First off, if you laugh at the picture above, you are going immediately to hell.
For the most part, I was a spectator of today’s tape, watching late bears get skewered into the close. My guidance here was prime, well in advance, and actionable. The McClellan is still relatively low, so into further weakness, I will start initiating a few new longs.
As I mentioned in my earlier post, focus on a few quality names for starters. The markets appetite for risk will only grow as it sees confirmation in its direction. When picking bottoms start with quality, and work your way higher. This is why despite a gain in the broad market, it felt like the Dow was down 200-300 points early on. Only quality names were up, while traders shuffled out of garbage that didn’t work out at higher price levels.
Here are a few stocks that come to mind. Quality, when compared to what I’ve been trading lately, and liquid options.
Energy: SLB, NOV, HAL
Top Tech Pick: ORCL
Industrial: CAT
Retail: UA
Bottom picks: VALE – PBR not bad either.
As requested by a few readers, here is a copy of my daily video recording from my trading room. This is an in depth review of the market and trade set-ups I am watching. It further explains some of the indicators and conditions blogged about here recently. It is a long recording, but the meat of the presentation is up front, followed by live Q&A at the end.
https://vimeo.com/67600773 – Start at the 6 minute mark or so.
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Good stuff , do you ever sell/ write calls ? It does tie up capital , but the weekly chains are really inticing .
Only against long stock positions.
The short call is the worst trade ever invented.
Hard question to answer , but I’m going to ask . When your selling covered calls are you mostly using near month out of the money ?
And if the stock runs do you ever buy your covered calls back ?
I know people do buy back and I just do not understand the strategy .
Yes, short dated and always OTM.
I never buy back the calls if the stock runs. Ever.
If I get called away, I’ll wait and buy my shares back cheaper down the road.
Headed straight to hell – I laughed. Not nice OA.
i laughed with a full chest
You are good teacher, you really make me think. I like the way you are well prepared and plan ahead as well.
Do you see any insight that can be applied by watching the commodity markets in general?
I noticed DBA, DBB, DBC, DBP, USO, were all up today and have been holding up fairly well recently. (I see them as “risk on” names that have some, but very little correlation to the stock indices.)
Do you think these kind of commodity investments can occasionally be a part of the risk cycle resetting to some degree? Sophisticated investors that are long looking to reduce correlation to the market rather than getting out and selling off, and those with cash on sidelines or selling bonds looking to get back in without being prepared to go “head first” into stocks only?
Yes, I think some individual asset classes, sectors, or groups do get stretched on occasion. I’ve been saying that I think the energy and materials stocks start to outperform in the second half of the year based on the fact that they were stretched too far originally and will have a resetting of risk independent to themselves.
Great observation on how they held up today. That subtle divergence will be telling in the days and weeks to come.
OA
Thanks for the video sample. Very informative, watched the whole thing.