Mutual Fund Tuesday – Holiday Edition

Today is the first day of the third quarter and also the second day of a holiday shortened week.  Nasdaq futures are currently priced to gap higher into the session by just over 10 points.  The important economic releases scheduled for today happen early during our session, with PMI Manufacturing index at 9:45 and more importantly ISM Manufacturing Index and Construction Spending at 10am.  There is a 4-Week T-bill auction at 11:30am.  Janet Yellen is set to speak tomorrow at 11am.

Price drifted higher overnight, and given the context of a poor high, the acceptance of value as evident by the clean distribution yesterday, and late responsive buyer the drift was expected.  These few days ahead of the 4^th of July tend to be bullish, but with money managers eager to start the new month/quarter off we can see some bigger swings in both directions intraday.

The long term and intermediate timeframes are buyer controlled meaning prices are not balanced nor are they making lower lows and lower highs.  Instead we are making higher highs and higher lows on a weekly chart of the composite (see yesterday morning’s premarket analysis) and the intermediate term chart is doing the same.  If the market sees some selling today, there are some interesting low volume nodes we could test out while still retaining buyer control.  I have highlighted these levels on the following intermediate term composite:

There is a slippery zone on the market profile.  This is a price area where buyers were very confident yesterday.  However, should we trade back into this region and not observe the same level of confidence from the buyers, they we are likely to see a fast liquidation take hold, something to shake out weak handed longs perhaps.  On the upside we are working with measured moves.  I have noted the measured move targets, as well as a few other observations on the following market profile chart:

Well the second quarter is in the books, and although a great many of you traded your asses off to get back in the green territory, and I congratulate you, I made my situation worse this quarter, tacking on an additional 8.28% in losses, pinning me at -16.51% YTD.

There were so many mistakes along the way.  There were also some tumultuous victories.  Net-net I lost money and that is not why any of you come to iBankCoin.  You come to see gregarious writers and traders who make money with poise and grace and a generous bit of panache.  These conditions during Q2 caught me pretty flat footed and when the time came to drop the hammer, well I dropped it only to scurry over to it and pick it back up before diving in my bunker.

To break the mistake loop I enacted some new rules, like maxing out at 12 positions.  This has already improved my focus and I am coming into the month with some nice positions in tote.  My cash is high, over 50% and I have a few places I want to stash said cash before all is said and done this week.

I have four investments I intend to hold through Q3 and perhaps Q4 – TWTR, LO, TSLA, and GPRO

I jumped on Senior Tropicana’s magic carpet at the end of May and have XOM shares purchased 46% cheaper than they are today. This position is also an investment of sorts, one that is mostly dictated by the good doctor.  I have some risk management in place, but with 46%  cushion I count this position as an investment as well.

I have July calls in DDD and ANGI.  Something tells me we will be rolling in Angela’s ashes before the month is over if you know what I mean.

The rest are trades – RGSE, WB, FRO, TSL, and GRNH

I intend to ride this steed, and other steeds to glory before the year is out, propelling my book to new heights and performing on the level of my internet peers and role models all nestled within the confines of iBankCoin.

May your cup runith over in Q3

http://youtu.be/2YcIgow6TDk

I have been live in NQ_F since the start of June. I wish I could say it has been stellar, but I started making some classic mistakes like taking random entries and ignoring stop losses. I have written a new business plan and trading plan (version 3839) and it calls for daily performance disclosure. You can now see every live trade I take, going forward as well as my daily performance.

Enjoy:

There are good products and then there are great products, and there are good companies who only create one great product and then fizzle.  However, we are occasionally blessed with a great company who also happens to make great products and Go Pro fits the bill.

Most gents my age can’t think about investments because they have to think about their next meal or their keeping their low level corporate job to feed their 2036 mutual fund, thing.  I must make several long term thoughts in order to achieve infinity pool status.

Glassdoor employee reviews of the place are not the best.  One employee was disappointed because the free food they offer their employees, yeah it’s not organic.  I could see that being reason for a low rating.  Overall, even with less than stellar employee feedback in public forum, they are still a cool tech company in California.  This allows them to pay people less, very nice.

GoPro market cap is currently valued just under 5 billion.  One month ago Apple paid 3 billion for Beats by Dre.   These are headphones.  There is a potential symbiotic bond between Apple and Beats, perhaps something to bolster their music business.  Even without digging into the motives that drove Apple to value Beats at 3 billion, we can see that in-demand wearable tech is worth billions.  If simple headphones can fetch 3 billion, then I see no reason why simple HD video cameras cannot fetch 9.

Finally, the GoPro is not just a great product.  It has achieved the ubiquitous feat of going completely viral and garnering mass cultural acceptance.  Children strap these cameras to their chests and heads with pride.  Try walking around with Google Glass on with pride.  Trying to hard brah.  It is the Red Bull of cameras.  You don’t have to walk around looking like a bunch of Starship Troopers.  Cultural acceptance also gave Beats the 3 billion dollar price tag.

So who will buy GoPro?  I could name a few, but maybe you could flex your brain muscles a bit on this one.

Raul is invested until further notice.  Here’s to hoping it does not go all Twitter on me.

Price target $72

As we head into another month end trade, the Nasdaq is starting off the shortened holiday week in the green.  The overnight session was mostly balanced.  A wave of selling came through around 6am which found responsive buyers lurking below.  The Canadians released weaker than expected GDP stats at 8:30am this morning and the news thus far has not triggered a response from the US equity futures.  Notable economic data on deck today includes US Pending Home Sales and 10am, Dallas Fed Survey at 10:30am, and Fed’s Williams speaking at 1:10pm.

We closed out last week with a rally, and with prices at fresh swing highs.  Looking at a long term chart you can see the buyers are in control as price advertises higher in an attempt to entice sellers into the exchange:

On the intermediate term we can see an important low volume node formed just before the breakout, 3823.75 is on watch early on this week:

Bringing our attention closer to the action, the market profile shows value on the rise with Friady printing a normal variation day with buyers extending the range higher and also pressing value higher.  The price zone from 3830 – 3826 is fast and we may traverse it a few times today, especially if the market begins to balance out.  I am particularly keen on the low volume node which appears here on the market profile as well as the composite, right at 3823.75.  This level is my in play action level of the day. I have highlighted this level and a few more observations on the following market profile chart:

Freedom is kicked into high gear this weekend as we prepare to celebrate Independence day.  The weather up north is paradise, something we patiently wait all year for.  With that in mind and family and friends arriving in town, I took a brief moment to work through the Nasdaq opening swings from last week.  Skipping an analysis of last week’s action with all the festivities as an excuse would be a shame because the action was so dynamic last week.  The market is coming to terms with swing highs with only the Dot Com bubble peak above.  These truly are interesting times for our country and its markets.  If that doesn’t excite you enough to dig into some charts, then I am not sure what will.

Let’s have a solid holiday week.  And what better way to kick it off then to wrap your mind around auction theory and how it can assist you in the daily navigation of our electronic markets.

MONDAY:

TUESDAY:

WEDNESDAY:

THURSDAY:

FRIDAY:

Camera maker GoPro (ticker: GPRO) is having a solid market premier, rewarding first day buyers with over 20% in gains.  Now of course, this is drawing the attention of media jack asses, none of which suggested buying the company yesterday.  A few say it is a buy here, a few are already calling it ‘frothy’.  These people are not on the television to help you in any way.  They do not want to converse with you and learn and grow, NO.  They want to entertain you with their jokes and looks.

Here at the Raul blog we live under a cloak of sorts, skating by on lower than average view counts and continually observing, studying, and hypothesizing the market.  This is science, live, with a touch of style.  As any scientist will tell you, failure is just as informative as success, if you allow it.

GoPro will go higher, lower, nowhere for a while based on nothing.  I could see here and I might, to lock in the quick gains.  But then I will be tasked with creeper stalking GoPro to ensure I do not miss the next move, praying for a dip and sacrificing Amish hormone free range chickens to the gods for the gift of a dip.  It is a ton of work and in this heat, it can be downright exhausting.  Or I can just take it off my screens and call it an investment, just like my TWTR, LO, and until Fly says otherwise XON.

Do not read too far into the GoPro move.  Yes this is a great company and one of the finest tangible products introduced to my generation, right up there with the iPhone, the Nest, Tesla Model X, e-cigarettes, and Coors light silver bullet power can/bottles.  But, this chart is still in its infancy and may not take shape for a few quarters.  Are you prepared to take a 2-3 quarter drawdown?

Nasdaq futures are currently down just about 5 points during an overnight session which featured more sellers than buyers but overall printed a balanced session.  There were several economic data points out of the UK and Europe early this morning including UK GDP YoY which came in just a tad below expectations (3% actual, 3.1% expected) and German CPI which was in line with expectations.  During our hours of trade, we only have the U of M Consumer Confidence report at 9:55am.

Yesterday we [nearly] printed a Normal day during the regular trading hours.  The range actually extended past the initial balance by a single tick during the final 15 minutes of the pit session after the stock market closed.  Normal days lack the directional conviction of other market profile formations.  It started with a strong responsive selling drive which may have been prompted by some unexpected news early on.  The action was contained within the prior day’s range and a two-way auction ensued which eventually gave way to buyers pressing to the high by closing bell.  The net effect was slightly higher prices and value, and a clear “crime scene” or low volume node which separates  where buyers and sellers gain short term control.  See below:

The same price level shows up on our composite profile which encompasses all the price action during our swing trade:

Lacking directional conviction makes sense given the bigger picture.  The Nasdaq is coming to terms with swing highs and the market is simply a mechanism for participants to exchange contracts based upon their perceived value of the Nasdaq.  You can imagine many participants are active at these price extremes because the proximity to prior inflection points demands the attention of all timeframes.

Keep in mind, we start a new month Tuesday, the market has shown headline sensitivity regarding Iraq, and 4^th of July is one week away.  We may enter a holiday drift.  However these are not price levels where you want to become complacent.

On the short term, I have observed a few key price levels and market profile features:

I like to keep a few long term ideas in the mix while I frivolously commit and ditch random tickers day by day.  That is because a few companies possess enough unique qualities to make me want to work for them.  And I figure, if I want to work for a company, then I want to own their shares for a few years.

Sometimes this works out very painlessly, like Blu e-Cig maker LO.  I have been collecting a dividend and my capital has appreciated over 20 percent.  Other times I go to bed with a stock, sticking by its side through rough times and continually working with the stock as it progresses through time.  This is much less enjoyable initially but the eventual fruit will taste that much sweeter.

Enter Twitter—oh sure, it has done well these last few weeks.  Some traders caught the entire move and walked away handsomely paid (h/t @RaginCajun).  Other traders caught a few days of the move and are happy, treating TWTR much like any other tradable ticker.  I on the other hand, am still in the red on Twitter, -18.6% to be precise.  Even down this much, the position is my largest and over 10% of my book.   It was built when my book was much larger than it is today.  It was built to be a 10% position when my book was about 20% higher than it is worth today.  I will ride it for five more years if I must, or until something that actually stands a chance at disrupting this media behemoth arises.  It is that big of a disruptive force.  I might even buy more.

I added a third investment to my books today, one that is likely to feel odd and misunderstood for several quarters.  I bought GPRO.  This camera is a massive disruption.  For a while, I was committed to AMBA because they supplied many of the Go Pro components, but now I can own the pure play and I will not be missing that opportunity.  If silly Dr. Dre headphones matter, than Go Pro REALLY matters.

Investments aside, I closed out my F calls and bought some WB and GRNH.  I am back in the pot trade and WB is looking for some sympathy action with social media on blast during FIFA WORLD CUP.  GO USA, today we advanced while losing.  It felt like No Child Left Behind.  #merica

The markets constantly shift from a state of balance to imbalance and back into balance.  This behavior is a result of the open marketplace and how buyers and sellers come to an agreement on where the value of a security is.  The key is knowing which timeframes are in balance, which are not, and who is likely to be participating in the marketplace given the conditions.

With the Nasdaq trading near annual highs it is reasonable to expect most participants are active in the market to some degree.  Right now the intermediate term is out of balance.  Even though price re-trended higher yesterday, we never saw value shift higher.  In fact, our VPOC stayed pinned back where the prior consolidation was.  The price action was impressive from the bulls but they are now tasked with proving their grit by sustaining this move and pressing value higher.  I have highlighted some of the interesting intermediate term levels below, including the “crime scene” where the rally-breakdown-rally seems to gather steam:

Short term we are out of balance on the RTH profiles.  It takes some chopping to see the auction properly but value is indeed moving higher.  Overnight we printed a very balanced session, see below:

US personal spending came in below expectations and consumption expenditures were in line during the 8:30am announcement.  We have Fed’s Bullard speaking in New York at 1:05 PM and some afternoon treasury auctions.  There is also a natural gas report at 10:30am.