From the official Kentucky Derby website, the recipe for the traditional Mint Julep cocktail enjoyed at The Kentucky Derby:

The Early Times Mint Julep Recipe

• 2 cups sugar
• 2 cups water
• Sprigs of fresh mint
• Crushed ice
• Early Times Kentucky Whisky
• Silver Julep Cups

Make a simple syrup by boiling sugar and water together for five minutes. Cool and place in a covered container with six or eight sprigs of fresh mint, then refrigerate overnight. Make one julep at a time by filling a julep cup with crushed ice, adding one tablespoon mint syrup and two ounces of Early Times Kentucky Whisky. Stir rapidly with a spoon to frost the outside of the cup. Garnish with a sprig of fresh mint.

The best times are enjoyed responsibly.
 Early Times Distillery Co., Kentucky Whisky. 40 percent Alc. By Volume. Louisville, KY 2006.

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I like a long-shot, “El Padrino,” to win the  138th Kentucky Derby later today. The field is stacked with great horses, but sometimes the oddsmakers learn a humbling lesson when they ignore the heart of a champion.

Speaking of Kentucky, you might not have known that the famous pizza chain, Papa John’s, is headquartered in Louisville. Papa’s reported earnings last week and spiked higher with strong buying volume to boot. The chart had been consolidating for quite some time. If the broad market settles into a trading range instead of another 2010/2011 summer swoon, PZZA would be a good long idea.

To balance out a mixed market, though, consider shorting the other major pizza chain, Domino’s. As I describe on the annotated weekly chart below, DPZ did not have as successful a post-earning’s reaction as Papa John’s. Domino’s gapped down on heavy selling volume, and is in danger of breaching its major weekly support trendline. Contrast the run that DPZ had already seen into earnings,versus the long consolidation that PZZA had been in prior to the earnings’ breakout. In other words, I think we have the makings of a good pair trade here: long PZZA, short DPZ. For the trade to have the best chance of working, I believe the broad market would need to slosh around in a reasonably-defined trading range, say from 1340-1420 on the S&P 500. That said, I still think the trade can work in all but the most of extreme upside or downside markets.

So, there you have it: Mint Juleps, some pizza, and a pair trade on this Kentucky Derby Saturday.

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To follow-up on this post from the other night, you can see another semiconductor is coming to a head. On a longer-term timeframe, Broadcom looks an awful lot like Skyworks in terms of working through a massive, post dot-com bubble base. Both are semiconductor firms with their tentacles deep in all of the smart phone/smart grid developments in the technology sector as a whole.

Earnings are now out of the way for Broadcom. Bears look at the daily chart below and see a head and shoulders top. Bulls might point out the uptick in buy volume over the past week. Coupled with the “doji string” of price candles marking time sideways, the presumption is that the bulls will break this pattern up and out, leaving head and shoulders’ bears drowning in their own dandruff. From failed head and shoulders tops (of which there are plenty in the history of the markets), usually come aggressive moves higher.

Buyers of size want in on Broadcom, and now they have the floor to do their thing. Stage fright could have devastating consequences.

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We are headed into the infamous choppy summer months of trading, so there seems to be more than enough caution out there amongst the entire trading community. The month of April proved to be largely a consolidation for the market, with some sectors and stocks getting hit more than others. With that backdrop, my focus is even more on sticking to the price action and my general trading discipline. I do not consider it a foregone conclusion, by any means, that we have neither topped out here nor are off to the races higher.

The recent pullback in the semiconductors had them finding support right where they were supposed to, not only at the rising 20 period weekly moving average, but also at the major support trendline dating back to the October 2011 lows. The presumption is that these lows will hold, and that we have just witnessed nothing more than a bull correction. That opinion would change, however, if the SMH, ETF for the semis, lost $33.

In the meantime, the market has responded in a way that is pleasing to the bull case. As an example, I wrote about SWKS impending correction back in March as likely a sound buying opportunity in this post. Since then, the stock pulled back from roughly $29 to $23, and then printed a massive weekly bullish engulfing candle to close out last week’s market reversal higher. In addition, members of 12631 can check out a great seasonality play from The PPT for the month of May in our chat room tonight.

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Back on March 5th of this year, I wrote a post for members inside the 12631 Trading Service discussing the bullish setups on a variety of charts in the lodging sector. It is an industry that rarely gets much traction amongst the hot money traders. Nevertheless, the charts of most of the key lodging firms are extremely impressive and basically speak for themselves, as you can see below.

In addition to real estate and biotechs, lodging appears to most certainly be a stealth area in demand this year. It is also noteworthy to see how well these charts have performed during this recent market correction, which may or may not have concluded. Either way, you are talking about resilient price action supported by ample buying volume. When you think about the implications of hotel stocks leading the charge higher, it is tough to be a bear on the market and economy looking out several months.

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