Traders Corner   29 comments

Pre-market movers

UP: AMZN, FB
DOWN: AAPL, TSLA, VZ

S&P 500 Daily Momentum: Bullish (weakening on the PPO)
S&P 500 Daily Overbought/oversold: Neutral
S&P 500 Weekly Momentum: Mixed (PPO is bullish, but MACD is still bearish. Both are weakening)
S&P 500 Weekly Overbought/oversold: Neutral (leaning overbought)
S&P 500 Futures (June): Flat
Overall: As the S&P 500’s Bollinger Bands continue to narrow, the early view is flat. The S&P 500 is clearly setting up for a big move in the near future.

The S&P 500 levels to watch today:

UPSIDE: 1891 (May 2nd’s high), 1896-1897 (3 data points and April’s high and the top of the Bollinger Bands), and 1902 (May 13th’s high and the all-time high).
LAST CLOSE: 1888, inside the 1888-1889 (2 data points) range.
DOWNSIDE: 1885 (2 data points), 1883 (May 6th’s high and March’s high), 1880 (May 12th’s low), 1878 (4 data points), 1877 (20 day moving average), 1870 (May 8th’s low), 1865-1867 (3 data points and February’s high and the 50 day moving average), 1859 (May 7th’s low), and 1858 (bottom of the Bollinger Bands).

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29 responses to “Traders Corner

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  1. On March 5th I wrote this post here: “GTIV is down another 6% today. It is starting to look extremely tempting at 9.14. I will try and do a little digging over lunch.” I later said their balance sheet looked to weak and took a pass. Today they got a buyout bid from Kindred and the stock has popped this morning from $8.54 to $12.93 (50% increase).

    These unsolicited buyout bids have really been accelerating lately (think PFE/AZN, AT&T/DTV and VRX/Allergan). So while I am neutral to bearish on the overall market, if you can identify some of these potential buyouts in advance, I suspect there is money to be made. The interesting thing about these buyout bids is that often the stock price of the potential acquirer is also popping. You can bet the board of directors of may companies are noting this. I think the reasons include tax efficiencies, ability to reduce costs due to overlap, cheap debt and excess cash getting put to some sort of accretive use.

    Not sure how to best identify in advance, but companies with carry forward tax credits are interesting, companies with a high tax rate that would benefit merging with a low tax rate company, companies with EV/EBITDA ratios say under 8.5 – these are some suggestions.

    • Marshall I do wonder if we would ever be able to compete with the big boys for this kind o information advantage? There is no way that I think I can beat the market to this type of intelligence and I’m not sure its worth trying.

      • Jeff, I agree with you. Unless you have inside information, your odds of finding buyout candidates is not much better than winning the lottery.

  2. Sold TZA I bought on 5-12 for plus .77 4.3%

  3. Sold my last Apple buy this morning. Bought in Jan 2013 or 16 months ago at $439.49 and sold at $595.81 for a 35.5% gain plus five quarterly dividend payouts. Will think about buying Apple back should it fall to the range of $525..

    • Well done Tom

    • 439 was a great price! I agree that $525 would make AAPL very interesting.

      • Marshall, I am as big a fan of Apple as Ed is a non-fan. The only technology I can’t live without that isn’t an Apple product is my car GPS. I don’t believe Apple is done changing the world — I-Pod, I-Phone, I-Pad, I-Tunes, etc. — and expect more life changing products from them. Have never reviewed but my guess is if I had only invested in Apple over the last eight years — buying and selling with 100% of my money rather than a portion — I would be better off than where I am today on a stock market return. Apple has not only provided me with technology I can use without a degree in computer science, etc. but has made me very good money.

        I may buy more in the next three months based on my anticipating new products being introduced before the Xmas buying time.

    • Nice work on Apple. This is the one covered call that I regret. Locked in a sale at a low price and couldn’t get back in.

  4. We’re approaching the 50 day ma on the S&P around 1870. Let’s see if it holds again.

    • Volume is much heavier today Trader. the up days have seen very light volume overall lately. Look at the other day when we hit over 1900 on the S&P, way below average. With the market showing a lot of indecision the last few weeks I think volume has been one of the better guages lately. Not much interest in up days by the market.

  5. Sold more TZA for plus .45 2.4%

  6. Cha ching

  7. Interesting day in the markets. I am very glad I am at highest cash position ever. Not the time to be bargain hunting yet in my view, but one that has caught my eye is LNC. I have been asked several times about MET vs LNC. I like them both, MET gives you more Intl exposure and is also at risk of being named a SIFI. The LNC drop today (over 6%) is driven by declining yield rates. If you believe that the declines in ten year from 280 to 250 is just a short term thing, LNC is a great buy at 46.85.

    As a note – people may know I follow decision moose as a barometer on the direction of the market. He moved from IWM to EDV (longer term treasuries) on 4/14. Since that switch, EDV is up 5.1% and IWM is down 3.3%.

    • Marshall,
      The only exception I would make to your bargain hunting rule is in dividend stocks. If you can get a good dividend stock at a bargain price, it’s certainly worth it. Even if it goes down, and you’re reinvesting your dividends, you’ll collect more shares for when it comes back up.

      • Ed – I agree 100%. My stocks in my dividend portfolio will not be sold if market sells off. In addition, I will be actively looking for entry points. International Paper is one I have on watch list.

    • One of my best performing stocks has been BAM…up again today even as market has been crazy. Very steady performer with a small dividend.

  8. For those who hold offshore drillers from Barclays:

    The YTD beatings suffered by Seadrill (SDRL), Transocean (RIG), Diamond Offshore Drilling (DO), Atwood Oceanics (ATW) and Rowan (RDC) have left them looking attractive to some value investors, but Barclays thinks the offshore drillers aren’t as cheap as they look.Barclays believes the seemingly compelling valuations are a “value trap,” as it sees potential for 30% or more downside to current earnings estimates based on current market dayrates for various asset classes.

    • Tim,
      We’ll see. I think the downside in offshore drillers is overrated. I won’t go so far as to say they can’t go down, but I will say that’s a buying opportunity.

    • On the other hand………..

      Seadrill (NYSE: SDRL ) has a fleet of 49 rigs (34 UDWs), with another 20 to be delivered by 2016 (11 UDWs). With the most modern UDW fleet in the world (average age 3.2 years), concerns over falling day rates shouldn’t apply to Seadrill. Ten out of Seadrill’s eleven latest UDW contracts have been for higher day rates, including its highest rate ever ($653,000/day) signed in the fourth quarter of 2013.

      With an almost 12% yield that even Barclay’s calls “rock solid” and the stock trading at just eight times cash flows (25% below historical average), Seadrill is massively undervalued. In addition, management has recently undertaken a balance sheet strengthening plan to secure the dividend (and grow it gradually during the short-term weakness) while paying down debt.

      Combine this with the 20% CAGR EBITDA growth management is projecting through 2016 (due to the fleet growth) and you have the potential for a great investment over the next decade, combining an already sky-high yield with the potential for dividend growth and substantial capital gains.

      • zosa, thanks for the encouraging words, I got some this week after watching it for quite a while..

      • Z – you make a good case, I just do not like the macro trends. Getting oil from Deepwater rigs is expensive and dangerous. With all the natural gas being discovered and us oil production booming from less expensive sources; and at same time solar ramping up and electric cars ramping up – I subscribe to oil demand shrinking and price shrinking next five to ten years.

  9. Marshall, you mentioned you bought KERX at 12.55 this morning in your blog, is this a long term hold? I used to own KERX and sold it for last month. I know they are waiting for approval for a new drug from FDA and the set date is June 7, I would like to get back in before then.

    • Lynn – it is purely a speculative play on jun 7th date. Seth Klaraman built a position at a fifteen percent higher price, and I am following him.

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