disclaimer: This is not a recommendation and is presented for informational purposes only.
Monday, February 1, 2010
JTX (Long)...
This is an example of my inner value investor. Jackson Hewitt is the US's second largest tax preparation firm, behind H&R Block. JTX has had some major issues over the past few years, issues of the legal, operational, and financial natures. This is how a stock drops 90%.
JTX also has a LOT of debt, way more than I like to see typically (the current ratio is 0.85 and the debt/equity ratio is ~150%). Because of the high debt and previous years' earnings consistency issues, JTX does not score favourably on the screens. On the plus side, its price/sales ratio is ~0.3 and the P/E ratio is ~3.5. JTX does not pay a dividend and does not report earnings again until probably early March (I can't find a date, but the last quarter was reported back in early December).
The chart also looks like death warmed over. Again, that's what happens when a stock drops from $30 to $3 in a couple years.
What I like here is the options chain. JTX's options are dirt cheap and there are a lot of ways to play, and though the common stock is viable, I would rather play with the options. The April $2.50 calls trade at $0.7/$0.8 bid/ask, so you can sell March and/or April $5 calls against these to reduce your downside and still leave you with a tidy profit should the stock rally past $5.
Position: None
Disclaimer: This is not a recommendation and is presented for informational purposes only.
JTX also has a LOT of debt, way more than I like to see typically (the current ratio is 0.85 and the debt/equity ratio is ~150%). Because of the high debt and previous years' earnings consistency issues, JTX does not score favourably on the screens. On the plus side, its price/sales ratio is ~0.3 and the P/E ratio is ~3.5. JTX does not pay a dividend and does not report earnings again until probably early March (I can't find a date, but the last quarter was reported back in early December).
The chart also looks like death warmed over. Again, that's what happens when a stock drops from $30 to $3 in a couple years.
What I like here is the options chain. JTX's options are dirt cheap and there are a lot of ways to play, and though the common stock is viable, I would rather play with the options. The April $2.50 calls trade at $0.7/$0.8 bid/ask, so you can sell March and/or April $5 calls against these to reduce your downside and still leave you with a tidy profit should the stock rally past $5.
Position: None
Disclaimer: This is not a recommendation and is presented for informational purposes only.
Daily View Monday 1 February 2010...
Well, we got the start of our bounce today, as the bulls were able to string something together. It wasn't much, but it was better than they've mustered the past two weeks. Indeed, compared to the selling barrage of the past two weeks, today was pretty anemic. We'll have to see what the bulls have for tomorrow. Though I am still inclined to look to short for quicker trades, I do still believe the broader uptrend remains intact, so it's a short-term bearish, intermediate-term bullish view.
I didn't make any trades today in any of my accounts. Right now, I'm content to give the bulls some room to try to take us higher in the next couple days, though I do expect any such bounce to fail and I expect the bears will be able to drag us lower.
I'm really liking the rallies in EJ, QCOM, and TSL today. These are setting up quite nicely on the short side.
I'm also really liking CBI's action. It held tough during the selling, and today the volume was heavier today on the upside than it was last week on the downside, which is a good thing.
EME held where it had to today, and this one could bounce a bit off the 200-day EMA. IACI and SPAR are also looking good at support.
JST and NEU are probably going to be taken off the watchlist soon. NEU tanked following its quarter and JST is not looking so good.
Position: Long CBI
Disclaimer: This is not a recommendation and is presented for informational purposes only.
I didn't make any trades today in any of my accounts. Right now, I'm content to give the bulls some room to try to take us higher in the next couple days, though I do expect any such bounce to fail and I expect the bears will be able to drag us lower.
I'm really liking the rallies in EJ, QCOM, and TSL today. These are setting up quite nicely on the short side.
I'm also really liking CBI's action. It held tough during the selling, and today the volume was heavier today on the upside than it was last week on the downside, which is a good thing.
EME held where it had to today, and this one could bounce a bit off the 200-day EMA. IACI and SPAR are also looking good at support.
JST and NEU are probably going to be taken off the watchlist soon. NEU tanked following its quarter and JST is not looking so good.
Position: Long CBI
Disclaimer: This is not a recommendation and is presented for informational purposes only.
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