Traders Corner   30 comments

The S&P 500’s Bollinger Bands have started to contract again, which could be an indicator that we can expect another major move soon. However, it is still too early to tell.

The S&P 500 squeaked past the 100 day moving average yesterday. Will today’s employment report cause it to challenge the 20 day moving average at 1806? I would call it a strong possibility at this point, although the technicals aren’t pointing the way. If the markets push up today, it is purely on sentiment.

The S&P 500 levels to watch today:

UPSIDE: 1774-1775 (February 6th’s high and October’s high), 1784 (February 3rd’s high), 1806 (20 day moving average), 1809 (50 day moving average), 1849-1850 (January’s high, December’s high and the all-time high), and 1876 (top of the Bollinger Bands).
LAST CLOSE: 1773.
DOWNSIDE: 1772 (100 day moving average), 1770 (January’s low), 1767 (December’s low), 1758 (February 4th’s high), 1755 (February 5th’s high), 1752 (February 6th’s low), 1746 (November’s low), 1743 (February 4th’s low), 1735 (bottom of the Bollinger Bands), 1739 (February 3rd’s low), 1738 (150 day moving average), 1737 (February 5th’s low), 1729 (September’s high), and 1710 (200 day moving average).

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30 responses to “Traders Corner

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  1. while looking for a good dividend play, I came across Molycorp Inc. Was never really interested in them, but the preferred shares with the symbol MCPpA has a dividend of 50% yield. I was surprised. Obviously that is ridiculous and have no plans to buy it. But I would like to hear what you guys have to say about it.

    • ted,
      Here’s the story:

      “Molycorp, Inc. (MCP) today announced that its Board of Directors has elected to declare a cash dividend on outstanding shares of its 5.50% Series A mandatory convertible preferred stock in an amount equal to $1.375 per share. Molycorp (MCP) will pay the dividend on March 1, 2014 to the holders of record of shares of Series A mandatory convertible preferred stock at the close of business on February 15, 2014. As of February 1, 2014, there were a total of 2,070,000 shares of Series A mandatory convertible preferred stock outstanding.
      On the Mandatory Conversion Date of March 1, 2014, holders of Preferred Stock will receive 2 shares of Common Stock, par value $0.001 for each share of Preferred stock converted. There are currently 2,070,000 shares of Preferred Stock outstanding, and a total of approximately 4,140,000 shares of Common Stock will be issued upon conversion of the Preferred Stock.
      From and after the Mandatory Conversion Date, the Preferred Stock not previously converted will be deemed to be no longer outstanding and all rights of the holders with respect to such Preferred Stock will terminate, except for the right to receive the number of whole shares of common stock issuable upon conversion of the Preferred Stock, as described.”

      So with MCP trading at $4.81 now, you will get 2 shares of that for each share of the $11.25 MCPpa. While you will get a nice $1.375 dividend for each share of the preferred, you will also be getting 2 shares of the soon-to-be-diluted MCP (you can expect MCP to be worth less than $4.81 after the conversion). It’s actually not too much of a dilution (1.7%).

      The big gamble here: Will MCP still be in business on March 1st? They aren’t reporting December’s earnings until March (uh oh). September’s earnings were awful, with debt/equity of 103%, levered free cash flow bleeding $506 million on revenues of $565 million and a profit margin of -101%. MCP could be in bankruptcy court before you even see the dividend.

      • Thank you Ed. I did read about the conversion of preferred stock to common stock. But didn’t even think too much about anything else. I had no plans to buy it and it looked “too good to be true”. When yields are too high, I become very skeptical. Your research only confirms it for me. Anyways, thank you for taking your time. I appreciate it.

      • I did a lot of research in the REE-sector a while ago. No way I’ll be buying MCP for the long run. They made a too big acquisition, they got terrible management and they are bleeding cash – at least that’s what I read about 6 months ago. I’d stay away from it, unless you got a very good reason.

  2. The market tipped its hand yesterday with the big move up. Unless there was a huge miss on the employment number it really didn’t care. Maybe different by the end of the day. This is a fickle market. The 150 held and it doesn’t look like the 100 will be much resistance. We’re not out of the woods yet and this could still be a trap. If we break through 1800 S&P and hold we should reach at least the 1820 level. We’re getting a good lesson on the importance of watching those moving averages. This continues to be a volatile market and favors the traders. Just be aware of the way the game is being played. Then you can decide if that game is for you.

    A few days back I posted that the S&P had reached extreme oversold levels on the daily chart. Going short there was a very high risk move. There will be more opportunities to go short. Just wait until the odds are in your favor.

  3. I bought a small position in ANGI this morning. I’m going to play the earnings game with a small bet. They report on the 12th. If it has a nice pop, I’ll sell on the news. If it goes the other way, I’ll be a covered call investor. Angie has been very good to me. I hope she doesn’t disappoint me this time.

  4. Looks like it might be time to talk about silver. It’s been in a consolidation pattern for the last three months. It is starting to show strength again but we have seen that before. I don’t know if it will finally break out this time or disappoint again. If you are interested in silver I would keep and eye on it. If we do break to the upside we could see a nice trade opportunity. I own AGQ.

    • I’m one of those NUGT suckers that rode it down. I sold some last year, but still have some left. Was thinking of selling some NUGT and re-buying AGQ. This would avoid the wash sale rule, allow me to harvest some losses, but stay in precious metals to (hopefully) catch the upswing. This is of course assuming that sliver and gold, or more specifically AGQ and NUGT move somewhat together. I realize one is mining and the other isn’t, but…. Any major holes in this theory?

      • John, since you have been in NUGT this long I don’t think I would sell here. Of course, that is coming from a guy who doesn’t like to sell anything at a loss. With averaging down and selling covered calls I can usually work my way, although it may take a long time. If you want silver, I would just add partial positions. Too early to tell if it will break out. I’m seeing some strength in NUGT. Having said that I wouldn’t buy any more at the moment.

  5. Bought GTAT this morning. Looking to sell Feb 10 calls. Haven’t hit my price yet. Looks like about a 4% return for a week on a conservative play.

  6. Well Ed…I held on to BID/Sotheby’s, and lucky me, it’s recovered a bit. I’m now 5% to the good! What do you think of it’s prospects given the way things have changed recently. Still think it’s a ‘sell’?

    • Howie,
      It depends. If you are holding it for the long-term, it is still a good combo “a little dividend, a little growth” play. If you are playing it short/medium term, I think you’ll get a better entry price in the next few months (possibly $45 or less). Take your money and run, and keep a close eye on it.

      Another aspect: The near-term upside is limited. The 52 week high is $53.90, and it has a multiple top on the charts. That is firm resistance.

  7. I guess those flowers I sent to Angie paid off. Sold my position for plus 64 3.9%. In this volatile market, I’m not going to risk quick profits of this size.

  8. Sold GTAT Feb 10 calls for 60 reducing my basis to 9.50. If called out next week my profit will be 50 5.3%. If not called I’ll get a 5.9% on my investment and I’ll look to see calls again. I’ve watched GTAT since Marshall first made the recommendation. Looks like a conservative play with low volatility and the opportunity for a nice profit. Thanks Marshall, I hope. 🙂

    • Trader – I certainly hope it works out well for you. I was actually considering ( for an instant) whether I should use 1/3 of my GTAT as a trading position, as it does seem to regularly swing between $9 and $10.50. But decided to just stay all in long.

      • I’m not going to try and change your mind, well maybe a little. 🙂 Covered calls work great on low volatility stocks. I was somewhat surprised to see a premium this high on a low volatility stock. That may not continue, so you have to take advantage of what the market is willing to give you.

  9. The S&P is moving up to the 50 day ma around 1800. We’ll have to see what kind of resistance we get there. My guess is we get some selling at that level. If we don’t see a big drop, we may bump our heads on that level for a few days before the market picks a direction. Technicals are turning up but won’t move into positive territory unless we break out above the 50 with a fairly strong move.

    • Trader,
      The key is Yellen’s testimony on Tuesday. I expect she’ll douse the markets with some cold reality (“the tapering will continue until the economy dies”). Ironically, if we have another big day on Monday, the technicals could be looking overbought in time for this event.

      • It would take a huge day for the technicals I follow to reach over bought that quickly. A couple hundred points on the Dow won’t do it.

  10. Very strong day for me. Really helped by GTAT being up 10% and ATVI up 12%. Even some of my “off picks” like RIOM are showing strength today. Overall I am up aboutb 2.5% and am actually just a stone throw from being back to break even for 2014. Actually I just went back and looked and dollar wise it is my best day since October 15th 2012! Almost a year and a half ago.

  11. Of course in full candor, Monday at the start of this week was my worst day since June 19th 2013. On the week I am up 1.3%.

  12. Has anyone on this board ever looked at REGI? They were profiled in MF round table on best stock to buy in February. They look too cheap, so wondering if anyone hear knows a reason why they would be cheap.

    • Marshall,
      It’s one of those rare cases of one bad thing followed by several “market negative” events. First, the EPA was considering easing the biofuel requirements for 2014, which led to an analyst downgrade on the stock. This was followed by the company doing two acquisitions, and the market usually punishes acquirers. So that is how it got where it is. You’re right, it does look cheap. I’m adding it to my watchlist.

  13. Friday Apple Rumors: Apple Could Produce 200M Sapphire Displays a Year
    It wants to have the sapphire factory in operation this month

    http://investorplace.com/2014/02/friday-apple-rumors-apple-produce-200m-sapphire-displays-year/#.UvVrSfldWa8

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