Nothing negates a failed auction quite like a slow and sideways trade right at the swing high. The quiet manner by which the market lingers at swing high suggests two things. First, the market is not sharply rejecting higher prices. Instead we are building acceptance at these prices. Second, the slow action suggests the market might be waiting for new information before moving elsewhere.
Under the hood of the market, the internals are showing an interesting rotation to start the week. Most interesting is today’s weakness in retail which has become a widely discussed area expecting some positive rotation. It is a simple trade to understand and started showing early signs of working last week. However, one must keep an open mind that the whole idea could take some heat before ultimately playing out into Thanksgiving. Shares in EXPR, ANF, JCP, and AEO are showing signs of relative weakness and LULU reversed its early pop. On the flip side we can see rotation into risk especially in security software, China names, and solar.
Overall the grind higher makes it tough to short, especially individual stocks who could squeeze at any moment. And on the other side, taking longs requires proper risk profiles to your trades and overall book in case we see a leg down quickly materialize.
The top three trades I am stalking into the close are YELP, DANG, and SCOK. All long ideas, especially if bulls sustain trade above the zone from the daily mid (4163.75) to opening swing high (4161.25).
Tomorrow is a big day for the social media industry. Tomorrow we get to see how the market reacts to our first Twitter earnings announcement. Twitter will be joined by special guests YELP! Together the pair makes up a big piece of the social media space.
We have absolutely no way of knowing how the market will react to this news. We do know that up unto this point TWTR has behaved almost exactly the opposite of FB during the first three months of public trade.
Facebook pretty much bottomed after their first call. Will Twitter pretty much top?
It deserves a consideration. On the eve of what promises to be a special day for the market, I have decided to raise some cash and buy popcorn rations. I want to be a casual observer of the action, not a red eyed madman trading the fallout. I want to instead casually observe the action and pick a spot to pounce and eat.
Social media is the ultimate disrupter. Solid state lighting and eCigs and reefer and big, but social media is HUGE. Thus we must continue to find ways to profit from it.
I still hold my $40 cost basis shares in Twitter, and these $57.50 February calls in Facebook. I sold out of the YELP calls for a handsome gain.
With these actions my book is now 30% cash. Cash rich, if you will, and resisting my junky urges to get another fix.
Tue Jan 28, 2014 4:48pm ESTComments Off on The Social Experiment Continues
I have been trading these social media stocks, the fire, names like FB, TWTR, Z, YELP, TRLA, ANGI, and GRPN since I started blogging here back in the cussing days. I would cuss and trade these stocks, like an internet villain of sorts, for my profit and your entertainment.
I was trying to get people excited about my little blog, over here.
I bought weekly calls in YELP and TWTR this afternoon, which prompted distinguished 12631 trader @ckelly44 to question what I was seeing, and also to explain a bit more about the trade. First, what I was seeing is this:
Second, we have Facebook earnings out tomorrow, and I have no idea what they are going to report. However, many social media stocks are in alignment into the earnings. Therefore, I expect a very binary response from the names once Facebook reports. I had a hard time choosing between TWTR and YELP, therefore I picked both—like a good American.
Here’s the YELP:
While we’re looking at charts, here’s FB:
This same look can be seen in Zillow too. ANGI is trading a bit radical, but nice too. Here’s the kicker, I have exposure to all of the above names like some kind of crack head. Should the names bounce, I will have exposure to said names, all of them, until Friday.
Here’s the exposure catalogue:
Z – Feb $95 calls and common stock
GRPN – Feb $12 calls
FB – Feb $57.50 calls
TRLA – Feb $40 calls
TWTR – weekly $65 calls and common
YELP – $80 weekly $80 calls
ANGI – Feb $17.50 calls
Via the above pot of positions, I have a ton of exposure to social media. More exposure then I have ever had in my life, as a matter of fact. The crazy part is, only one of those call positions needs to cooperate and I will profit. Options, when bought with halfway decent timing and proper sizing, offer a much more modest risk profile then I previously understood. Should they all lose after a big FB upset, my book will sink about 3.3% from here. That is losing ALL of the premium. I know, bananas.
I have a short term expectation for movement higher, you see?
MOVING ON…I had some AAPL call exposure left that scalped me today, yet I am still up 1.6% on the day. Leading the way was LEDS. The stock went #BEASTMODE into the bell on heavy volume. Someone wants some LED exposure. I still hold 25% of my risk in the LED industry. I have not sold anything yet. Today it became clear they are making another attempt to take my shares from me. They will fail, again.
I am most bullish on the LED industry. Next is social media, and third is natural gas. It is so freakishly cold here in Michigan, colder then I can remember. Also, they are limiting the propane deliveries to the hilled billy folk, telling them to, “get with the times and hook up to a natural gas pipe.” I was going to get something exotic, like UGAZ, but I opted to follow The Fly into AREX.
I did not sell anything yet, therefore my cash is down below 10 percent. I think we still trade lower from here, but it is also my expectation that individual stocks will be allowed to behave on their own merit. This could be seen today in volatility, which was crushed.
Here’s my plan, we stuck to it today, albeit slightly weaker than expected. Let’s see what tomorrow may bring:
The selling continues this afternoon, with sellers continuing their blitzkrieg campaign with a 2pm algorithmic shock wave. A block trade like the one we just experienced at 2pm is a way of starting a siphon—the algo sucks on the tube with the intent of motivating atmospheric pressure to move liquid(ity). Once it starts the flow, a force of equal or greater value must arrive to stop the force.
There’s nothing wrong with sell algos, they just receive more criticism then buy algos. They are both attempting the same feat.
Keep the context of our market in mind. It is mid-December, we have had a huge run, correlations are low, the long term trend is higher, risky assets continue seeing cash inflow, and sellers just controlled their first week since mid-summer.
With that in mind, and despite my extensive coverage of the indices, I think it is important to keep your focus on individual setups and how they are behaving.
My book is going out 95% long after purchasing OWW today at the top tick. I have other names of interest, including LEDS basing just below one dollar.
My AMZN YOLO lottery ticket was a loser. I risked the entire premium because it was a lottery ticket. It had a moment of hope early on, but could not breach recent overhead supply. The trade needed more time than one day. I realized this soon after taking the trade, and was discussing how TSLA would have been a more prudent YOLO…if there is such a thing.
I never grabbed ENPH yesterday. Instead I just watched it and commented on it. Now I cannot buy it and it can likely go much higher. I simply lack to conviction to assume nearly 20% more risk.
My book of stocks spun donuts in the mud this week even though I have winners among my ranks. Here’s the book, largest-to-smallest:
BALT, OWW, FSLR, GRPN, TSLA, YELP, RVLT, YGE, Z, LO, WBMD, GOGO, CREE, F, and my bane MJNA.
Final word of on the market – this looks like discouragement phase, where the market makes an earnest attempt to steal away your favorite shares. Review your risk plans, make adjustments where necessary, and stick to them. Do not assume gains are guaranteed.
We’ve had good fun poking the stupidity of Morgan Stanley in their downgrade of AMBA this month. We banked some nice coin along the way. The recent leg up in our aging index rally has been mostly to the benefit of old men and their mega cap stocks. The snoozers, if you will. We participated where appropriate, riding LO and PPC, but to be honest I could have held less crack rock and more bourbon and cigars, the preferred vice of old men.
But today we saw the speculative juices begin to sizzle. Today we had WUBA pulling out the tits, Emily Ratajkowski style. Today was for the brazen and the bold, with social media saying, “not.just.yet my friend.” So my portfolio finally caught a decent boost.
I think there is more in store and I implore iBankCoin readers to get in line at the feeders: names like GRPN, Z, FB, TWTR, and TRIP. Pay special attention to TRIP as it appears poised to rip.
I am 95% long and low on cash. I had to sell PPC today to buy Zillow. I have so much money tied up in LEDs right now and they are not doing a thing, except for bleeding me modestly. This industry is ice cold, yet I love it. What is an intermediate term speculator to do?
We caught the Apple breakout yesterday via 12631 service.
Top picks into the turkey: GOGO, YELP, and Z.
I have huge positions in CREE and BALT, yet I do not mention them as top picks. Hmm…they need to DO SOMETHING.
It turns out the NASDAQ printed what is called a normal day in market profile theory and the fun thing about normal days is they are anything but. In fact, they are rather rare.
And I must say I do not particularly like normal days, at least not up here at swing highs, because they tend to occur at or near inflection points. A normal day is described as having a very wide initial balance (first hour of trade) which is not breached for the remainder of the session. It suggests indecision, intraday, mostly signaling directional conviction is low.
That context makes sense if think about gapping higher, in a hot (too hot?) bull trend, into a short holiday week. Short sellers do not want to get steamrolled in the thin trade, buyers are hesitant to initiate additional exposure at these elevated levels, and current longs are likely mulling taking profits.
Add to that the narrow pockets of market momentum and you have a solid recipe for indecision.
I have my book about 90% long at this indecisive juncture. AMBA finally went to work, crushing the hopes and dreams of Morgan Stanley analysis hoping to make a name in the technology space. I like to think this guy who downgraded AMBA will read the Raul blog, so I have a special message for him: this chipset powers the GoPro, it is on the X-mas list of every adventurer. Short interest, albeit modest, will start to get icy hands as we approach December 5th earnings. Then they will start making mistakes.
The chicken trade adhered to the November seasonality statistics, naturally, unlike the unnatural meat produced in PPCs new streamlined robot facilities. December brings a tad bit more seasonality mojo, and we still have national eat 1-to-3-birds-at-once day Thursday. I took an obligatory 1/3 scale today, but I like my prospects with the net.
I bought AAPL back right near the closing bell. If you recall, I was in this trade a few weeks back and bailed with a little 2 percent gain. It is an easy vehicle for me to lever long exposure up and down, as it consolidates along gently.
I now hold large positions in the following names, listed largest-to-smallest:
GOGO, RVLT, BALT, YELP, and CREE
These are all full size positions. As you may imagine, this type of book requires attentiveness. It has the capability of lopping 10% off my person rather effortlessly.
My ¾ size positions are as follows, listed again largest-to-smallest:
AMBA, AAPL, PPC, LO, and TSLA
Note: AMBA was by far my largest position prior to taking a scale near today’s high. Tesla and their innovative CEO Elon Musk are in the house of pain. Much like any successful individual, the media will frame Elon with a skeptical eye. Innovators hunt profit and self-gain after all, which is inherently evil. The issue most closely watched at TSLA is the battery technology. If it is to usher in the era of zero emission commuting, it needs to hold up to rigorous scrutiny. If Telsa intends to roll out a model for the middle class, they need sound battery technology established. The chart is just basing out, below my favorite moving averages, suggesting acceptance of these lower prices. What likely comes next is a new exploration lower by price. This will scare most of you. But I will be casually observing the action, minding the drawdown to my books, and meticulously selecting an opportunity to ratchet up exposure because I love me some sweet baby Elon.
I have dog and pony positions in the following stocks. These positions are practically placeholders and some are relics from prior trades:
F, FXY, ONVO, TWTR, MJNA, and O
I thought I would turn a clever trick in MJNA. Now I am -40% on this stupid, STUPID, holding. It will enjoy a fake pump service or go to zero otherwise I will continue to hold this dumbness.
ONVO needs to die for a while. It trades poorly. I will keep my toe in the water to keep my eyes on the name.
TWTR is another name I will hold until zero. I use twitter more than any other social media service in the world, why wouldn’t I own it? One day I will have huge size, but right now there simply is not much to base my risk on. Therefore I wait.
This post has gone on far too long. These are my holdings and some reasoning behind them. Let’s see how they perform this week.
Fri Sep 6, 2013 11:24am ESTComments Off on The Overplay for the Underlay
Well how about that morning /ES session? Quite the contrast to yesterday and the paint drying we were subjected to.
I had a great little scalp long at the open. Then I engaged Bossram even though I wanted to see a test of yesterday’s VAH first. I adhered to Bossram. It took a loss on the long side, then it engaged short, and took a loss on the short side.
The bad news is I took 2 losses in a row trading Bossram, the good news is they trades were fully plan compliant, and could have been much worse had I not adhered to the plan.
Typically, it goes on a huge win streak at this point, so the key is to continue to engage. But probabilities are probabilities, every trade is a coin toss.
Elroi scored one short for 1.75 handles and is currently taking heat in another short.
Onto my portfolio:
I sold some scraps out of my book, remaining runners in YELP, BBRY, and YGE. I also bought more SKF. Whether or not that trade works out is very much still debatable.
No reason to be down on these losses or saying adios to my winners, it’s time to dig my heels in.
The S&P traded in a silly manner today, pressing higher without much by the way of a rotation lower. The action had the strong scent of big money sloshing around, it smells like chemicals. We finally rotated lower in the last half hour of trade, but not quite enough to allow me entry on the long side.
For the day I was up 1.5 trading discretionary using the Bossram cycle, and Elroi was down 1 handle. Most of that vertical movement was untradeable with my toolbox.
It became clear early on I wouldn’t have much action in the /ES so I turned my focus to the stocks. For some reason, likely the lower leverage, I’m much more careless with my entries. I identified a quality entry point in BBRY today, but with the broad markets busting through resistance with ease I rushed my entry. The trade ended up working out so far, but unnecessary risk was taken. That’s the over analytic, slightly perturbed me talking about BBRY.
I’ve seen this daily chart pattern play out 100s of times: a stock is in a long trend, by long I mean months, quarters, or years. Then it makes a sharp move higher (or lower) to a reference point, like the 9ema. Then it throws down some price action that forms a letter ‘N’. You buy that setup. You buy that setup every time. That was the case in BBRY today. Having Cool Hand Luke aka #voodooshark aka RaginCajun as your wingman makes the trade even easier. This evening I’ll be donning a Canadian belt buckle at the local grocery, and tomorrow a full Canadian tuxedo, regardless of the heat or itinerary. Please refer to me as Drake, the name of all Canadian men. That’s the long hair don’t care me talking about smacking BBRY around.
Sometimes a beautiful woman sullies her entire appearance by lacking confidence. Take 20 minutes to practice your posture and enjoy the confidence it brings you. Raul writes for the ladies.
I scored big wins in YGE, YELP, BBRY, AIXG, and TRLA today.
FB, USO, and END lagged. Meanwhile, RVLT was beaten over the head with a sack of nickels. They need to land some big retrofits and blow the news out on the wires. I have to stick with this name. You probably shouldn’t. This isn’t some hot sexy trade, like you all crave so rabidly. This is a cold, passive aggressive relationship that will eventually fruit into something beautiful after several months of therapy. At that point things will warm up. Until then it’s the highs and lows of mood swings and recovery. It’s a long way, to the top, if you want to rock and roll.