Thursday, May 31, 2007

Sell CYPB Cypress Bioscience

I sell CYPB Cypress Bioscience for a loss (sell stock, buy back the June 17.5 call).

News is a secondary offering of 4.7 million shares at 15.5. Yuck. The stock may recover, but cutting losses is my style. When I think it is time to bend the rule, that is often the worst time to do so. This is big percentage hit for such a short holding period, but knowing that this is a speculative stock the position size is small.

Wednesday, May 30, 2007

Buy JWN Nordstroms (sell puts)

Sell July 50 puts on JWN Nordstroms. This is equivalent to a buy/write. Another equivalence is putting in a bid to buy JWN at below 50. I like today's recovery from a weak opening and decent support at 50 (chart).

Shorts target AMZN Amazon

Schaeffer's (link) says AMZN Amazon is the target of put buyers and short sellers. It wasn't enough for the stock to jump and demolish an army of bears. New bears are lining up, or old bears doubling their bets. Odds favor another spike up, or sideways action. Any corrections will tend to be shallow as all those bears will want to cover. As of this writing 18% of the entire float is now short, a number that has gone up considerably from the day the stock jumped.

As I always say, calling tops is a dangerous and rarely profitable game. A lot more would be top calling bears will likely be wrong before the top in AMZN is in.

Two more reasons for concern

The Chinese stock market is selling off on news of an increase in taxes on stock transactions. It will be interesting to see how much linkage there is.

Another reason for concern is the weakness in the U. S. Treasury bond market. Here is a chart of TLT, a U. S. long bond exchange traded fund (chart).

On Tuesday, my CYPB Cypress Bioscience sold off on apparent profit taking. TXN Texas Instruments is my only other position.

Monday, May 28, 2007

Band picks NWS, TGT, TOL

Richard Band cited in a MarketWatch article picks NWS News Corp, TGT Target, TOL Toll Brothers (article). Band remains bullish on the market saying that at what should be a rollicking party half the guests are asleep.

Quite a few folks missed this rally, or like me have been uninvested. This means there is a lot of dry powder to fuel a run to higher highs. It is unlikely to be straight up, however, when there is are a lot of folks looking to get in, corrections tend to be shallow and quick.

Friday, May 25, 2007

Buy/write TXN Texas Instruments

Buy/write TXN Texas Instruments, sell the July 35 call. TXN breaks out from a five year base. Strong support at the gap at 34 (5-year-chart).

Positions: CYPB, TXN both hedged, long stock, short calls.

Thursday, May 24, 2007

Buy/write CYPB Cypress Bioscience

Buy/write CYPB Cypress Bioscience
Buy the stock, sell the Jun 17.5 call. I am impressed with the stress in this speculative issue with most stocks moving lower today. Bears may get frustrated on CYPB and some may move on to greener pastures. A lot of longs got burned on DNDN and either are out of the game or gun shy.

NTAP Network Appliance is down on poor earnings projections. I'll watch it and look for shorting opportunities.

Wednesday, May 23, 2007

CYPB Cypress Bioscience

I was tempted to buy CYPB Cypress Bioscience (chart) today, as it doubled in price on news of positive drug trial results. It is a $500 million company after the jump in price, and only has one drug. The recent disaster in DNDN Dendreon, makes a lot of bulls extra cautious, and bears extra greedy. That kind of sentiment makes for a bullish scenario.

Elsewhere retailer TGT Target reports good results and the stock gaps higher, only to fade by the end of the day. JWN Nordstrom follows a similar pattern. It looks to me, that a major player such as a mutual fund or hedge fund is unwinding a large position, selling some every day for the past three weeks or so. For JWN, 50 looks like support (chart).

Tuesday, May 22, 2007

The path of least resistance is higher

The path of least resistance is higher. Yes, the market is over extended on the upside. However, a lot of folks are cautious, myself included, and that will limit any downside. Another cliche that comes to mind is "never short a dull market." Today's market action, other than a few special situations, qualifies for dullsville.

MGM the casino operator is in the news. Readers will remember I bought puts and got out at break even. The huge gap open up is one reason I prefer buying puts to shorting stocks. However, that is my personal preference, not necessarily something that will work best for everyone. If positions are small, shorting stocks is not inherently any more risky than buying put options. The devil is in the details of money management and how much is allocated to any one position.

A couple of stocks I am watching closely as potential longs include JWN, TXN, KMX.

Monday, May 21, 2007

High level breakout on AMZN Amazon

A high level breakout on AMZN Amazon punishes the bears. Arrogant shorts publicly announce taking on large new or additional short positions. I interpret this to mean AMZN is likely to go higher. My technical projections are 73 to 78 (chart) with the stock currently at 68. Risk is high for both longs and shorts.

To think I made money buying puts on AMZN just a little while back. Today I am tempted to go long, however, that would be more of an excitement and sentiment trade than a risk-reward analysis.

Elsewhere, CPB Campbell Soup has decent earnings. JWN Nordstrom and JCP Penney had good earnings last week. WFMI Whole Foods Market is opening up some large stores with a higher level of service. WFMI is a fallen star, having lost its luster. Moving more up market may help. Valuation of the stock is reaching a reasonable buy level. Technicals still look weak, with a projection to 35 (currently 39 to 40).

No current positions.

Thursday, May 17, 2007

Case Studies by Jeff Kohler

Something worth sharing: some entries and exits with charts by Jeff Kohler (link).

Market seems incredibly strong, with buyers coming into every dip. Options expiration is tomorrow (Friday). It will be interesting to see if the bullish bias continues, or even picks up after option expiration.

If I had to buy today: EWJ Japan Fund ETF and BRKB Berkshire Hathaway
If I had to short: AMZN

Gold continues to be high risk, low reward for longs. Clive Maund observes a continuing large number of commercial shorts and speculator longs, making for very high risk for short term longs at Kitco Commentary (link). I don't see it as a good time to be short gold either.

Wednesday, May 16, 2007

What year is it in China?

True Contrarian (link) and Random Roger (link) both mention China in their latest entries. Mr. Kaplan at True Contrarian sees a late stage bubble. Mr. Nusbaum the ETF investor reports a recent IPO going up 71% on the first day. Nusbaum is primarily interested in what spillover a correction or crash in China will have around the world.

Bubbles do tend to pop, though most of the time they expand far beyond the wildest projections of fair value. When a bubble is forming far away, it is more difficult to collect anecdotal evidence. Anecdotal doesn't survive backtesting, and it isn't a surefire indicator. However, in the case of bubbles, it can be powerful.

Closer to home, the U. S. stock market had another bull day. Gold and silver got hit hard. Those that bought last week on the $15 down day in gold are underwater. Some novices that bought that dip, may be in the wishing and hoping mode, rather than managing their risk.

JBX Jack in the Box

JBX Jack in the Box up on earnings. JBX saw a pop on Monday after TV comments by Jim Cramer, and had a nice pop at the open today (3-month-chart).

Another Cramer mentioned stock, and one that I had a position in, AAPL Apple, slides on news of AMZN Amazon launching a music download service. I covered my short near the all time high of 110 on Tuesday and now it is in the 105 range :(.

Mistakes are average, losses are going to happen. No one bats 1000, except perhaps a few specialists that get out immediately after they get in and have access to the order book. The only others that bat 1000 are those paper traders that post their entry and exit well after the events have taken place.

Traders, in particular, need to recognize that losses will happen and not take any one loss or gain to heart. It still hurts when something like this happens. The best thing for a person to do is look at the entry and exit objectively and try to learn from the experience.

My personal style is to cut losses, usually very quickly. Other traders and investors can be, and have been successful with other styles.

Tuesday, May 15, 2007

Cover AAPL and SPY shorts (sell puts)

Sell SPY Jun 149 put
Sell AAPL Jun 105 put

These shorts are not working out. I am taking my lumps. May expiration is this week, and Wednesday is often rollover day. Option premiums get hit hard on the out month during the rollover process.

I took big percentage losses on these puts options, however, actual dollar amounts are not that big.

Monday, May 14, 2007

Airlines stocks falling

Higher oil and worries about a slowing economy have hit many of the major airline stocks hard. UAUA United, AMR American, LCC U.S. Air are all in waterfall declines. CAL Continental is holding. Overseas, BAB British Air, RYAAY Ryan Air are also breaking down.

These would all be high risk shorts or longs at this point in time. Why it is relevant is that transports sometimes lead the market. The rail sector has been supported by Warren Buffett's interest. Without that it could look like a real bloodbath in the Dow Jones Transports. As is, the transports confirmed the recent high in the industrials. Some will say that the numbers are the numbers and that no matter the reason, a new high is a new high.

Sell ACTIX Capital Value Fund

Sell ACTIX American Century Capital Value Fund

This is long term money, away from my trading account. Sell in May, buy in October has become somewhat of a market cliche. However, when the market has gone almost straight up for six weeks now, it seems like an especially good idea.

Friday, May 11, 2007

Bears get spanked--ouch

Tame inflation data sends the bears scurrying. I continue to hold my puts on AAPL and SPY. My puts got hit hard on today's rally. AAPL makes a new all time high. The only saving grace is that these are small positions, and downside is contained to the total price of the option.

Thursday, May 10, 2007

Short SPY Spyders ETF (buy puts)

Buy SPY Jun 149 puts
SPY is the Standard and Poors 500 index ETF

Downside target 145 on SPY.

Short AAPL Apple (buy puts)

Buy AAPL June 105 puts, Apple Inc

Stock looks extended, yesterday's high is resistance. Apple is one of the leaders in this bull market, and if the bull is ready to rest, as I believe, it will get hit hard. Short interest is small, so any buying big enough to move this big stock is going to come from fund managers or other big boys. The Apple story is still exciting, with the new IPhone coming out, high Mac computer sales, record IPod sales, however, all of that information is in the price. All of that and then some.

GLD Gold year to nowhere

I haven't mentioned gold recently. There is not much to write about. Gold remains in a relatively narrow range and looks like it is building a long term base (2-year-chart). The recent weakness is only a buying opportunity for scalpers. The upside remains limited to the old highs from last May. The downside is all the way back down to 600 (60 on GLD). The chart for GDX Gold stock ETF doesn't look much either, with limited opportunities at significant risk for longs or shorts. Readers know that I favor high probability trades with at least the perception of low risk.

The broad stock market is getting hit today. Is this the start of a bigger sell off? If I had to bet, I would bet yes. The 12 month calendar seasonality is against the market now, though the presidential election cycle still counts as bullish. Sentiment is again complacent. The market news seems dominated by mergers and shooting stars on earnings news. Most of the earnings movers are getting to their price targets lickity-split without much correction.

Mergers and acquistion activity, I see as bullish. However, the house of cards can tumble if a high probability merger falls through and the merger arbitrage scalpers get the rug pulled out from under them.

Well, like gold's year to nowhere, this blog entry doesn't have much new to report, that most readers don't already know.

Wednesday, May 09, 2007

Easy come, easy go DNDN Dendreon

DNDN Dendreon completed a round trip rocketship ride, from 5 to 23 and now back to 6 (3-month-chart). Last month, promising data from one of their drugs launched the stock to the moon. Today's plummet due to the Federal Drug Administration requesting another clinical study.

Elsewhere, the Fed stands pat, and the market drops for about 15 seconds before rallying. TXN Texas Instruments raises its targets on gross margins. B Barnes Group up on earnings.

FLR Fluor got a $1 billion contract to do work in Saudi Arabia and trades above 102. I can only shake my head because I sold early yesterday in the 95 range. The conference call went well, and the good news from FWLT Foster Wheeler give FLR a boost.

One bullet I dodge is TM Toyota, which was down a bit on earnings. Sometimes it is mystifying why stocks move on their earnings, sometimes it is clear. Another stock I am watching is GTRC Guitar Center. GTRC was up on earnings. It has a market cap of $1.5 billion (stats).

Positions: none, all cash for now

Tuesday, May 08, 2007

Sell BA, cover MGM short

Sell BA, Sell MGM May 65 puts

More of a market decision than an individual stock decision.

This leaves me all in cash for now. Cash can do wonders for clearing the mind.

Cover AMZN short (sell puts)

Sell AMZN May 65 puts. I don't like the tape action in AMZN and I cover my short. I kick myself for missing the shot down below 60 to take out stops. Poor intraday timing costs me a good chunk, as it did in FLR, which has rallied a bit after the weak open. Good thing I am not a daytrader, because these kind of missteps would cost me my lunch every day.

Currently:
Long BA
Short MGM (puts)

Sell FLR

I sell FLR at the market this morning a few moments after the open. I get a decent fill on my order as the stock fluctuates widely during the first few minutes.

Monday, May 07, 2007

Visions of sugar plums, then FLR

This morning BA up, FLR up, MGM down, AMZN down hard, a nice day for my account balance with my four open positions all going my way.

Then after the close FLR earnings are disappointing and the stock tumbles in the after hours. I bought after the previous earnings report, and plan to bail out tomorrow.

I could write more cliches, but will spare you.

Friday, May 04, 2007

AMZN puts, short Amazon

Buy AMZN May 65 put. Like I wrote early, Amazon came into earnings with seven days worth of short interest. Well, today is day seven. Yahoo takeover rumor adds support to the segment. A pullback to 60 would still remain full bore bullish. A pullback to the breakaway gap at 52.5 would also be a normal move.

Puts on MGM Mirage

Buy MGM May 65 puts. Mirage the hotel and casino company is down after earnings yesterday. After some early buying on an SP upgrade, it is now below support at 65. Technical short term price target is the 57 range. I think it is worth a shot on the May puts, though I may bail out before the price target.

Thursday, May 03, 2007

Doing nothing, Citigroup called away

C Citigroup called away before the dividend date. After all my in and outs and hedges, the net-net is a small loss after commissions.

If I had to buy, I'd buy BNI Burlington Northern or BRKA Berkshire Hathaway.

If I had to short, MGM Grand, AMZN Amazon, ADM Archer Daniels Midland would be the top candidates.

I don't have to do anything. The market looks extended to the upside, however, the steady strength is not something I want to short.

Other stocks in the news include EL Estee Lauder, which is down today after a penny miss on earnings. The down move seems like an over reaction. Unfortunately, option premiums are small even with the down day.

Wednesday, May 02, 2007

MA Mastercard

MA Mastercard is the latest in what have been a series of big movers on earnings news.

My Citigroup will probably be called away for the dividend. That will leave me with BA and FLR.

Tuesday, May 01, 2007

Bears at bay

The Dow Industrials push to a new high, frustrating a legion of bears.

AMZN Amazon has another rally day. When the earnings came out there were seven days worth of short interest. One thought is that the short covering would run out after seven days. The counter thought is that many traders shorted the gap up and will have to cover at ever higher levels. To my eye, speculative puts might be worth taking a shot, looking for a pullback towards the gap at 52, ten points from today's close.