Even a Stopped Clock is Right Twice a Day

Maybe I have been a little hard on myself lately, but even a stopped clock gets the time right twice a day. AAPL is breaking out of their bottoming pattern today on good volume and those calls that I have beating myself up about are now back in play.

I have been waiting all day to write this into my blog (as a log), but was afraid the down tape may be a red tide that would even drag down AAPL's good news. Instead, it is looking like AAPL may close near its high near $132.00.

As reported by many, the COO gave some very bullish remarks at the GS Tech Conference yesterday that has enabled the stock to break out (see chart). The stock gapped above the downtrend at open and then recently cleared the only resistance hurdle I see at $131.00 on the way to $140.00.

Next week is Apple's stockholder meeting on Tuesday, followed by a Media Event for iPhone SDK. The buzz will be flying and my luck is turning. I expect a little momentum to be back into Apple over the next week.

Now, I just need horrible numbers from TIE tomorrow evening to make this a week to remember.

You’ve Got Mail

Next week is all about Apple. On March 4^th, AAPL has its annual stockholder’s meeting. Then, two days later, Apple is hosting a special media event to unveil the new iPhone SDK (software developer’s kit). Words like “enterprise” and “Outlook Exchange” are being bantered about within the media as we speak, but the press invitation (as I understand it) appears to be pretty cryptic as the company just mentions that the event will be about some “exciting new enterprise features”.

You have to give a hand to Apple; they sure know how to create a buzz. How this all plays out is going to be interesting and I am expecting some real volatility in the stock price next week.

The Shareholders Meeting should be interesting in that investors have seen a 40% decline in the company’s share price this year to date and they will want reassurance that the ship is in good shape. How the company handles this exchange will be very important.

Then on the 6^th, the media event, which I assume will be reported on CNBC will get the faithful blog believers in a frenzy driving a buzz of expectations that may be hard to top. However, providing meaningful business applications on the iPhone like Outlook opens a whole New World. RIM and Nokia are in Apple’s sights.

Therefore, I am holding those underwater AAPL calls hoping to make lemonade out what has simply been a very poor series of options trading on my part.

P.S. Steve Job's email to employees last month says it all: "I continue to believe that our fundamentals--our remarkable people, our clear and focused strategy, our new product pipeline, our 200+ retail stores, our $18 billion of cash in the bank with no debt, etc., will serve us well in the coming months and years....investors who stay with us will be rewarded as the market's confidence is restored over time. Hang in there."

Digging A Hole

Help me, I can't get out. Once again, I look like a rookie with my AAPL options call. Early again. Trying to anticipate the upturn out of the bull flag while the stock obviously still has more work to do.

So I am stuck with serious losses on my AAPL options as result of trading hope and not facts. What to do? Good question. The chart still has the same pattern with $125.00 as the new breakout point on volume, but what would be the catalyst to get that positive inflow?

At this point, I am going to hold on and try to be patient. The mistake has already been made. I am not afraid of taking the loss, but can afford to hold. Buying Mar135's at $0.60 today still looks like a good trade. I also picked up some Mar125's. We shall see.

On other news, GRMN has broken support as it undergoes a "sell-the-news" period. Consumer stocks are just getting crushed. It is an investment and I am holding for now. I don't need the money elsewhere and I see the investment paying off.

ANSS is rebounding well. Keep an eye on that stock. It is my number one play at the moment.

My TIE puts position is also underwater. News should be out on Friday (earnings) that is the reason for the trade.

Under Promise, Over Perform

Engineering simulation software developer Ansys (ANSS) once again beat consensus estimates for Q4 and guided higher for 2008. Not only did they blow out current estimates, they also exceeded Street expectations going forward. Their guidance included a Q1 prediction of revenue of $103-$106 million and earnings of $0.33-$0.34 per share.

They expect 2008 earnings to be in a range of $1.48 - $1.51 per share and revenue in the range of $442-$447 million. Considering that this is the 21st quarter in a row that the company has outperformed consensus estimates, I think that investors can hope for a little more.

With a somewhat consistent 30% year over year revenue growth and earnings that continue to accelerate, this stock is a screaming buy. One look at the weekly chart tells the story about the strength of this stock's performance and how management has effectively managed expectations for their investors.

Garmin Rocks Q4

Hundreds of articles are being written about Garmin's blowout quarter as a type so I won't spend a lot of time rehashing the financials, but the numbers and guidance does bring a smile to my face. Year over year, GRMN doubled revenue in Q4 and earnings increased by 70%.

What they made, they sold and the margins are holding up better than analysts expected. Their 2008 guidance sets expectations that revenue will exceed $4.5 billion and earnings per share will exceed $4.40. These are big numbers and the stock is technically set up to take off.

It was a screaming buy at $56.00 when I bought my shares, but it is still a buy today. I expect a double in this stock price in 2008 from here.

The consumer electronics market is alive and well for device makers that are willing to innovate and provide the "wow" factor. GRMN and AAPL both fit this category, but have been taken down with the rest of the sector.

Looking at the chart, the volume is there and buying above $74.00 could push this stock to $80.00 in the short term. A good base has been formed between $62 and $73 allowing this stock to efficiently move higher.

Adding with TIE Puts

The Golden Boy is in danger of losing his Fortune 400 Richest Person status as his fortune is at risk with TIE. The Golden Boy, of course, is Harold Simmons the Chairman of Titanium Metals. Today's RTI earnings data told the tale that confirmed to me that TIE will miss Q4 earnings, so I have added to my existing puts by doubling down on the position (Mar22.5).

I expect TIE to report $0.34/share when it reports sometime in the next 9 days, missing analyst expectations by $0.02 (which was already lowered significantly last quarter).

RTI exceeded their numbers for Q4 as reported by In-Play: 7:10AM RTI Intl Metals beats by $0.04, reports revs in-line; guides FY08 revs in-line (RTI) 54.23 : Reports Q4 (Dec) earnings of $1.08 per share, $0.04 better than the First Call consensus of $1.04; revenues rose 13.9% year/year to $163.8 mln vs the $164.1 mln consensus. Co issues in-line guidance for FY08, sees FY08 revs of $720-$752 mln vs. $731.70 mln consensus. For 2008, we expect mill product shipments to range between 17 - 18 mln pounds at an average realized price lower than that experienced in 2007. We also expect sales to increase 15 - 20% and operating income to increase 7 - 12% versus 2007."

The problem with this earnings release is that RTI's titanium pricing has a multi-quarter lag to TIE's titanium prices, providing little insight into TIE's numbers. However, with back channel chatter that TIE has completed its annual Long Term Pricing Agreements (LTA) with their major customers for 2008 at prices significantly below their 2007 prices and with the erosion of spot market pricing for sponge and scrap, last year's numbers will be unsustainable for 2008.

While the supply/demand imbalance problem may be short lived as the 787 finally ramps up in 2009, I think that 2008 will be the year that wasn't for TIE longs.

How do Options Daytraders Sleep?

This morning I spent a "day in the life" of an options daytrader. It was fairly obvious this morning (at least to me) that AAPL was not going to break back out like I thought yesterday afternoon.

I hate being wrong, so instead of selling near open to buy back lower, I decided to collar my AAPL long position with Feb puts. In this case, it was Feb125 puts due to expire tomorrow (effectively at 4 pm tonight). On top of that, the Feb puts were OTM.

I initially bought these puts this morning for $0.65 and watched the market and AAPL turn around for a moment and I quickly covered at $0.50. Not a good start.

I then noticed the absolute lack of buying in AAPL this morning so I started a position again at $0.53 about 30 minutes after I had previously covered. I ended up riding a downward slide of the stock below $125.00 when I covered in chunks between $0.90 and $1.35.

Overall, it was a great performance that will more than make up for any losses that I currently have today. The problem was that I was very, very lucky. It became apparent that I didn't have a comfort zone at all with this trade. I had no tool that would show greeks intraday. The puts were trading at about a $1.00 premium at open and slide to about $0.70 later in the morning before increased volatility after the stock broke $125 gave it a bump again. I kept thinking that the premium was going down to close to zero by the close.

In order for this trade to work (which was supposed to be a collar), the stock needed to go down and go down fast. It was like playing high stakes poker. At one point, I had 400 contracts in play and had to run to the bathroom and hurry so that I didn't miss any price action changes.

This was not investing and this is a reminder to myself that I need to avoid this stupidity in the future.

By the way, I bought more AAPL March long calls when the stock started to rebound at $124+. I have a little more time on that one and I think my downside is limited.

Better than poker. How do they sleep?

Adding Apple

The chart finally looks ready to break out. I added some more stock and calls today at close. It has a bullish pattern and, with some volume, should move higher. Added to the Mar35 calls and doubled my stock.

Happy Valentine's Day!

The charts are turning the corner and it is looking like investors are starting to dip their toe in the water again. Being that it is Valentine's Day, I finally decided to deploy a little more cash this morning.

First, I bought some TIE Mar22.5 puts. The stock is hitting its upper downward trend line and I am betting that it will provide some resistance in an otherwise upward moving market tape.

I also bought some APPY on this weakness. I am a little disappointed that the MM hasn't defended the stock price a little more than it appears, but the thesis is still intact and the price of under $6.00 will not be around long.

I also added some ANSS with earnings coming out next week.

Are we are Doomed to Repeat History?

Will history repeat itself? Since I began toying with the idea that the 2007 “slowdown” may look a lot like the 1990 recession for the stock market, I am still surprised by how the data is tracking. Let’s look at the data.

The S&P hit a peak in 1990 at 369.00 on July 17th. Then, just 13 trading days later, during the week of August 6th, the index was hit with the “death cross” when short term moving averages cross below longer term moving averages (in this case, I track the 10-week ema and the 40-week ema). You may recall that the Gulf War was hitting about this time and the markets were taking a queue from the oil pits. I mention this crossover event because the 80-week moving average was also broken this same week, suggesting a bear market.

After some initial attempts at a bottom (the 1st attempt at 306 was put in on August 23rd), it was finally reached on October 11th some 59 trading days after the top was put in. From top to bottom the index experienced a 20% loss. Following the official bottom being put in at 294.00, the market retested that bottom 13 trading days later on October 31st with an intraday low of 299.00.

So where are we with the current correction? Well the S&P index peaked on October 11th of last year at 1576.09. By the last week in December, it had similar moving average crossovers on the way to what is currently a bottom that was reached on January 23rd at 1270.05. Top to bottom, the index had experienced a 19.4% loss, slightly lower than the 20% experienced in 1990. It also took 68 trading days to reach a bottom as opposed to the 59 trading days mentioned above.

Is it pretty similar so far? It is to me. Now let’s look at a potential retest of the low. In 1990, the retest occurred 13 trading days later as described above while a current possible intraday low was reached for a 2008 retest on January 23rd (11 trading days after the bottom). Again, pretty darn close.

So if the theory holds (and this has always been a huge “if”), then the market will rise out of the ashes in 50 more trading days. In 1990, after some volatility (sound familiar?), the market stopped looking back on January 14, 1991 after hitting an intraday low of 309.00. That puts us on a course for the market to really pick up steam right around the 1st of May.

Hopefully, we will all enjoy this summer.

Disclaimer: Metrics have not been verified (I may be off by a trading day or two). This was a back-of-the-envelope exercise in which I am confident that the results will not materially change, but the details may be slightly off.

GRMN's Gap

A message board friend of mine tipped me off about an option put play for GRMN (thanks SP!). He saw this play from a free weekend newsletter put out by the Investment House Group. To paraphrase the newsletter, they were recommending building a put position using Mar65 strikes with a 41% profit target.

The technical reasoning for this play is that GRMN had a gap in their chart (most stocks revisit most of their gaps) that was tested last week by the stock and the gap failed to close. As a current investor, this play is very interesting to me. Someone has set up a trade, however, that is really not incompatible with my investment (see chart).

I say this because my time horizon is different and I actually would be happy if GRMN stayed here and built a base of support for a few more weeks before heading higher. The best moves are from a technical base. The newsletter also forced me to look at the chart more carefully and see that I should closely follow any breakdown below $62.00 and weigh whether I should lock in profits and buy back lower.

While I don't think that will happen, we should all have a worst case exit strategy. They report on 2/20/08 which may make this put strategy that the newsletter is suggesting problematic. If I where them, I would have bought the Feb puts expecting a move by Friday to avoid the earnings date and limit the premium loss. This is what makes a market.

I like my current GRMN position and expect a move higher in the next 30 days.

Watching the Banks

While the image is really about credit cards, I am sure that you see my point that it applys to banks in general. The banks are definitely being tested today. I find the opening tape to be interesting because the financials are being taken down, but not the entire tape. One look at the difference between the VIX and the VXN tells the tale (VIX is up, meaning volatility is huge on the S&P which is weighted heavily to the financials, while the VXN reflects volatility on the Nasdaq 100).

This brings me to the XLF. Since the credit crunch started, I have been tracking this ETF and occasionally have used the ETF as a hedge against my long positions. Today, it is being tested (See chart). It is down big, but may put in a reverse head and shoulders that could spell some positives for the market on this options expiration week. The conditions for this to happen are if the XLF holds $26.00 and reverses. It could also happen tomorrow as well, if it doesn’t happen today. If it fails, then it could test its lows.

I believe that what brought the market down originally (financials) will also lead us out from the bottom. That is why I am focused on the XLF.

P.S. As I was writing this, the market moved up suggesting a possible bounce here.

Love the Price Action

In the back of my mind, I can hear that CNBC Reporter named Dylan screaming "From the Nasdaq in Times Square, this is Fast Money...". Well today, the index has something to say.

While we still have an hour of trading left and anything can happen, today was a day when Mr. Market just said enough when it came to the technology-laden index. Mr. Market is saying enough of taking everything down on every sub-prime headline. Things are cheap and Mr. Market is looking outside the rope line for opportunities. Technology has put on a two day show since the CSCO debacle with the bulls saying enough!

The DJI and S&P are each down more than 0.75% while the Nasdaq is still positive (although barely). Not bad for a Friday when everyone is afraid to hold long positions over a weekend.

On the stock front:

Did anyone notice that Garmin received another upgrade this afternoon? This is the second upgrade in a week. The first was from Morgan Stanley (which they reiterated this week) and the second was this afternoon from DA Davidson. Morgan Stanley is saying that a valuation bounce through $80 is very possible. This is something that I will take a look at technically.

SIRO missed the Street's estimate on what I think was a very good quarter. The "one size fits all" Wall Street estimates model doesn't work well for thinly traded stocks. The revenue growth is there and the EPS improvement was also there (although not as high as some would like). Have they ever heard of lumpy earnings? It would seem not. I sold SIRO during the correction to raise cash but will re-enter when the timing looks good.

Speaking of lumpy, the ROCM results were just that. The CEO is sometimes a little less than inspiring, but he is basically saying that the private label sales that fell off a cliff is mostly an accounting thing (they booked the revenue late). I am willing to take this explanation because I am a long time investor in this category and not a trader. The conference call could provide a little color, however.

BioPharma is just getting killed. So much for defensive. APPY is way underwater and I am looking to add under $6.00 next week if the market tape gives us any life. Again, this is an investment so I am not looking to scalp something here.

That's all for now.

Closing the Deal

The bulls can close the deal on the perfect bottom and retest today (see image #1) or risk an ugly ending (see image #2). Yesterday's buying was great to watch. The sellers were not committed and the volume was good.

Bargain shopping was going on!

I am a little obsessed on finding a bottom here. The year has started out so poorly for the market (and especially me), that I am getting a little relucant with my trading. I seem to do best when I am fearless and not cautious.

I plan to do a post mordum on what went right and wrong for me over the last 90 days for future reference (maybe this weekend). I really had some good moments and some horrible ones that has cost me a couple hundred G's.


I am sticking with Apple as my main horse for now, but I am thinking about shorting TIE for a trade in the short term. The other long positions are solid and I just have to have major patience with them.

I am also looking for the next rocket sector to try to get in early, but the current tape is not conducive to this approach.

I want to put the last of my cash to work, but the bulls need to set up a positive next week this afternoon before I do.

Retest May be Today

The big boys may really be fighting the down tape for a reason. One look at the market indexes and you realize that the closing lows of each index was much higher than where they were at a certain point intraday on the day they bottomed. This is important in that many technical traders consider the closing price more significant technically than any intraday number.

That thought process means that the DJI basically needs to hold 12,000 or that the COMPQ needs to hold 2225. We are not far from that so fighting now instead of when the indexes get there may make more sense to someone.

While I am not an "invisible hand" conspiracy guy, I am also not naive enough to believe that trading floors don't talk to each other and telegraph their moves on purpose. What this means to me is that even though I have collared everything, the downside may be fairly limited if the market retests the closing lows today and it holds.

This is a slight change in thinking to the state of mind of where I was only an hour ago. I have been doing this a long time, but the emotional part of the process is now taking a toll.

I need to breathe.

Big Boys Have Come to Play

On a day that technology was going to take out the market, the big boys made an opening play with some strong buying that is holding up the indexes. At first, I was just grateful as I collared everything with puts (SPY and AAPL).

Now, I am underwater from both directions as the market stays higher. I still think that the downside has more possibility this week, but I have to say that I am not wedded to any direction. I am only trying to hold on to what has been a brutal market that has put me in a very big hole for the year.

What an Ego!

John Chambers is the biggest sandbagger known to the market (well, maybe with the exception of Steve Jobs).

His ego insists that he prognosticate on the state of the economy every quarter and the media just eats it up. By talking down his book so that he can be "successful" later, he has been taking down the entire sector - the sector he sells too.

Give me a break. If tech is an indicator, it looks like we will retest the low. Tomorrow will be ugly. Hide the women and children; the traders plan to rape and pillage.

I am planning on buying protection at open, dumping any calls and riding out the dust up with my stocks at this point. This is short term and was a very real possibility, but I had hoped that it would be averted.

It is almost over and I truly believe that technical traders will jump on the retest near the bottom. Shorts and weak hands are selling, in my opinion. The buyers are just nowhere to be found.

Traveling Again

I am traveling again tomorrow after being on the Left Coast for the last week. I am still holding on to a more aggressive long position and planning on a climb up from here. Today (and possibly this week) is all about building a base to move higher.

ROCM reported this evening and I haven't checked into the numbers because of my travel schedule. It may be a few days before I can listen to the call. From the reaction, it looks like folks weren't blown away, but the volume was light and any panic was also not evident.

We shall see.

Catching Its Breath

The market is catching its breath after what was a very good week last week. It is time to "prove it" for the markets. We are starting to work our way into some resistance here and may re-trace a little more before moving higher.

Building a base here helps us go higher. No need to fear a retrace and bail out of long positions - the real risk is currently with anyone shorting at this moment.

Tracking each index and individual stocks may differ significantly at this point. There are a lot of cross currents and sector rotation going on. Tech is under owned at the moment, whereas a lot of money has moved into the financials in a short period of time.

I am looking to buy AAPL heavy on any move on volume above $140.00 to fill the gap. I also bought more BOLT this morning. I now have just less than 20% of my portfolio in cash.

Got Garmin?

Morgan Stanley suggested that Garmin company execs are still very bullish on the US consumer and that they are not seeing a slowdown in the U.S. affecting their business. Come again? This is telling me that the quarter has more upside than analysts are anticipating.

While I am not sold on the Nuviphone (I think it is a distraction and I would like to see them hook up with someone instead of going it alone), 2008 will surprise a lot of folks.

Stay tuned and pay attention to the forward guidance when they report.

Held My Fire - Now it is Buy, Buy, Buy!

I held my fire yesterday in deploying my cash. I decided to wait until the jobs report this morning. With that data point now behind us, I now have a little more certainty about where the market is going.

We got follow through yesterday!!!!!!!!!!!!!!!! In case somebody is not paying attention, I will be clear: I think the bottom has been put in.

Banks, technology, materials, metals, and retail (yes, even them) are now in my sights. I had become lazy - it wasn't worth a ton of research when forward guidance was constantly being revised and slashed. Now I need to start looking hard at stocks on my watch list like UA and getting busy.

I bought more AAPL this morning. I bought ANSS this morning. I bought BOLT this morning and I am thinking about a few more like PCP and UA. Time to deploy the cash.