Blackberry Bull Banks Profits as RIMM Shares Rebound
by Andrew Wilkinson - December 7th, 2009 4:13 pm
Today’s tickers: RIMM, BAC, VZ, CAG, NYB, RMBS, TEVA, DIS & NVDA
RIMM - Research in Motion Limited – Blackberry maker, Research in Motion, revealed a distribution deal with Digital China – a unit of Legend Holdings – aimed at expanding its business in China. Shares stood 2.5% higher to $60.22 thirty minutes before the closing bell. One option investor banked profits on a previously established call position in the January 2010 contract today. It appears the trader originally purchased 25,000 calls at the January 80 strike for 30 cents apiece on December 4, 2009. Today the investor shed all 25,000 lots for 43 cents each. Net profits on the closing sale amount to 13 cents per contract for total gains of $325,000. Option implied volatility on the stock is up slightly on the day to 59.91%.
BAC - Bank of America Corp. – A bearish risk reversal on Bank of America this afternoon suggests one investor expects shares to suffer significant declines by expiration in May 2010. BAC’s shares slipped 2% to $15.98 in late-day trading. It appears the pessimistic player shed 7,500 calls at the May 22 strike for 36 cents apiece in order to partially offset the cost of buying the same number of put options at the lower May 13 strike for 70 cents premium each. The net cost of the transaction amounts to 34 cents per contract. The effective breakeven point on the put options of $12.66 is 20.77% lower than the current price per BAC share. The investor responsible for the reversal could be taking an extremely bearish bet on Bank of America. If this is the case, the investor expects shares to nosedive down to lows experienced at the end of July 2009. Alternatively, the trader could be long the stock, and financing cheap downside protection by selling covered call options. The long puts serve as protection in case the stock tumbles, whereas the short calls suggest the investor is happy to have the underlying stock position called from him at $22.00 each. Shares of BAC would need to rally 38% from the current price in order for the March 22 strike calls to land in-the-money.
VZ - Verizon Communications, Inc. – Option traders displayed mixed near-term sentiment on the communications company this afternoon. Shares edged 2% higher to a new 52-week high of $33.36 with less than one hour remaining in the trading session. Bullish traders picked up…
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Two Week Wrap-Up - Trading Our Range
by Phil - December 6th, 2009 7:58 am
Your "crystal ball" was dead-on with the insights into the report on jobs as well as the initial rise and then correction. Truly impressive. - Champstar2
We didn’t have a weekly wrap-up last week because of the holiday.
In our Nov 21st Wrap-Up, I had said next week we’ll be watching to see if we can get more bullish above our 25% lines at: Dow 10,250, S&P 1,100, Nasdaq 2,187, NYSE 7,000 and Russell 600 and that became the bottom of our new range while I sent out a 9:41 Alert to our Members on Nov 23rd sticking with our upside targets of Dow 10,471, S&P 1,113, Nas 2,205, NYSE 7,266 and Russell 605. That has been a very reliable range to play for the past two weeks and we’ve been having a good time playing both ends of it.
Rather than just wrapping up this week’s moves, I thought we’d add the prior week as the pattern is very much the same (and it was the same the week before) so it certainly bears (oops, don’t say bears!) studying. Of course, when I talk about patterns, I don’t just mean the chart pattern where we have all of our gains for the week on Monday and Tuesday on low volume and then larger volume selling for the rest of the week as the funds who pump the futures up dump their ill-gotten gains on retail investors. I’m talking about the global new patterns, as reported by the MSM, that make this sort of manipulation so effective. It’s not that I’m so good at predicting things - it’s really just that I’m good at spotting the BS…
Monday - Stuffing the Futures for Thanksgiving
I was pointing out that morning that 90% of the market gains since October had been coming on a single day each week and how a lot of that was happening in the very thinly-traded Futures market, where a few thousand shares traded overnight are able to lever the entire US market up by Trillions of Dollars. It’s a very sick and broken system that has been seized by manipulators to yank investors around, making sure retail investors have little ability to participate in these wild market moves as the game is already over by the time trading starts the next day.
This week, we had 2 days like that with both Tuesday and Friday gapping up over 100 points at the open, accounting for 250% of the…
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Weak Weekly Wrap-Up
by Phil - November 21st, 2009 8:26 am
This chart says it all (thanks Jesse).
In last week’s wrap-up I said: "Since early September our upside targets for the indexes have been: Dow 10,087, S&P 1,096, Nasdaq 2,173, NYSE 7,204 and Russell 623 and nothing has happened to change our fundamental outlook for the better so the closer we get to those levels, the LESS comfortable we are taking bullish positions." I mentioned how tempting it had been to cash out all our longs and go 100% bearish when we hit 10,300. Our downside levels told us to wait until the 16th, when Monday’s move up was finally the last straw and we are out of the bull game (our last major Buy List was July 11th and most picks are up over 100%), probably for the rest of the year.
This chart shows you that the S&P is primed for a 5% correction back to 1,050. I don’t know why Jesse didn’t extend out the lower support line, which would take us right about to my pullback target of S&P 1,000/Dow 9,650. I stuck my neck out on TV two weeks ago, calling for a 10% correction to those levels but we’ve been playing both sides of the fence until this week, when I finally had to put my foot down on Monday, after having discussed cashing out for the holidays in Member Chat over the weekend. Our general plan this week was to cash out the winners and leave only longer-term, hedged bullish plays while adding more speculative downside plays for the short-term correction.
Why the change of heart? Well, something you don’t see on this chart but is pretty clear on the Yahoo monthly view, is that virtually all of the gains (ALL of them if you include the spikes) in the Dow for the ENTIRE month of November have come on single days each week. This week it was Monday (139 points), last week Monday (206 points) and Nov 5th was Wednesday (198 points). Take those days out of the run from our Oct 30th close at 9,712 and we’re up just 63 points to 9,975 despite there being only 1 losing day in the first week (11/3, down 16 points) of the month and one losing day in the second (Nov 12th, down 92 points). That is one super-flimsy way to build a "rally" don’t you think?
Getting 90% of our gains in on 3 days in 3 weeks indicates a certain lack of follow-through to these bullish market moves. I outlined the nature of the manipulation that takes place in yesterday’s post so…
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Trash in Drugs Sends Genzyme Lower
by Andrew Wilkinson - November 13th, 2009 4:47 pm
Today’s tickers: GENZ, AGO, UUP, PALM & DIS
GENZ - Genzyme Corp. – - A hot topic in the last few minutes has seen shares of biotech company, Genzyme slide by 5% to $50.50 with the AP reporting that the FDA has found tiny particles of trash in Genzyme made drugs, which according to the article says “bits of steel, rubber and fiber in drug vials could cause serious adverse health effects for patients. Option wizards were quick to pounce on the opportunity to sell rapidly deteriorating call options in the December 50 and 55 strike prices. While this could be the work of frantic bulls trying to get out of the way of a potential sandstorm it’s more likely the case that trigger-happy bears have been awakened. Ahead of the news the December 50 call traded lightly during the morning at a 4.70 premium before slumping to 2.30 on volume measuring a couple of thousand contracts, while the 55 strike fell from a pre-breaking news premium of 1.85 all the way down to 70 cents. While the situation has stabilized, option implied volatility across the field is up around 25% at 42% today. That’s something for call-writers to pay heed to.
AGO - Assured Guaranty Ltd. – – Shares in the bond issurer are 14.8% higher at $20.77 and broke right through the 52-week high after Moody’s lowered its insurance financial strength rating on the company from Aa2 to Aa3. In a statement the company expressed its delight in having maintained a double-A rating in the current economic climate. It also noted that Moody’s number-crunching of its insured residential mortgage exposure was conducted under a pretty dire scenario and was based on “an extremely pessimistic view of the future performance of residential mortgage exposure.” The company boasted that even on this worst case scenario its $12.5 billion claims paying resources are more than sufficient to meet projected obligations. The options activity confirmed the bullish jump in Assured’s share price. Using the December contract investors established 11,000 bullish bought call options at the December 22.5 strike price indicating further bullish moves ahead. The 1.40 premium would require the share price to rise a further 15% to reach breakeven at expiration. Curiously the call buying frenzy caused options implied volatility to rise from 69% to 75% today. Options volume of almost 30,000 contracts is around nine times the usual on the stock.
UUP - PowerShares DB US…
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Which Way Wednesday - Fed Edition
by Phil - September 23rd, 2009 8:22 am
We’re just waiting on the Fed today, as are the rest of the markets.
Yesterday’s volume was the lowest since Sept 11th but not as low as Monday, which was our lowest volume since the end of June, just before we had a 5% correction. June 26th and 29th were our last two consecutive ultra-low volume days but June 30th was much bigger (a down 100 day), July 1st was up again on low volume and then July 2nd was another big down day and we bottomed out on July 10th. That was the time that the media was telling us we were forming a "classic" head and shoulders pattern and were doomed to revisit the March lows. It was also the last time we enthusiastically bought stocks.
At the time of that weekly review (7/11), we had CAL at $10 (now $16.82), CBS at $5.97 (now $12.58), COST at $43.45 (now $58.58), CVX - who we just shorted - at $58.20 (now $72.60), DIS at $22.41 (now $28.38), EXM at $6.05 (now $7.32), RT at $7.12 (now $8.85), SNDK at $14.47 (now $22.91), SPY at $87.96 (now $107.27), SPWRA at $22.35 (now $32.63), SUN at $22.09 (now $27.75), V at $59.86 (now $74.41), VLO at $15.57 (now $20.50), WFR at $16.61 (now 19.09), X at $30.77 (now $50.45), XLF at $11.10 (now $15.35), XOM at $65.12 (now $69.85) and ZION at $11 (now $19). Of course our members had much better entries as we had been targeting our entries on all of those but anyone reading our weekend review on July 11th could have played along at home from those prices (we even spiked down at Monday’s open) and when I say we are now bearish - it is that we are bearishly protecting these ridiculous profits - the kind of profits you usually don’t get after 3 years, not 3 months!
Overall, the broader market is up 20% over that time so it can be argued that a monkey with a dart board could have made good picks at that time but, if you read that week’s notes - you’ll notice that this monkey was screaming for people to buy and was going against what pretty much EVERY other analyst was saying and I was confident enough to lay out my picks, my strategy and my fundamental arguments for everyone to see. It would have really sucked if I was wrong, but…
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Tuesday: The Brown Booster Shot
by Phil - September 22nd, 2009 7:58 am
What a morning already!
The futures were drifting along until 3 am and the Shanghai Composite had closed down 2.3% at 2,897. At 3:23 the Hang Seng was looking to close down as well but then Gordon Brown, the UK Prime Minister, on his way to the G20 meeting in Pittsburgh this week said:
The stimulus that we have still got to give the world economy is greater than the stimulus we have already had. What we want to do is safeguard a recovery from a recession we feared would develop into a depression… By meeting at Pittsburgh, we are looking at how we can put in place for the future the mechanism or path that can lead us to either making decisions about better ways of creating growth that is sustainable in the future, a better early warning system for the world economy about potential crises, a better way of resolving difficulties or imbalances around the world.. I have been talking to many countries in Asia as well as in Europe, and I have been talking to President Obama and others, and I believe that there is support for that framework.
WooEee! More free money!!! No sooner did the words come out of Mr. Brown’s mouth than the Hang Seng began to climb, reversing a down day to finish up 228 points, right at the 21,700 line they have been struggling to hold since last Thursday. Gold flew up to $1,020 and oil jumped to $71 worthless-looking dollars and, as usual, once Asia closed, the dollar was free once again to drift down to 91 Yen (Japanese markets were closed today). But, despite his performance, Gordon Brown may not win today’s Globey Award for blatant market manipulation.
Brown’s performance was great - make a bold statement that indicates another $13Tn or more may be dumped on the Global economy and insinuate the the whole G20 is behind him before jumping on a plane, leaving the British tabloids (owned by Gang of 12 member Rupert Murdoch) to boost the market for 2 days in a row - BRILLIANT!
But, he does have serious competition this morning by not one, not two but THREE Gang of 12 members as UBS, GS and JPM triple teamed up and all issued reports saying "Russian stocks are poised to surge, extending an 88 percent rally this year, as the economy’s recovery spurs profits." "Earnings growth is set to be explosive,” wrote UBS’s Moscow-based economist Clemens Grafe, who predicted profits will exceed analysts’…
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Stock Market Crash - Year One Review III - March Madness!
by Phil - September 10th, 2009 5:51 pm
We left off in Part II with our Feb 23rd Big Chart Review.
Even though I said: "Once again we are in a market that environment that reminds me of the Simpsons episode where Homer jumps over a gorge, crashes, is taken up by a helicopter (Ben) smashing against the wall along the way only to fall all the way from the top again. Pain, pain and more pain every time we try to get long" - we still weren’t fully prepared for the devastation that was to follow as the Dow fell from 7,500 to 6,500 in the next 10 days. My commentary on the environment the next day was:
According to Cap, someone on the YHOO message board was counting the number of times CNBC talking heads said "nationalization" this morning and, as of 8:15, they were up to 300 times. Sadly, this is the fear-mongering that is driving the markets to new lows while Cramer continues to keep his sheeple out of protective ETFs like SKF. So you have the man’s network telling you financials are going to zero while dog and pony boy tells his minions to sell ALL the financials, causing them to go to zero - even though they could hold on and protect themselves with conta-funds, if Cramer didn’t spend 3 days a week convincing his viewers contra-funds are poison. I’ve never seen anything like this outside of a racketerring investigation. Speaking of racketeering - Dennis Kucinich nailed it when he pinned that charge on Paulson and company back in November.
Our wall of worry continues to be a steep one. After yesterday’s failure we do not expect too much out of today, we’ll be happy to just see a bottom at this point but it’s looking a little more likely that we’re heading into a capitulation event that can take us down to frightening levels. The 60% line is a line the markets dare not cross but, as I pointed out yesterday, we already lost the SOX and the Nikkei, with the Hang Seng and the BSE hanging on by a thread. Let’s take these levels very seriously, if the administration can’t turn it around this week - the downward momentum can easily pick up steam.
I’ll spare you the details other than to say we DIDN’T turn it around that week and the downward momentum DID pick up steam. I was at war with Cramer at the time as he was blatantly ripping off my ideas and trying…
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Thrilling Thursday Morning - Beijing Bop
by Phil - September 3rd, 2009 8:28 am
That is, of course, what residents of Macau are required to chant every morning in honor of Stanley Ho, who held the monopoly on casinos in China until 1992. This morning it turns out Macau’s economy contracted by 13.7% in Q2, it’s 3rd consecutive quarter of shrinkage. It’s possible that the restrictions placed on civil servants in 2008 to stop them from gambling and to curb money laundering has caused much of the decline why is the decline accelerating if things are so good in China? One thing about Macau is that all the US businesses that are now there make it harder for the Chinese government to pad the statistics and, taken at face value, Maccau is underperfoming the rest of China by 22%.
This is worth noting today as China is leading the market bounce as the vice chairman of the China Securities Regulatory Commission, said the authorities will promote a “stable and healthy” market, tempering investor concern that the government wants to curb equity and property speculation. Ministers from the Group of 20 nations are likely to suggest the global economy is healing when they meet in London this weekend, while the European Central Bank probably will keep interest rates at a record low today. The Shangai composite index ran right up to the 5% rule today and has pulled a turnaround in global equities. As noted in David Fry’s chart, we were oversold and due for a little bounce anyway.
As noted by Ben over in our Chart School section, copper has climbed back into the "stupid zone" on that news but still has a ways to go before getting stupid enough to short again. We’ll be keeping an eye on the copper miners like PCU, FCX and RTP as well as BHP, who got a nice pop on a UBS upgrade this morning but it’s a little early to short until we see jobs reports today and tomorrow.
This is not surprising to us as we read the Fed minutes yesterday and the greenest shoot they could find was that things were picking up in other countries, a favorite ploy we discussed in Monday’s post as the Shanghai was falling 6.7% that day. Fortunately, we were playing bullish into the close as we know how this game works and I had said to members just ahead of the Fed, at 1:58: "Beware bears - I was just noticing that last minutes were May 20th…
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Which Way Wednesday - Fed Minutes Might Help
by Phil - September 2nd, 2009 8:26 am
Wheee what a ride!
I don’t think we could have had a better day as the move up allowed us to place our bear plays (we went naked on our DIA $98 puts right at the top at 10 am) and the only fear we had was the morning data but by 10:10 I sent out an Alert to Members reviewing the bullish-looking data but then concluding: "Still this should give us a big boost with volume still light at 30M at 10am. Unless we break 9,600 with some authority, this should just be another shorting opportunity." We were still concerned about good Auto Sales numbers boosting us back up but they were actually a series of disappointments all day long.
As David Fry points out in his morning post: "Most trading systems don’t have a “feel” component and mine doesn’t either. The only logical thing which we’ve commented on repeatedly as have others is light volume and how the news hasn’t jived with reality. And, recently, investors have been selling good news versus buying bad news as before." This is why PSW always stresses the fundamentals in stock trading. The market can trade against them for quite some time but, eventually, the true value will set you free (and often can make you a very nice profit!). I’ve had a very tough month in August pointing out the the news hasn’t "jived with reality" and suddenly we have gone from feeling overly conservative to being the only well-positioned people around - in cash, with plenty of winning puts and ready for another round of bottom fishing with the VIX right back at 30, which gives us exactly what we need to run our favorite plays.
We still have tons of cash in our $100,000 Portfolio and I’ll be initiating some buy/writes this week. I already proposed one for TTWO after last night’s earnings but now it looks like I’m not the only one who thought they looked pretty good and we’re not going to chase - there are, once again, plenty of fish in the sea! The last time we ran a Buy List was the week of July 6th and if you want to see what an actual list that goes 18 for 18 with an average upside of over 25% looks like, you can check that week’s wrap-up, which has a lot of good commentary for how we recognize a bottom. We will,…
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Testing Tuesday Morning - S&P 1,010 Edition
by Phil - September 1st, 2009 8:30 am
So far so good.
As I said in yesterday’s post (and the weekend wrap-up), we were well-positioned for the drop - It’s just a quesiton of finding a bottom now. It didn’t take very long as we found it at 9:46 when I sent out an Alert to Members saying: "Once again it’s a good time to sell the DIA $95 puts at $2 as the volume on this sell-off is not at all exciting so far. As long as the Dow holds 9,450 (now 9,475) it’s a good play." We had a couple of spikes below but, on the whole, 9,450 held like a champ and those puts hit our 20% target by the day’s end (some of our quicker traders even had a chance to double dip). That level and 1,010 on the S&P will be our critical tests today as well.
As you can see from David Fry’s SPY chart, that 1,010 line on the S&P represents the bottom of the range we broke out of on Aug 21st after failing it several times earlier in the month so it either holds this week or last week begins to look like noting more than a blow-off top at the tip of a downturn.
We followed through with our DIS play but we’re still hoping to do better on the call sale to complete our buy/write. We took an early stab at shorting OIH but chickened out by the end of the day and we took advantage of a nice drops in ITMN, LZB (hedged) and CIM (hedged) while adding protective plays by going long in TZA (hedged) so it was a busier day than we planned. We also picked up some more fills for our $100K Portfolio, as per our weekend plans and that portfolio jumped $500 on the day, which is nice for a down day and indicates we are doing pretty well on that balance thing…
At 1:03 I sent out an Alert to Members saying: "Should be stick time after a blow out bottom - I still like those DIA $95 puts sold naked for $2+, looking for .25 to .50." We got a false run at 2:30 then a drop down to a blow-out spike at 3:30 and then, of course, the daily stick, that took up right back to good old 9,500. The movement is getting so aggregious that even conspiracy theory-hating Barry Ritholtz is now saying: "I’m not inclined toward conspiracy theories, but it’s difficult to…
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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
Ilene is editor and affiliate program
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