Traders Corner   37 comments

The S&P 500’s Bollinger Bands resumed narrowing yesterday as the markets seem headed towards a big move. Strangely, even after the recent run-up, the P&F chart still has a bearish price target of 1620. Along that line, this morning’s futures are down.

I have heard two different analyses on the current market: The first one is the S&P 500 has to revisit the recent highs before we can see what direction it will take. The second analysis said the S&P 500 will have to break through resistance in the 1820-1830 range in order to turn bullish. So far, based on the last two days, that resistance seems to be holding.

The S&P 500 levels to watch today:

UPSIDE: 1823 (February 11th’s high), 1826 (February 12th’s high), 1849-1850 (January’s high, December’s high and the all-time high), and 1866 (top of the Bollinger Bands).
LAST CLOSE: 1819.
DOWNSIDE: 1815 (February 12th’s low), 1809 (50 day moving average), 1801 (20 day moving average), 1798-1800 (3 data points), 1791 (February 10th’s low), 1784 (February 3rd’s high), 1774-1776 (2 data points and October’s high and the 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 and the 150 day moving average), 1735 (bottom of the Bollinger Bands), 1739 (February 3rd’s low), 1737 (February 5th’s low), 1729 (September’s high), and 1714 (200 day moving average).

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Posted February 13, 2014 by edmcgon in Daytrading, Investing, Market Analysis, Technical Analysis

37 responses to “Traders Corner

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  1. Bought some CSCO this am 21.95. I’m a little worried about the CEO’s attitude. Seems a little arrogant. The dip was too much to resist and nice divi.

  2. Chambers is very arrogant. I actually would applaud a change.

  3. Marshall,
    What are your thoughts on BBEP?

    Robb

    • Robb, they are a large holding of mine – 4th largest position with pullback of CSCO. I was fortunate to get them around $16.00 last July when LINE was under scrutiny. I like their model. Probably full priced, so I do not see much upside besides their nice dividend. Keep in mind though that I believe they are an MLP, so you will have to file a K-1 and dividends are taxed as ordinary income. Please double check on those points as I am not an accountant. I will know more as I file my taxes in March.

      • I own it in my SEP IRA (so no tax concerns). Seemed like it was fairly close to fully valued to me but wanted another opinion before I decide whether to sell or hold for longer.
        Thanks,

        Robb

      • I personally got tired of filing K-1, so that is why I only put MLPs in IRA accounts.

        It isn’t that K-1s are hard to file or such its just that they always come out very late.
        I had one that didn’t come out until days before the deadline to file, and then did a correction about a week after that deadline.
        Luckily for me the changes amounted to pennies for me, so I didn’t have to file amended return.

      • Marshall, Don’t remember if I said thank you but if I did or didn’t THANK YOU. I bought at $16.30 which produces a 12.08% dividend based on my buy price.

      • Tom – glad it worked out for you. There was some risk at that time with the SEC investigation into Linn Energy.

  4. Trader,
    Any thoughts on UCO? I have a position with a basis around 32 and was thinking about selling some covered calls on it as it seems to be at the top of its recent range.

    Robb

    • Robb, I would either sell it or sell the calls. I have one position with calls. Looks like I’ll be called out tomorrow. Not ready to add SCO yet. I’ll be looking for some weakness before I buy.

  5. I re-bought FGL today. I was a little hasty in selling them at $19.80 a couple weeks back. I read their press release on earnings and the transcript of the earnings call (talk about under-followed, not a single analyst questions). I like what I am reading and hearing. Not a sexy stock, but could be a steady eddy over next 18 months and go to $25. I think in today’s market environment, that is a winner. I am planning to hold long term and add on weakness.

  6. Wow, another brutal day for NNVC, likely due to the law firm starting the investigation. Who hired the law firm though?

  7. Ed – did you see this on NNVC? Down again today as fallout from that SA article.
    http://money.msn.com/business-news/article.aspx?feed=BW&date=20140212&id=17347064
    I’m still up 82% on it, (and have taken some profit) but this is getting old.

  8. John/QD,
    There’s at least 4 different law firms currently “investigating” NNVC. By that they mean they are looking for plaintiffs for a lawsuit. The blood is in the water, so the sharks are circling…

    • I’m actually kind of impressed with how they keep bouncing back? Granted, they’ve had some really bad days lately but its not like they’re going back under a dollar. Very volatile and probably got some more bad days to come but I’m going to watch this a little closer

    • In fact these kinds of firms seldom worry about “plaintiffs”. Whenever these firms see any chance of suing they do so.
      This is how a lot of them make their money. They simply claim that they are suing for the “stock holders”.

      The “game” is ironic in a lot of ways. I have seen these kinds of firms sue because a security price makes an unexpected move, like if it goes down a lot for no real reason you will usually see some of these vulture firms jump on it. I have seen this exact thing happen to a couple of companies I have worked for. They are really looking for a payoff in a settlement, they pocket something like 60% “for expenses”, and send pennies to each stock holder.

      With something like this where they are questioning the company officers and such, well like you say Ed, the sharks are going after the kill.

      • Well, I’m fairly certain the law firm has to have at least one shareholder as a class representative of all the other shareholders. So it’s not quite as you suggest, whatever your anecdotal evidence might be. And the firms are highly supervised by the court overseeing the case, and the court has the duty to approve (or not) the fee application at the end of the case.

        Most of the firms that sue companies and their BODs for screwing their shareholders actually do some good in forcing bad guys out of positions of trust. If even a tenth of what has been written about NNVC’s CEO and board chairman is correct, that dude needs to be either in jail or in hell, but in any event not in the C-level lounge of any publicly traded companies with access to capital markets.

  9. Chris – I thought that even in an IRA the portion of MLP distributions designated as “ordinary income” may still be considered unrelated business taxable income (UBTI), and subject to tax. Not so?

    • The idea of “ordinary income” or “investment income” doesn’t come into play in an IRA.

      In a taxable account, if you sell a security before one year is is “short term” and is taxed at the same rate as “ordinary income”.
      After a year it is “long term” and is taxed at a lower rate.

      In an IRA you don’t have “short term” or “long term”, and you don’t pay taxes each year as you would in an taxable account.

      Your IRA will be either a Roth or a Traditional.
      With the Roth IRA the deal is that you pay tax on the money you put into the account, and nothing on what you take out of it (the gains are not taxed like they would be in a taxable account). So clearly this “ordinary income” tax doesn’t apply.

      With a Traditional IRA the deal is that you don’t pay any tax on the money going into it, or for any gains while it is in the account. Instead the tax is deferred to why you take it out, and you pay whatever your tax rate is at that time. And since you didn’t pay any tax on any of the money in the account you pay tax on everything you take out.

      Of course there are rules about when you can take money out of an IRA without penalty, like after 59 1/2 you can take the money out without a 10% penalty. But this is separate from the tax rules.

      Please note a Traditional 401K has basically the same rules as a Traditional IRA as far as taxes, and you can roll a Traditional 401K into a Traditional IRA when you leave the company.
      There is also a Roth 401K these days and it would have the same rules as the Roth IRA, and would rollover into a Roth IRA.

      Please note that in the case of a taxable account you paid tax on the money you put into it, so you only owe taxes on the gains in that account.
      The question about taxes then just becomes at what tax rate. Please also note that like a mutual fund that might sell assets or give dividends throughout the year whether you like it or not, a “Partnership” means that the business can be doing the same kinds of things where profits and such are paid out during the year, and so you will have to pay tax on them.

      The K-1 is a form for the MLP to put all these different kinds of gains/losses into the right boxes so that they can be properly added into your taxes.

      • http://www.naptp.org/PTP101/MLPs_Retirement_Accounts.htm

        “More importantly, contrary as it may seem, holding MLPs in a retirement account can result in the account owing tax. ”

        Saving grace for smaller investors/position is that UBTI is usually a small percentage of total distributions and it will not be taxed as long as the amount of this income and all other sources of UBTI does not exceed $1,000 in any year.

        Robb

    • Thanks Robb, but look at this statement just under the one about $1000.

      ” It is important to remember that you are not the one who will owe any unrelated business income tax on MLP units held in your retirement account. The tax is owed by the IRA or other retirement account itself, as it is the partner in the MLP. It is the responsibility of the custodian of the account to file a tax return (form 990-T) and pay any tax owed out of the account’s funds. ”

      So even though the tax might be paid, for say over $1000, you will not be paying it directly. And you will not have to deal with the paperwork, which in fact is the reason I don’t like MLP in a taxable account.

    • Not generally so. The UBIT rules are intended to prevent you from running your business in a retirement plan. While there are limits to the amount of UBI you can earn in an IRA (haven’t looked for awhile but I think it is 25% of the plan’s net income), MLPs typically do not cause you to cross the threshold of taxability. The rules are definitionally dependent and can be very complicated so talk to your tax advisor if you have significant UBI in your plan and you are concerned.

      Jeff CPA, MST

  10. I added a second position of SPXU at $61.05. This is NOT for dollar cost averaging with my original position, as this one is strictly a 1 day trade.

  11. Marshall, as long as I am catching up with thank you’s let me add your posting on RIOM: 1/17/14 buy is up 11.82% and 1/27/14 buy is up 21.18% for a combined up of 16.87%. KLIC is down 1.83% but this is a long term hold per your post so I do expect it to move into the green eventually.

  12. Decided on GTAT again at 11.45 today and sold the March 11Call for 1.35. 8% if called out in 5 weeks. I’m going to hit this play until it doesn’t work anymore. Stock has good momentum with it right now.

    • I’m still waiting on a significant pullback below my last sale. It does seem to have momentum so it may never get there. Bought LNG at around 39. I think this stock is a huge LT winner and I’m looking to double on a pull back. Not really buying any longs right now.

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