Nice move in the oil patch yesterday, up 5%! That is the largest move in one day in 16 months. Oil just kept going up, breaking through key resistance levels. I am still long here and will add on dips. I think oil moves solidly higher.
My gold position is also doing nicely. I like being in the commodities right now, since equities look toppy and earnings reports are coming in mixed.
Wednesday, January 31, 2007
Monday, January 29, 2007
long oil, long GPS
Moving into a USO long position today. It looks like we've hit some resistance on the downside here around $45 and I like the chances for an upside move.
Also, I opened a longer-term speculative position on a PE buyout of GPS (Gap Stores). I bought a bunch of Jun 2007 calls at $22.50 for $0.35 each. If GPS gets taken out before then, you are looking at $2-3 upside, which is basically a 10:1 shot. I like those odds!
Also, I opened a longer-term speculative position on a PE buyout of GPS (Gap Stores). I bought a bunch of Jun 2007 calls at $22.50 for $0.35 each. If GPS gets taken out before then, you are looking at $2-3 upside, which is basically a 10:1 shot. I like those odds!
Tuesday, January 23, 2007
Not stepping in yet
A little dead-cat bounce perhaps after some brutally down days, and crushing weakness in the techs. I think we will see a day or two of strength here after some ostensibly encouraging earnings reports (TXN). However I'm not yet ready to buy with any conviction. I'm opening a new position in DNA as my healthcare play of choice, since I think biotech will get a lot of attention in 2007, and it's a great story. DNA has been executing but has had a lid on it due to fears about the new Democratic congress, and general outperformance in tech. Now that tech is weaker, this money's got to go somewhere. I think it'll be biotech.
In metals, RIO is doing extremely well today and looks strong going forward. I sidelined RIO a bit too early and have missed a nice upside move. Since RIO is one of the only things solidly working in this market, I will look to reopen when it comes in.
Lastly, YHOO reports after the close today. They have rolled out the new Panama advertising system to about 30% of their advertisers, to generally positive reviews. They should have enough data to give meaningful guidance for 2007, and I think Semel will raise it. Switching to a more rational pricing system is an obvious change, and they should have strong indications of how it will perform. Even if Semel does not raise guidance here, I think the downside is limited. Most everyone thinks that Yahoo can't execute at all and the pessimism is rampant. Tepid numbers would not harm the stock too much.
Overall though, I am not stepping firmly into this market just yet. I think there is quite a bit of downside through the bleak days of February, especially if a rate cut gets taken firmly off the table.
In metals, RIO is doing extremely well today and looks strong going forward. I sidelined RIO a bit too early and have missed a nice upside move. Since RIO is one of the only things solidly working in this market, I will look to reopen when it comes in.
Lastly, YHOO reports after the close today. They have rolled out the new Panama advertising system to about 30% of their advertisers, to generally positive reviews. They should have enough data to give meaningful guidance for 2007, and I think Semel will raise it. Switching to a more rational pricing system is an obvious change, and they should have strong indications of how it will perform. Even if Semel does not raise guidance here, I think the downside is limited. Most everyone thinks that Yahoo can't execute at all and the pessimism is rampant. Tepid numbers would not harm the stock too much.
Overall though, I am not stepping firmly into this market just yet. I think there is quite a bit of downside through the bleak days of February, especially if a rate cut gets taken firmly off the table.
Thursday, January 18, 2007
three and out
Three earnings disappointments. AAPL came out with absolute blowout numbers, but the stock goes down because the guidance for Q2 was below expectations. MER is up a bit, but not enough to recover the volatility compression in the options. Same deal with CAL.
Back to the drawing board. It may not make sense to trade long options during expiration week going forward.
Back to the drawing board. It may not make sense to trade long options during expiration week going forward.
Tuesday, January 16, 2007
continental, merrill and apple
Three earnings reports coming this week, around Wednesday. Here are my strategies for each:
* CAL. Up strongly today and I don't want to buy into this rally here. If AMR and LUV report disappointing earnings tomorrow, I think CAL will get hit and present a buying opportunity. If not, I am comfortable letting this one go. I am not interested in chasing.
* MER. Merrill is poised to post a strong number here and I am buying weakness. I opened a position today and will build it tomorrow if it is still soft.
* AAPL. Opened a position on Friday that is solidly in the money today. I will add some more if there is weakness tomorrow, expecting a blowout quarter.
* CAL. Up strongly today and I don't want to buy into this rally here. If AMR and LUV report disappointing earnings tomorrow, I think CAL will get hit and present a buying opportunity. If not, I am comfortable letting this one go. I am not interested in chasing.
* MER. Merrill is poised to post a strong number here and I am buying weakness. I opened a position today and will build it tomorrow if it is still soft.
* AAPL. Opened a position on Friday that is solidly in the money today. I will add some more if there is weakness tomorrow, expecting a blowout quarter.
Thursday, January 11, 2007
rally mode
Core holdings portfolio is very strong today! Google, Goldman Sachs, Mastercard, Level III are all moving solidly higher. Lowe's and USG are participating too.
Two moves of note:
1. sidelined RIO because of overall commodity weakness. I want to wait until they hit bottom before moving in there.
2. Closed out all AAPL positions. I would like to re-enter before earnings one last time, then revisit in March on weakness.
Two areas that I'm thinking about going forward:
1. LOW and USG are both levered to housing. One is a retail play and one is a raw materials play. I may try to exit one of these in the coming days, for diversification.
2. Cheap oil. There should be some interesting ways to play plummeting oil right now. Maybe back into KMB for a while?
3. ATI looks nice right now. It's a commodity play in a solidly booming industry (airlines), and it is off its highs. I may move in here.
Tuesday, January 09, 2007
AAPL does not disappoint!
My call yesterday was pretty dead on for AAPL! The phone came out, and we got our $8 upside move. I closed everything out late in the day for a big score. Not as big as if I had left my entire position on the table. But if there was no phone it would have been game over for the Rhombus Team. That would be undisciplined. Overall, it was a great trade!
Oddly enough now that I'm cashed out I feel a little strange, like there is something missing from my life.
Going forward, I like AAPL ahead of Q4 earnings on the 17th. Between now and then, AAPL will probably come in and retest some lows. The phone is a massive leap forward for technology and it is a ridiculously amazing product. But, in actuality, it will barely move the company's earnings for 07. And there are all sorts of issues with adoption - Cingular only, super-high price point, etc. I think it will blow any estimates away, but between here and June there may be uncertainty and panic about whether a $500 phone can actually sell.
Those panicky times will be buying opportunities.
Oddly enough now that I'm cashed out I feel a little strange, like there is something missing from my life.
Going forward, I like AAPL ahead of Q4 earnings on the 17th. Between now and then, AAPL will probably come in and retest some lows. The phone is a massive leap forward for technology and it is a ridiculously amazing product. But, in actuality, it will barely move the company's earnings for 07. And there are all sorts of issues with adoption - Cingular only, super-high price point, etc. I think it will blow any estimates away, but between here and June there may be uncertainty and panic about whether a $500 phone can actually sell.
Those panicky times will be buying opportunities.
Monday, January 08, 2007
MacWorld
Seems like forever ago that I opened up my "run to Macworld" trade. AAPL has done a lot of moving in both directions but ended up today around $86. I closed out the bulk of my position this morning with a nice profit. I set up a 95/100 Jan bull spread in case there is a phone tomorrow. I think the downside is limited. The upside could be $8-10, since estimates don't include a phone at all.
Jobs' keynote is at 9am, so stay tuned. Either way I will close out the position and re-enter next week ahead of earnings.
Then a much deserved break from owning Apple options!
Jobs' keynote is at 9am, so stay tuned. Either way I will close out the position and re-enter next week ahead of earnings.
Then a much deserved break from owning Apple options!
Thursday, January 04, 2007
AAPL exit plan
Apple is looking great so far into Macworld. Today we are holding $85 nicely. If we stay here, we could see a run to the close and gap up tomorrow getting close to resistance at $90. I am looking to unwind the bulk of my speculative position in Jan 85s by the EOD Monday, so I'm selling into strength whenever possible. I'll sell aggressively anywhere above $90.
I have been doing a lot of research into Apple's iTV and iPhone product announcements for Macworld next week. I think they are both game changers. Personally, I would buy both as soon as I could get my hands on them (although it might be tough to give up the Blackberry). With that in mind, I am going to leave some of my more speculative Jan 95s on the table through Jobs' keynote and sell into any strength that comes out of the announcements.
I have been doing a lot of research into Apple's iTV and iPhone product announcements for Macworld next week. I think they are both game changers. Personally, I would buy both as soon as I could get my hands on them (although it might be tough to give up the Blackberry). With that in mind, I am going to leave some of my more speculative Jan 95s on the table through Jobs' keynote and sell into any strength that comes out of the announcements.
Tuesday, January 02, 2007
ideas for 2007
2007 looks to be a great year for markets, if we do get some rate-cutting by the Fed. The big question that markets will likely have is when the rate cutting cycle will begin. This could introduce some uncertainty (and volatility) into things in the early part of the year.
With that thesis in mind, here is a summary of what we'll be doing over the next few sessions to get positioned:
* GS. Phenomenal earnings, best of breed investment bank, lower interest rates and a rising stock market should keep GS flying high this year.
* RIO. Growth in emerging markets will keep demand for raw materials (steel/iron ore) high.
* JNJ. Defensive play. Any weakness in the dollar or panic about the soft landing should propel this issue higher.
* MA. Tremendous organic and secular growth in Mastercard's business should provide great upside for this stock. I think it will be beaten down over concerns about the strength of retail... but this is not levered as heavily to retail as most people think. That means buying opportunities.
* USG. Strong fundamentals because of home remodeling, which happens when the housing market slows down. USG also looks cheap here and could be taken out by PE guys or Mr. Buffett.
This will be our model portfolio so far. There is space for speculation which happens orthogonally to these positional movements. I am also still looking for a good technology play for 2007, and any ideas would be welcome. AKAM and NVDA did well in 06 so they may continue to do so. CSCO also looked strong during the December selloff. Updates will be posted here.
With that thesis in mind, here is a summary of what we'll be doing over the next few sessions to get positioned:
* GS. Phenomenal earnings, best of breed investment bank, lower interest rates and a rising stock market should keep GS flying high this year.
* RIO. Growth in emerging markets will keep demand for raw materials (steel/iron ore) high.
* JNJ. Defensive play. Any weakness in the dollar or panic about the soft landing should propel this issue higher.
* MA. Tremendous organic and secular growth in Mastercard's business should provide great upside for this stock. I think it will be beaten down over concerns about the strength of retail... but this is not levered as heavily to retail as most people think. That means buying opportunities.
* USG. Strong fundamentals because of home remodeling, which happens when the housing market slows down. USG also looks cheap here and could be taken out by PE guys or Mr. Buffett.
This will be our model portfolio so far. There is space for speculation which happens orthogonally to these positional movements. I am also still looking for a good technology play for 2007, and any ideas would be welcome. AKAM and NVDA did well in 06 so they may continue to do so. CSCO also looked strong during the December selloff. Updates will be posted here.
apple recap
Welcome to 2007! Last week was an intense one for AAPL, and the drama made for some great trading opportunities. Shortly after the rumors about falsified documents came out on Wednesday, we bought in long at about $78. The next day, the FT repeats the story and the stock is knocked down again to $80. Another buy-in opportunity and we went more long. It was a great trade, because Friday the uncertainty cloud was lifted and AAPL moved straight up to our resistance point at $85. We sold a little there but are still long ahead of Macworld.
The exit strategy will be a phased one. The next resistance point is a soft one around $90, where it held support in the face of shorts in late November. We will be selling a little of our position there.
It should be nonstop good news and rumors from here through Macworld next Tuesday, so I think there will be nothing but upside. We will be selling into strength wherever it materializes, with the goal to be completely unwound ahead of Macworld. If Jobs does not release a phone I think we will see some panicking, and the upside if there is a phone is limited.
Apple reports Q4 earnings on the 17th, conveniently after Macworld and just before options expiration. If AAPL gets knocked down because of the product announcements, I think there will be tremendous upside ahead of the reports. When I visited best buy, the salesman noted that they sold out of every shipment of macs that came in. Not only that, but the ipod case looked like an earthquake had hit it. Anecdotal evidence, to be sure. But I like the risk/reward if we're back in the 80s after the expo.
The exit strategy will be a phased one. The next resistance point is a soft one around $90, where it held support in the face of shorts in late November. We will be selling a little of our position there.
It should be nonstop good news and rumors from here through Macworld next Tuesday, so I think there will be nothing but upside. We will be selling into strength wherever it materializes, with the goal to be completely unwound ahead of Macworld. If Jobs does not release a phone I think we will see some panicking, and the upside if there is a phone is limited.
Apple reports Q4 earnings on the 17th, conveniently after Macworld and just before options expiration. If AAPL gets knocked down because of the product announcements, I think there will be tremendous upside ahead of the reports. When I visited best buy, the salesman noted that they sold out of every shipment of macs that came in. Not only that, but the ipod case looked like an earthquake had hit it. Anecdotal evidence, to be sure. But I like the risk/reward if we're back in the 80s after the expo.
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