Thursday, April 27, 2006

China rate hike (ouch)

First rate hike by China's central bank in 12 years, to 5.85% from 5.58%, creates selling in the morning. I sell NX and WIRE.

Trades
Sell NX
Sell WIRE
Both hedged positions

The broad market is rebounding as I type so it may be a mistake to get out. However, in my overall strategy, each trade has a limit as to how much of a loss I will take. I got out and will live to fight another day. It is easy to argue with the market and find reasons, real or imagined to justify holding on or adding more, however, stubbornness in traders (vs. value investors) is rarely rewarded.

Central bank rate hikes are rarely a positive sign, despite the rally in the U.S. with the Fed barrage of hikes. Old timers might know what I mean about rate hikes, the newer traders would wonder what the fuss is about.

Wednesday, April 26, 2006

Buy Encore Wiring WIRE

Trade

Buy/write on WIRE Encore Wiring (profile)
buy the stock, sell the May 40 call

I am selling the in-the-money call, making this a relatively conservative trade with small upside and higher odds of success. The catalyst is a blowout earnings report. I am not all in because a slow down in housing means less new wiring and the stock has had an amazing run from 8 to over 40. So far, any slowdown in housing has not impacted this company. The market capitalization is $900 million which is another reason to be a bit cautious.

Elsewhere, BUD Budweiser reports earnings and trades up. Beer is a mature market, and BUD has 50% share. If the option premiums were higher I'd be tempted.

BA Boeing reported nice earnings, opened lower then rallied. I sold my BA too soon, seven points lower.

Current positions:
WIRE Encore Wiring hedged
NX Quanex (steel) hedged
BAB British Air hedged
PGR Progressive (insurance)
* hedged means I own the stock and am short the call

Tuesday, April 25, 2006

NutriSystems NTRI

Almost everyone can see the social trend of weight and weight control. NutriSystems is up 33% today (chart), and is a ten-bagger just this year with a 52-week low of under 7. It is difficult to buy after a stock has had this kind of run. However, there is no chance I would want to short this kind of momentum.

Elsewhere, earnings from US Steel X, and Steel Dynamics STTX depress the sector. I am tempted to add to my position in Quanex NX as it dips to support below 45. No need to do so, so soon. Patience and eroding premiums are the friend of the option writer.

Pop-pop fizz-fizz seems common. PGR Progressive popped up on a 4-1 split announcement, but has come fizzled. Many other stocks that popped have also fizzled. It seems like the exception is stocks that can keep running. The pullback is often a good time to get in.

Monday, April 24, 2006

Rally in Bonds

Trades
ABX Barrick Gold called away at option expiration
PDLI PDL Biopharma April option call expires worthless
Sell PDLI to finish closing account as I move to another broker. Both ABX and this batch of PDLI are closed at just above break even, with commissions equaling or exceeding my profit.

Bond market continues a modest rally from an oversold condition. TLT is an exchange traded fund of 20-year US Treasuries (chart).

RMBS Rambus which was down on a rumor, gets a positive jury ruling and shoots up. All the options are tanking because a much bigger move was expected on both sides.

TZOO Travel Zoo continues an amazing rally since announcing its earnings. It shot up 42% on the day of the announcement to 29 and is now at 51! Holy Toledo.

Oil leads gold, silver and other metals lower. The steel stock NX I bought on Friday is tanking. ACI Arch Coal another stock I considered is leaping up again. This kind of event keeps me humble.

BEAV B.E. Aerospace up on earnings and I've added it to my watch list.

Friday, April 21, 2006

Bought NX Quanex

Trade

Buy/write NX Quanex
Buy the stock, sell the May 50 call

A picture perfect chart base and upward earnings guidance are the impetus to buy this steel stock.

Current holdings:
PDLI PDL Biopharma (slight chance of it being called)
ABX Barrick Gold (certain to be called away today)
BAB British Air (hedged)
PGR Progressive (auto insurance)
NX Quanex steel (hedged)

Elsewhere, Google reports blow out earnings and booms higher. Google announcing earnings just before options expiration creates a real crap shoot situation for option traders. Dell gets slammed by an analyst and almost becomes interesting on valuation. One "magic" number is one-times sales (currently at 1.17 times at $27 per share). Dell would have to drop to about $24 for that 1.0 price-to-sales ratio. Ebay and Intel continue lower after their earnings. Google is not providing much of a halo effect for other tech stocks.

Oil stocks provide leadership for the broad market. Oil also leads a recovery in both gold in silver after yesterday's dump, the precious metals have recouped a good deal of the losses. Again, my opinion is that these volative markets, especially silver, are only for the most nimble, or those looking to average in or average out of a position.

Thursday, April 20, 2006

The race goes to the Swift (SWFT)

SWFT (chart) a trucking company posts earnings and moves higher. A fuel surcharge has more than offset higher fuel costs. Elsewhere, DGX (chart) leads the medical equipment group higher. These two look the most promising out of today's earnings reports.

GM also reports and leads the Dow Industrials higher. The tape action on other notables such as INTC and AAPL are not so good, despite trading higher after hours and in early morning action.

For many, the big news of the day is the rout in gold and silver. Silver down over $2. Remember that I sold a couple of weeks back based on a potential double top in the HUI gold bugs index. Turns out that the XAU, a broader gold stock index is showing a very similar formation today (chart), a potential double top.

These volatile precious metal markets are only for the nimble, and most days I do not count myself in that group. At this point, I am much more likely to look to go short rather than the long. The first real rally after a blow off top is often a low-risk entry point on the short side.

Wednesday, April 19, 2006

Black Knight (BLK and NITE)

Zacks has an earnings surprise summary page that is very helpful during this time of quarter (link). Listed there are Black Rock and Knight Trading. Both are connected to the financial industry. Strong earnings and stock performance in these kind of stocks are a big positive for the overall market because this is a group that often leads the market.

I am hesitant to buy these two because both are a bit extended and valuations are a bit rich. Still, it is hard to argue with the earnings.

Lots of other movers JCI Johnson Control, TXN Texas Instruments, AMGN Amgen. Two biggies reporting later this week are Google GOOG and Apple AAPL. Schaeffer's reports a huge expansion in premiums on Google options (link).

Tuesday, April 18, 2006

It's a zoo out there (TZOO)

Travel Zoo, TZOO up 42% today on earnings (chart). This was one of the most shorted stocks of all time. Many a novice short seller lost their shirt on this stock during its halycon days. Shorting something just because it is over valued is not a sound strategy. Remember back to Sir John Templeton's looking for a trigger for selling short, not going on valuation alone. Momemtum can and does often carry stocks or commodities well past their fair value. Speaking of value, an interesting value play in the same industry is Priceline PCLN (stats), with a low price-to-sales and low price-earnings ratio.

Lots of stocks reporting, lots are moving. It is difficult to track them all. Here is a link with dollar gainers (not percentage movers). INFY Infosys Technologies reported yesterday. It is a software company based in India (profile). What cracks me up is the stated salaries of their top executives, $27k a year! Of course with stock options it is many multiples of that, but can anyone imagine.

Monday, April 17, 2006

Metals charge ahead

Gold, silver, copper, almost every other metal all charge higher. Calling "top" is a difficult game when the trend is this strong. That said, there are ways to measure possible moves. The only one I will hazard a guess on is gold projects to $675 based on the break out from the $575 level.

Thursday, April 13, 2006

Back to BAB (British Air)

Trade
Buy/write on BAB British Air, buy the stock, sell the May 60 call

For the most part the market is in pre-holiday mode, with the holiday tomorrow for Good Friday. One exception is AMD Advanced Micro. It is lower after guiding in-line to lower for next quarter. Readers might remember that I took a loss on AMD a few weeks back (6-month-chart). Again, survival is #1 in my book.

Wednesday, April 12, 2006

Progressive PGR

Trade
Buy Progressive Insurance PGR
A nice upside earnings surprise and a decent looking chart.

Earnings are what drive stocks for the long term. Short term, stocks sometimes bob and weave after earnings. Institutions that want to initiate or add to a position will usually buy over the course of several weeks or sometimes months.

Gold and silver continue to be strong. I am surprised at the strength in silver. I thought $12 would be the extent of the run. One interpretation of the gold chart projects to $675.

Current holdings 4-11-2006:
ABX Barrick Gold hedged
PDLI PDL Biopharma hedged
PGR Progressive Insurance (just bought today)

Tuesday, April 11, 2006

Four master investors

The April 15, 2006 issue of "Bottom Line Personal" has an article, "Suprising Habits of Master Investors." The four legends mentioned in the article are Warren Buffett, Carl Icahn, George Soros, Sir John Templeton. The "habit" for each of them:

* Buffett - Infinite patience, the example given is Washington Post, and how the stock went down after he bought and he waited it out to huge profits.

* Icahn - Passionately avoid risk, the example is a real estate investment trust , Baird & Warner. Icahn valued the company at $20 a share and bought at $8.50, giving himself a wide margin of error.

* Templeton - Act Instantly, the example is how he sold short dot com stocks in 2000. The trigger for each was the end of the "lockup period" for insiders.

* Soros - Buy as much as you can, the example is Jaguar and how he put 5% of his assets into the one investment.

A friend of mine mentioned that their significant other is just getting into picking stocks. The one piece of investing advice I shared is that there are a thousand ways to make money in the stock market, find one that works for you. One that fits your personality and temperament. Some people like to shop for bargains. Others like the latest fashion. Some people like to look at financial statements, others at charts. There are successful investors and traders of all stripes. What works well for one person may fail for the next.

The good news is that my new brokerage account is finally ready to go. Time away from the market can be healthy.

Monday, April 10, 2006

USO - new oil ETF

Today was the first day of trading for the new oil ETF. It seems to be trading at a discount to most spot prices quoted. The mechanics of it will become clearer with time.

Alcoa AA reporting earnings is seen by some as the official "kick off" for earnings season.

Friday, April 07, 2006

Bonds fall on employment report

A strong employment report is usually bad news for the bond market. Oldtimers might remember PBS host Louis Rukeyseyer's term "ghouls" of the bond market, because economic pain for others was good news for bond bulls. TLT is an ETF for long term treasuries. Chart looks like hell.

Research in Motion RIMM is lower on earnings and guidance.

Gold retreating from $600, while silver holds above $12. Silver stocks, however, are lower.

Thursday, April 06, 2006

$600 gold, Sotheby's (BID)

Front month gold futures touch $600. Like I said, I sold my gold fund last Friday. It is up about 5% this week. Not my brightest move, not by a long shot.

Sotheby's BID steaming higher. I missed the breakout a couple of months back. Geez, talk about a powerful chart.

My new account isn't ready yet, hopefully tomorrow.

Wednesday, April 05, 2006

Hey Jude STJ

St. Jude Medical down on lower guidance (chart) .

Boeing BA has several analysts making positive comments.

Apple Computer AAPL up on its "Boot Camp" project to let the new Intel-processor Macs run Windows. This lets Mac fans buy this computer and still run PC games. Game companies are reluctant to port their products to the Mac when their market share is in the single digits.

Looking at the AAPL chart, it is right at the 200-day-moving-average.

My new account will be ready to go soon. Hopefully by the end of the week. My new broker is one of the those reviewed in the March 6, 2006 issue of Barron's.

Tuesday, April 04, 2006

A Best Buy (BBY)

Best Buy up nicely, nice chart too (2-yr-chart). Here is the AP story about cost-cutting (story).

Elsewhere, MRK ups its guidance, GM back under 20, MO nearing support at 70.

Monday, April 03, 2006

Green is not so good

It kinda s*cks when you sell and the market moves higher. Yes it does. It all looks so easy with those hindsight glasses. I am almost entire in cash and equivalents and the market is up. Industrial metals and Farm equipment are the leading industries (link).

I am still in the processing of moving my brokerage account. However, the mutual funds I sold Friday are not under that cloud. I just sold too early. Until next time.