On Friday I took the 8% rally in Alpha Natural Resources (ANR) as an opp to take a 1/3 off the table. It was a good thing since by the EOD, that 8% rally had become a 4% rally. In Japanese candlestick theory, ANR printed a pretty textbook “topping candle” Friday, so I’m expecting some much deserved rest this week. We know that one candlestick does not a pattern make, so obviously we’ll be looking for confirmation. If I’m wrong, I’ll just have to take my 65% postion to war, and wait for another pullback to add. If we do correct, I’m looking for support at 7.50 (where I’ll buy my first lots back), but I’m willing to take pain down to the 6.90 area. I intend to buy back the 1/3 I sold, and another 1/3 on top to position for my 16 Jan target. I”ve been using JAN13 10c’s to play ANR since I didn’t know when QE was coming. Now that QE is here, I’ll be looking to add closer months as well.
Visa (V) acted very well Friday. Mild, benign consolidation on the lowest volume since the b/o, and closed off the LOD. Exactly what you want to see. Some more quiet consolidation between 134-136 would be healthy and constructive in terms of the b/o. The b/o is in jeopardy on a close below the previous ATH at 132.58. I’ve been playing V through SEP 135c’s, and had taken 60% off the table going into Friday. If V consolidates more Monday, and the market is down, I’ll add. My thinking is if the market is up Monday, it will be down Tuesday and Wednesday, so V won’t be able to fight the tape; hence I won’t add. I’ll just take my 40% postion (which has tons of cushion) into OpEx. If V is up, and the is market up, I’ll take another 10% off. V, along with ANR and AAPL, are my top picks going out half a year, so with these 3 names I’ll always be looking for good entries to roll a % of profits into forward months for the foreseeable future.
Am I forgetting someone? Think…..think….Oh yea…Research In Motion (RIMM)! Kidding, kidding. Let’s look at Apple (AAPL). Just like ANR, AAPL printed a somewhat bearish candle, but given the headline risk we face Monday, I’m not quite as bearish about AAPL as I am ANR. Overall, here’s the issue right now; we have plenty of b/o’s and pretty charts, but a toppy, OB market. So, in AAPL‘s case in particular, you have a huge amount of headline risk going into Monday even though the market seems toppy. That’s why I’ve stayed long my SEP 700c’s, and bot some SEP 720c’s right at the close Friday. More than likely AAPL is going to report aboslutely, and I quote, ‘incredible‘ numbers in presale orders for the iPhone5. 3m, 4m, 5m? I’m not sure, but I expect the stock to open up and get to 702 at some point Monday. I think ES_F will be on the right side of this one too, going back and testing those multi-year highs at 1468. If this scenario plays out, I’ll take the opportunity to get flat AAPL, and short ES_F. I think Tuesday and Wednesday we’ll see a retrace to 1435-1440 on ES_F, and fill the Friday gap in AAPL at 683. I expect buyers to come in, and Thursday and Friday we’ll rip tits. My targets would be AAPL 713, and ES_F 1477-83. If this scenario does not play out, and we just continue marching higher on the major indices, I think AAPL can do 725-730 by OpEx. I’ll give the latter about a 40% chance of happening. While I think the higher probability bet Monday will be on the short side, it’s well known that “hated” rallies tend to go much further than people think. And with the talking heads on CNBC calling this “the most hated rally in history”, you’re not going to catch me leaning heavily short into anything.
I hope you read my previous blog post.