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Market had confirmed it’s up move!

Ok, the market has confirmed it’s up move and it seems that everything seems to be turning as credit spreads have eased and most financial reports are largely being ignored.  We have to now reset all the resistence levels as the previous resistance has become support.  Here they are:
DOW 13200   Nasdaq 2500   SP 1410
Those aren’t exact figures but around there.  So there’s 2-4% upside left I think.  I’m current become slight more inclined to be long but I am still very very cautious.  I’ve taken up most long global positions.  Value Click looks tempting to me but I decided against it as it has earnings on May 6th and I hate that earnings game.  I’m still very high on commodities as the world still ramps up on production and modernization.  It’s a very very long term story but the food crisis is also here to stay.  As the world gets modern, we waste more food.  It’s just what happens.  Too much money chasing the same amount of food.  But alway pick up protection for your trades…either covered calls or just putts.  I’m still very negative on COF and GRMN.  But since then my friend has convinced me about the negatives of Game Stop which is everyone’s all time favorite.  But the possibility of downloading games directly to consoles instead of going through retailers is a very real possibility.  Cutting out the middle man is disastrous to retailers but especially GME!!!  But it’s a long term trade but with just one single announcement that stock is dead meat.

Disclosure: I’m currently long RIO, TRA and short COF

No Comments | Posted in » Market Talk

Market in limbo? What now?

You know it’s bad when my own father says he’s going to retire in China because our dollar is falling to the dumper and the worst thing is that my dad doesn’t even follow the economy.  But it’s not good and there is still a lot of pain to come but for the short term, the market seems to be in a range.  I’m a little hesitant to be in the market right now until a direction has been confirmed.  As of right now the markets are rather flat.
My Valero position is down but net wise, I’m up by selling calls and buying them back when the stock drops and selling them when it rises.  It’s somewhat of a insurance to lock you gains without selling the stock.  It works well but just don’t go crazy.  As for the shorts on Garmin and Capital One, they have made me a hefty amount of money.  My Citibank putts were sold at a slight loss as I saw it rise to $25 before coming back down to $22.  Horrible trade…should have been a little better but I was thinking of doubling down but I always learn never to double down on short term trades.  At the advice of Pete Najarian, I bought some Wachovia putts last Friday and made a killing yesterday.  Thanks Pete!  You’re the best.  Someone bought $8M worth of options last Friday.  I had to trust that type of conviction.  I’m going to probably sell my Valero position after this week with options expiration and I”m holding SPG putts for protection and I’m slight up on those so I may just take my profits and just reposition myself after this week.  It’s good to refresh yourself and not get caught up with your positions.  Doing that is the path  of least resistence and good traders look for the edge.  None of my positions have any edge.

I’m looking at getting in Apple perhaps before it’s new phone launch or Terra Industries because it’s a agriculture play that has more room to run with a 10% short interest.  Another Pete Najarian suggestion that I looked into.  Of course I will be selling calls into both of these.  Apple has about $10 call profit while Terra has bout $4 with at the money calls.  So usually, I try to get in low then when it rises to a good point, I sell my calls for protection.  If it falls, I locked in my profit and get to keep the stock while I hedge with some putts to maintain further gains.  I’m trying to keep it simple now but I’ll update everyone more soon.  I think today will end flat or slightly negative by the way.

I currently hold Valero long and SPG shorts.

No Comments | Posted in » Market Talk

George Soros and his big predictions

George Soros who came back last year to his fund because of the subpar performances took his fund back it’s previous glory by trouncing the market with currency bets against the dollar but he now suggest that the market may correct in the short term but in the long as I concur, we had large systematic problems that are not easily corrected.  The two problems that he sees are in the credit swaps market and the growing foreclosures in the real estate market.  My understanding of the credit swaps market was pretty limited until I read about how he suggested that the market had many loop holes which he suggest was a reason that Bear Stearns had to be rescue to avoid massive chaos which still may happen.  With growth in funds for distressed securities, many people see defaults as the next logical step and with inflation rising that may likely occur.  Here is a snippet of the article:

Instead of reshuffling regulatory agencies, the authorities ought to prepare for the next shoes to drop. I shall mention only two. There is an esoteric financial instrument called credit default swaps. The notional amount of CDS contracts outstanding is roughly $45,000bn. To put it into perspective, that is about equal to half the total US household wealth and about five times the national debt. The market is totally unregulated and those who hold the contracts do not know whether their counterparties have adequately protected themselves. If and when defaults occur, some of the counterparties are likely to prove unable to fulfil their obligations. This prospect hangs over the financial markets like a sword of Damocles that is bound to fall, but only after some defaults have occurred. That must have played a role in the Fed’s decision not to allow Bear Stearns to fail. One possible solution is to establish a clearing house or exchange with a sound capital structure and strict margin requirements to which all existing and future contracts would have to be submitted. That would do more good in clearing the air than a grand regulatory reorganisation.

The other issue is rising foreclosures. About 40 per cent of the 6m subprime loans outstanding will default in the next two years. The defaults of option-adjustable-rate mortgages and other mortgages subject to rate reset will be of the same order of magnitude but occur over a longer period. With single family home sales running at an annual rate of 600,000, foreclosures will overwhelm the market and cause prices to overshoot on the downside. This will swell the number of homeowners with negative equity who may be tempted to turn in their keys. The fall in house prices will become practically bottomless until the government intervenes. Cutting foreclosures should be a priority but the measures so far are public relations exercises.

Anyways…good luck and happy trading.  I’m still long VLO, short C and GRMN.  I am looking into longs in MSFT and shorts in COF.

No Comments | Posted in » Econ Talk

Refine Trade update and Market outlook

I got into Valero and Tesoro last week and both are up double digits as well as selling calls on them has increase profits significantly so I’m winding down the trade now.  They have ran more than the market but not more than the financials which seems a little over done to me.

My suggestion is that the financials are not at a bottom yet.  I was short Citibank through putts which have lost value the last couple days but it was a safe hedge so the loss was more than offset by the refiner trade.

I think the next trade may be shorting gold related stocks when they rally a little bit.  I should have thought of this before but didn’t even come to mind.  What a dope!  But I still need more research.

As for the market, it’s been a nice rally but be aware of this Friday’s jobs report that may ruin everything as all the markets are headed toward resistance again but slight higher though which may signify bottom but I believe it’s a fake rally.  Not all the earnings have been marked down yet especially with a recession coming.  I will write a post about inflation soon.  The resistance levels are as follows:

DOW - 12,800         S&P - 1,420        NAS - 2,440

They are getting close so buy those putts for safety.  Selling calls at this moment doesn’t seem worth while as volatility is down.

Btw, I had a comment about the Nymex trade which I did take a small loss because I’ve been selling $3 calls for the six months that I was holding it.  Almost $20 in profit so that lowered my risk but I still managed a loss.  Yes it was a bad trade for one huge reason.  There was no edge on the trade as all the information as available and not catalyst but I still think if the market wasn’t spiraling to it’s death, the deal would have gone through at plus $140.

Good luck trading.

Currently holding: Long VLO, Short GRMN, C

No Comments | Posted in » Market Talk, Sector Trade

Oil Refiner Trade

Ok I just watched Fast Money and I’ve decided that the refiner trade is going to be my next move. I’m pretty short now but still I have to hedge those shorts but this short will have to go against the grain as oil goes down, refining margins go up. Like last year, the refiners ran up last year with the crack spreads going up but it looks like it may run up again but there are a lot of factors that may contribute to the raise.

1. Oversold

2. Rising Crack Spread

3. Higher Short Interest

The three subject stocks are Tesoro (TSO), Valero (VLO) and Frontier Oil (FTO) I don’t expect the stocks to go too far lower as they are all hitting lows and support levels. See the charts below. I’m debating about which stock to purchase as I plan to sell some upside calls just in case. Or perhaps just buy some calls strategically. Still up in the air. See the charts below. I played with one of them as you see the trends and the supports.

1 Comment | Posted in » Sector Trade