Friday, December 25, 2009

WEEKEND STOCK MARKET MASALA- 25 DEC 2009

I. OUTLOOK FOR NEXT WEEK:

I am thinking 1130-1134 max on Monday followed by a decline to 1113-1120 by Wednesday.

I have been thinking about this for the past two days and this is on the capital gain taxes and CAN WE SEE SOME SELLING BETWEEN DEC 29th-31st 2009???-

Assuming the institutions started buying in Jan-Feb 2009, those who bought in Jan will start to hit the sell buttons in Feb and those who bought in Feb might do so in March. Now, the question is are they going to wait until a year is over to avoid higher capital gain taxes or will they start selling the beginning of next year (2010) as opposed to this current year so that they do not have worry about paying taxes before April 2010 versus April 2011. The focus here is when will will the sell orders come in?--a year after stock purchase or beginning of 2010? I know we would think a year after stock purchase to avoid higher capital gain taxes but what if some institutions start to sell at the beginning of next year because they do not want to wait until Feb-Mar when the market could be down 5-10% due to selling by institutions who have waited a little more than a year. What I am trying to say is all the selling might not happen in Feb-Mar, we might see some selling by people who are ready to take profits in the beginning of 2010 and ready to pay taxes by Apr 2011 as opposed to Apr 2010 because they do not want to wait until Feb-Mar where they might be selling at a 10% lower levels if a correction happens.

Now, if people are ready to sell at the beginning of 2010, can they still sell between Dec 29th - Dec 31st of 2009? Assuming it takes 3 business days for the transaction, will selling between Dec 29th-Dec 31st appear as selling in Jan 2010? If so, some people will sell between Dec 29th-31st 2009 and still not pay taxes until Apr 2011. This is possible because they will be selling at the highs as opposed to selling at a 10% lower level (assuming we have a correction) in Feb-Mar 2010 and not worry about paying capital gain taxes until Apr 2011. They will save 10% by selling at the end of Dec-early Jan but may pay 10-15% more in capital gain taxes compared to the institutions who will be selling in Feb-Mar 2010 at 10% lower levels but pay 10-15% less in capital gain taxes. In summary, it may not make much of a difference between selling end of Dec-early Jan and selling in Feb-Mar 2010 (assuming we have a 10% correction).

I am just speculating here. Correct me if I am wrong and appreciate others insight.

II. X AND SNDK:

X and SNDK are doing a parabolic move similar to Gold. You know how these parabolic moves end? Just see how GLD dropped from 120 to 105 within a few weeks

X- Maybe a tiny bit more upside and then it corrects to 50-51. Weekly RSI still has some room to the upside

http://finviz.com/quote.ashx?t=x

SNDK- Has huge resistance at 32.50, which is also the 200 MA on weekly.

III. OPTION ARM's: Suggest a market crash in July-Oct 2010 and July-Oct 2011???

"It’s tough to say exactly when the storm will come. But my guess is the second half of 2010.

This second wave of foreclosures will not be good news for the economy or the stock market…At least that’s my guess."


http://dailyreckoning.com/the-second-wave-of-mortgage-defaults/



Merry X-mas and a Happy & Prosperous New Year to all.


Wednesday, December 23, 2009

UPDATE

I. GLD: I bought calls at 107 and 105.60. Exit target at 109. GLD formed a inverted hammer/ inverted lollipop candlestick today and in the past it always led to 2-3% upside within 2-3 trading days. Also based on historic trading, GLD always went up 2-3% between X-mas and New Year. Pay attention to the black bars at the bottom of previous downtrend on the daily chart and you will see what I mean. I think UUP could drop to at least 22.90 in the next few days. I will close my GLD calls on Dec 28th/29th regardless of where it trades. I am hoping for a 2-3% rally in the next 2-3 trading days. The worst case scenario is it trades sideways, in which case I will break even. Gold usually drops during the first week of Jan. This is just a short term trade.

II. Few overbought stocks with my target entry price (for buying puts) and exit targets-

1. SNDK @ 28.75, exit at 24-25

2. X @55-56, exit at 50

3. SPG @ 84, exit at 79-80

4. CSIQ @ 32.00-32.50, exit at 28-29

Merry X-mas and Happy New Year.

Saturday, December 19, 2009

WEEKEND STOCK MARKET MASALA- 19 DEC 2009


OUTLOOK FOR NEXT WEEK
: I am expecting a drop in the indexes early next week and a Santa rally to begin Dec 23rd and end during the first week of Jan 2010. Yes, Santa rally happens after X-mas based on past trading history.

CURRENT POSITIONS (Initiated on 12/18/2009):

1. Visa (V): Jan 90/85 put spread at 1.90

Visa (V) was added to S&P after Friday's (12/18/2009) close. The announcement that V will be added to S&P was made on Dec 11th.

Stocks added to the S&P gain 8.49% (on an average) from the announcement date to effective date (V gained almost 10% between Dec 11th-18th). Then they correct 3.23% (average) within 10 days of the effective date. If this is true, V should correct to 86 before Dec 28th.

http://www2.standardandpoors.com/spf/pdf/index/EventStudy.pdf

2. GOOG: Jan 590/580 put spread at 3.20.

600-605 is a huge resistance zone. I think GOOG will eventually break above it but I am hoping for a small pullback to 580-585 first.

Daneric's chart-

http://3.bp.blogspot.com/_TwUS3GyHKsQ/SyltYX3GM-I/AAAAAAAADDM/p7tn8lb5Fec/s1600-h/goog.png

Equilibrium's chart-

http://chart.ly/7fry4x

WATCH LIST:

1. GS: Target entry at 158

2. POT: Target entry at 104-105

3. GLD: Target entry at 105-107

4. BBY: Target entry at 38



Have a great weekend.

Saturday, December 12, 2009

WEEKEND STOCK MARKET MASALA- 12 DEC 2009



OUTLOOK FOR NEXT WEEK:

My outlook for next week is neutral/flat. Next week is options expiration week and I think SPX will be pinned at 1100. why 1100? Look at the graph above (Courtesy of schaeffersresearch). The 1,100 strike, per the graph below, is home to monstrous put and call open interest in the December series, which in turn may cause a magnetic effect in the week ahead.

MY WATCH LIST:

1. GLD: Target entry at 107.50-108.20. The 50 MA is at 107.87 and I believe GLD will find support at that level. Exit target (for GLD) at 113 and 115

Strategy- Jan 110/115 call spread (BTO Jan 110 call and STO Jan 115 call)

2. USO: Target entry at 34. The 50 MA on weekly is at 34.18 and 200 MA on daily is at 35.10. I will go 100% long if we get to 34 for a short term trade. My exit target would be a gap fill at 37.50

Strategy- Jan 35/38 call spread (BTO Jan 35 call and STO Jan 38 call)

3. FCX: Target entry at 72.50-73.00 and exit at 20 EMA at 80

Strategy- Jan 75/80 call spread (BTO Jan 75 call and STO Jan 80 call)



GLTA


Saturday, December 5, 2009

WEEKEND STOCKMARKET MASALA- 05 DEC 2009

If you had followed me at HOB, I made a decent profit on my GLD puts which I bought on Thursday. I went into Friday with 30% of my portfolio in GLD Jan 118/110 put spread and rest in cash. I closed all my GLD put spreads on Friday when GLD was trading at 115.64. I bought some index Jan put spreads on Friday when S&P was trading at 1115-1118.

OUTLOOK FOR NEXT WEEK:

1. Here is a perspective of the much talked about rectangle/box chart pattern that we are currently in (trading between 1087-1090 and 1111-1113):

In an uptrend, it could be bullish i.e., it can break above. However, the volume has been high on down days and low on up days within this rectangle pattern, which does not support the bullish breakout-

http://www.chartpatterns.com/rectanglecharts.htm

If we do end up breaking above, the target would be 1130-1140 (add the height of the rectangle to the upper trendline of the rectangle). Todays break above 1113 appears to be a fake out.

2. Thursday's and Friday's action were not bullish to me at all. "BAC repaying TARP" was rejected on Thursday and the better unemployment news was also rejected on Friday. On a closer look, the much touted rectangle/box trading pattern actually looks like an expanding wedge/megaphone/broadening formation. We could drop to 1092/1085/1072 next week and then stay flat or have a small rally into X-mas. I looked at the historic trading data between Dec 7th-Dec 25th from 1997-2008 and it suggests a small drop (2-3%) next week and flat to small rally (2-3%) into X-mas.

3. Gold dropped to 1140 during overnight trading on Thursday last week after the Dubai news but it recovered like SPX and rallied to 1225. However, it dropped to 1140's again during yesterday's regular trading session. The SPX low (after Dubai news) during Thanksgiving holiday was 1067 and I think we will see that level soon. Too many of us are expecting an X-mas rally and believe it is impossible for the markets to crash just before X-mas. Though I am not expecting a crash, I would not be surprised to see the gap at 1070 getting filled.

4. Bullish Scenario: There are no economic news on Mon and Tue. It will be easy for the crooks to take the tape higher on those days. Also all the indices formed an intra day double bottom on Friday, the target of which could be 1114-1115. If it is indeed a rectabgle chart pattern, the target upon a breakout would be 1130-1140.

NEXT WEEK'S POTENTIAL EARNING'S PLAYS:

1. AZO and SAFM- Tue BMO

2. LULU- Wed AMC

3. COST- Thu BMO

AZO: My thoughts on AZO-

AZO has around 4.5% short interest. It filled its gap at 152. Daily RSI is currently at 65. AZO still has room to run up to 160-162. Daily MACD is yet to show a bearish cross over.

In Summary, I have a NEUTRAL bias and my strategy is to buy both Dec 155/160 call spread and Dec 150/145 put spread.

LULU:

I like LULU the most. LULU has 12% short interest and has the potential to move >10% after earnings.

BULLISH scenario:There is not much insider selling. They raised earnings forecast by 50%

http://chart.ly/6szz9k

http://www.cnbc.com/id/15840232?play=1&video=13...

BEARISH scenario- Looks like a bearish rising wedge with backtesting of the lower trendline.

http://finviz.com/quote.ashx?t=lulu

My strategy is to place a straddle/strangle.


GLTA