Traders Corner   37 comments

There is nothing conclusive in the S&P 500 technicals this morning, although the futures are pointing up, so we should get a boost at the open. However, with the FOMC meeting pending this week, I would be surprised to see any large moves that hold until the close. Also, with a potential announcement of sanctions against Russia today, I would be careful viewing any large upward moves as anything more than temporary.

The S&P 500 levels to watch today:

UPSIDE: 1849-1850 (March 4th’s low and January’s high and December’s high), 1852 (March 14th’s high), 1854 (March 12th’s low and the 20 day moving average), 1857 (March 3rd’s high), 1863 (March 11th’s low), 1867-1868 (2 data points and February’s high), 1870-1871 (2 data points), 1874 (2 data points), 1876-1877 (3 data points), 1881-1883 (3 data points and the all-time high), and 1885 (top of the Bollinger Bands).
LAST CLOSE: 1841 (March 13th’s low).
DOWNSIDE: 1839 (March 14th’s low), 1834 (March 3rd’s low), 1828 (50 day moving average), 1822 (bottom of the Bollinger Bands), 1808 (100 day moving average), 1775 (October’s high), 1770 (January’s low), 1767 (December’s low), 1766 (150 day moving average), 1745 (November’s low), and 1737 (February’s low and the 200 day moving average).

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37 responses to “Traders Corner

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  1. I saw this morning where the buyout of GA was approved at $12 a share. I bought them on 11/15 at 9.04, so that will be a 35% gain (inclusive of dividend). I had bought additional shares on Dec 2nd at 11.16, assuming the deal would go through. But I got shook out (weak hands) on January 3rd when a bear article came out questioning whether the deal would occur at 10.69. That cost me some gains! Finally GTAT is up 50 cents this morning on what is shaping up as a strong day.

  2. Trying to predict how the market will react to upcoming news events is a waste of time.

    • Trader what do you think of those March 22 18 calls at .36? looks like a 6-7% return for a week?

      • Sorry for GTAT

      • At the moment GTAT is 17.07. March 18’s are bid .25. I would ask for .30 and see if you can get a taker. Assuming .25. 17.07-25=16.82. If called out your profit is 1.18 7.0% for the week. If not called you keep the .25 and get a 1.5% return on your investment. Either way it looks like a nice return for a low risk play. GTAT continues to be an excellent candidate for covered calls. Stocks that trade within a tight range work well.

      • sold GTAT mar 22 18 covered calls for ..30. My shares are 17. If I get called at 18 then my return is 1.30/16.70 or 7.8% for a week. If I don’t get called I own the shares at 16.70. I should have been doing these transactions along time ago.

      • Jeff – are you doing these trades in a taxable account?

      • retirement account at the moment. But if a nice st opportunity shows itself, I’ll go for it with some calls that are a little farther out

      • in my taxable account as well

      • Interesting, CNBC just pointed out that there has been a fair amount of insider selling of GTAT. Doesn’t necessarily mean anything but??

      • Jeff,
        My general rule of thumb is to take insider selling with a grain of salt. There’s lots of innocent reasons for insiders to sell, such as simply taking profits on their positions, or even diversifying their investments.

        Now when you see insider buying, THAT is a good sign!

      • Great question. Most companies have pretty tight restrictions on when their executives can buy or sell stock. Many companies only allow transactions in the three weeks within the filing of the 10K or 10Q. Quite often, right after the year end, executives will vest shares from longer term compensation. Looking at the Proxy, Gutierrez had as of 12/31/2012 320,000 options that were exercisable (strike price around $5.40) and 345,000 shares in RSUs that would vest equally over four years. Then it also looks like he has some long term awards, which seem a bit complex. But my read is that it is 760,000 more shares, of which 207,000 would be vested this February – that 207,000 may have some sort of multiplier if GTAT really did well. A end of the day, Gutierrez was likely vesting at least 300,000 shares of GTAT in February/March (before consideration of options). Now if you vest 300,000 shares, it is not uncommon for 40 to 50% of those shares to be sold automatically for taxes (IRS and states want their cash – not shares). I show he disposed of 233,000 shares in March.

        This is getting long winded, but my view is that the majority of his sales were probably for tax purposes.

  3. Added SPXU at $57.44, will sell at $58.01 or best price later.

  4. Added riom at 2.19.

  5. Hmm I know the economic data was good but can’t understand the why Crimea voting to leave is positive? US will start sanctions, maybe EU also looks like an economic headwind if everyone digs in heels.

    • You made my point bobb. I’m not saying we shouldn’t pay attention to what is going on around us. Trying to use this information to make investment decisions on day to day news doesn’t work. Unless you are a trader using short term technical indicators, developing a longer term plan makes more sense. For you investors, I believe Marshall has it right. One exception, I would add covered calls to generate current income. At least, on part of the portfolio. Stocks like GTAT that is trading flat is a perfect example of how to generate cash flow. Jeff’s question this morning is an example of a great way to make money on a short term play. I doubt GTAT is going to take off like a rocket this week.

      • I agree with Marshall approach but in a market that looks long in the tooth would you suggest areas that are beating down at the moment? Looks like there has been a lot of bad news for drillers. Trader what do you think of ESV at these levels? Do you think it has alot more room to drop or is there a price that you think accumulating at would be good. Has a nice dividend while you wait.

      • This looks like a very high risk stock. I would wait for some strength or if you want to take the risk, small position and add later. It is not showing any technical strength on up days. It has been closing at its low for the day which is never a good sign. Not a prediction, but it could see low 40’s. I always prefer to buy strength. Trying to catch a bottom is a crap shoot and in my opinion, not worth the risk.

      • Trader – I have thought often (as you might expect) about the covered calls. I really struggle with them for two reasons: (1) I try to be a long term investor, and I hate the idea of being called out if the shares spike in a stock I like and (2) for me I think the tax implications water out a lot of potential gains. Think about GTAT for a second. Assume I bought 10,000 shares last April for 3.39. Right now I would be sitting on a $14 per share gain which would be $140,000. If I used those share in a covered call, and I got called out before I hit my one year anniversary, I would have to pay short term taxes as opposed to long term taxes on that gain. Plus, if I really think GTAT is going to $25, I have then lost that upside just for that call premium. I agree with you 100% that your approach is great for some people and is an excellent way to generate $ in a flat market.

      • Marshall, I am by no means an expert in covered calls. However, if you do get called out then you can always rebuy and do another covered call etc.

        I can see if you are buying longer term options, where you might miss some gain potential because you get stuck in a position that has topped out at your call price and you need to retain the stock at the lower price just to cover the call until expiration.

        One solution might be to sell shorter term calls so you don’t get locked in for a long period of time while a stock goes up past the call price?

        I’m experimenting with some short and longer term GTAT call options and I’ll let you know how they turn out over time. But, at least at the moment, the risk reward looks very attractive.

      • Personally if knew that a market (let alone a given security) was going to be flat, bull or bear over the next year, I wouldn’t have any worries at all.

      • Marshall, I don’t disagree with anything you said. There is no question that you may give up some upside potential if a stock spikes. It happens to me all of the time. Covered calls work best in a down or flat market. As I have said previously, I expect that the market will be flat to slightly up this year. So far, that has been the case. Using GTAT as an example, it may go to 25 but, I don’t see it exploding to the upside. Staying with short term calls that are slightly out of money can generate a nice income. I’m making around 7% a month using this approach. I’ll stick with it until something changes. Most of my trading is done in a corporate profit sharing plan so I’m not concerned about the tax consequences. Everyone should make their own decision there. I keep pushing covered calls because they are a very effective tool in the market we have found ourselves so far this year. There are numerous ways to make money in any market. What works at one point make not work at another. We have to be flexible and take what the market will give us.

      • Jeff, you are right on staying short term. I try to position myself to achieve a monthly yield whether I am called out or not. With GTAT I go for 5 plus percent a month. As long as I can do this, I don’t care what I pay for the stock as long as the premium without price appreciation in the stock will give me the yield I am looking for. For example, I bought GTAT on 3-6 for 16.67. I sold March 17 calls for 80 reducing my basis to 15.87. If called my yield for three weeks will be 7.1% If I’m not called I made 4.8% on the premium I collected. As long as GTAT doesn’t drop big and the premiums stay high, this should be a repeatable play every month.

  6. So far today, silver is holding up. I wouldn’t buy today. Need to see if we get a positive follow through over the next few days. If it does break out, there should be plenty of room to profit with less risk. Swinging for the fences leads to a lot of strike outs.

  7. I just increased my GTAT by 50% (back to where it was before I sold 33% in early February => bad move). I see where their CEO will be on CNBC tonight and I see that as a catalyst for at least a short term spike.

  8. For those looking for a riskier trade that might have upside – check out CTCM. This is a Direct Russian play. They are quite beaten down and their financials are strong and they pay a decent dividend. Will be on my watch list.

  9. Question for the group, how would you view a stock that up 45% in the last year, nice gain, but over the last five years is pretty flat? The stock I am referring to is DWA, I think that it has struggled but I think has got alot of irons in the fire that will start paying off in the next year. Also 3 of their next 5 feature films will be sequels that are normally big money makers.
    It has had a recent pullback from $36 to $27 on earnings and some analyst have said it had a nice gain over the last year, which is true but has lagged over the last 5 years.

    • It looks like it has some support around 26.75. Charts don’t look good. I would wait to see if it hits that support and look to buy if it bounces there and starts to show some follow through. Broken record, wait for some strength.

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