Traders Corner   32 comments

The S&P 500 levels to watch today:

UPSIDE: none.
LAST CLOSE: 1949 (June 6th’s high and the all-time high).
DOWNSIDE: 1948 (top of the Bollinger Bands), 1941-1942 (2 data points), 1928 (June 4th’s high), 1924-1925 (2 data points and May’s high), 1922 (June 5th’s low), 1918 (2 data points), 1915 (June 2nd’s low), 1904 (20 day moving average), 1897 (April’s high), 1883 (March’s high), 1881 (50 day moving average), 1867 (February’s high), 1859 (May’s low and the bottom of the Bollinger Bands), and 1857 (100 day moving average).

S&P 500 Daily Momentum: Bullish
S&P 500 Daily Overbought/oversold: Overbought
S&P 500 Weekly Momentum: Bullish
S&P 500 Weekly Overbought/oversold: Overbought
S&P 500 Futures (June): Flat (leaning negative)
Overall: The S&P 500 shows clear sky above, with lots of support below. However, I think we are due for a sideways day, or even a little correction. One more up day and that correction might be bigger, or we might see a longer period of sideways trading.

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32 responses to “Traders Corner

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  1. Ed and Marshall

    What are your thoughts on GE?

    • Bobb,
      The conglomerate business model used by GE is at least 20 years out of date. Doing a million things “ok” is not comparable to doing one thing excellently, and leaves the company vulnerable to competition.

      Their financials are ok too, but not excellent, which is what you’d expect from a conglomerate. But they are an example of a company that’s “too big to die”, so their dividend is probably safe. If that’s what you’re looking for, go for it. I wouldn’t buy them for growth though.

      • So then your take on Cree?

      • I like GE. Solid pick for my kids college funds. Not a sexy stock, but should generally move up with the market and pays a decent dividend. I disagree with Ed about being negative because it is a conglomerate. To me, that is an opportunity to unlock value by spinning off pieces over time. Look at ITT several years ago, that was a conglomerate. It split into three parts and you would have done very very well (check out charts on ITT, XLS and XYZ since December 2011).

      • That’s what I was looking at that it would be a core holding type of stock that would give some income and growth. Would you consider a ETF like VIS?

      • Bobb,
        CREE is a good play, if you like their growth story.

        Marshall,
        You don’t buy a stock “hoping” they will spin off pieces. I agree there is value in GE if they spin off pieces, but that’s an “if”, not an investible thesis. I agree that it’s a safe dividend play.

      • Ed – people buy stocks all the time when the sum of the parts is greater than the whole. In today’s world of activist investors, it is even a better approach. The downside is limited and you gave significant upside.

    • NOt sure I completely agree on GE. I see increased focus on their core industrial, aviation and technology businesses and a movement away from finance. I think they are a steady eddie that is going to pay increasing dividends and add significant value over the next 5 to 10 years. I own them in my LT portfolio and expect decent LT returns. This is not a stock for quick gains but it does have a place in your LT portfolio.

  2. Closed a position in FEYE. Bought 5-27 at 33.47. Sold weekly calls for 1.00 reducing my basis to 32.47. Those options expired worthless. Sold the stock this morning for 33.77. Total profit 1.60 5.0%.

    • nice work trader. I now have some extra cash from expired cc.s last week that I would like to put to work. I’m going to be following your and Marshall’s posts and taking a look at some of my watch lists for some new investments. I was thinking SNDK but its had a nice run of late and I’d really like them to fall a little before I buy back in.

      • Thanks Jeff. I probably won’t add any longs for a few days to see if we get a pull back. The indicators I follow look extended on the S&P. As a matter of fact, at this level I will be surprised if we don’t pull back.

  3. One of my holding, NSR, is down about 8% today on rumors they may not renew a major contract. It feels way oversold as they were already down over 50% on those rumors. I believe they are fairly priced for the potential bad news and there is significant upside should they get the good news. Of course I could be wrong, so people should do their own analysis. I did buy TIME today. This is the spin off of the magazines. Not an exciting company, but will pay about a 4% dividend, has a strong balance sheet and brand and often when these spin offs happen, management can be more focused and incentives to build shareholder value.

    • Marshall, I put a buy in on NSR for 24.60. Up nicely from the lows, but I expect a little pull back before the end of the day. They absolutely look oversold to me as well.

      • Call premiums look pretty good on NSR. I’m going to put this on my watch list. I would like to see if this drop holds before I buy. Thanks Marshall for the post.

      • Got it.

      • Trader, I noticed the call premiums as well. Gonna wait for an up day and CC.s it is

      • Just be aware that NSR could pop upwards materially if they retain FCC contract. If you sell calls, you are missing that potential upside

      • Good Point Marshall. But this is probably a trade for me and if I get 10% I’m probably going to sell. As we can see from the net neutrality proposal, the FCC is for sale to the highest bidder (did you notice the head of the FCC was previously the head of the cable industry lobbying group? no conflict there eh?) When will they learn if they will keep the contract?

      • Marshall, about the only downside to writing covered calls is the potential of lost opportunity. That is why covered calls work best in flat or down markets. GTAT is a great example of how beneficial this tool can be. Lost opportunity doesn’t concern me since there is always another opportunity. Lost cash is quite painful.

      • Just to highlight Traders point, My GTAT shares are down 7%+ as of the current price. However, with the call premiums that I have earned while owning the shares I’m actually up about 3% overall. CC’s are a fantastic tool that I am only now beginning to figure out. .

      • With all the discussion here, I definitely feel I understand covered calls finally. I do not believe trader is technically right in saying missed opportunity of upside is only risk of covered calls. When you sell a covered call, you are capping your maximum upside, but you still have the downside should the stock tank. So the stock dropping 50% is certainly another risk. Granted, it is a risk I also take when I buy and hold a stock – but I also get the upside. To date, I have only executed one covered call, and am very pleased with it. I definitely see a place for it, but I doubt it will ever become my primary tool as my approach is to find stocks that I believe to be undervalued and then hold them until the story changes or the market recognizes the true value. So I would only give away that upside when I believe it is pretty remote (such as my one cc of GTAT at $22 in September). Obviously, many ways to skin a cat here – people need to get comfortable with what works for them.

      • Only thing is Marshall, if the shares drop, then you can collect the premium and reduce your cost and keep buying new tranches of CCs to collect premium and reduce your cost even more and dramatically increase the likelihood that you can ultimately be profitable in the shares.

        If the shares fall in price, CCs give you a tool to progressively reduce your cost in the shares and ultimately make a profit.

      • Marshall, the only risk in the covered call itself is the potential for lost opportunity. The risk in the underlying stock is a different matter. I did not mean to imply that using covered calls eliminates all risk.

  4. The S&P is overbought on the daily charts at a level where I would expect we will see a pull back soon. I wouldn’t expect to see anything big unless something really spooks the market.

  5. Sold June 16 calls for 80 on the GTAT position I bought on 6-5 for 16.00. If called, my profit will be 80 5.3%.

    • I bought back my June 16 calls last week for .85, I’m looking to resell but I’d like to get a slightly higher gain if called and in the end I would prefer to keep my shares. Accordingly I’m focused on June or July 17 calls.

      • Nice job Trader. You’re skill has def showed with GTAT. I’m looking forward to getting called out in June and July.
        Update on other trades. Bought OIH at 54.55 this morning. Sold the weekly 54.50C for .50 this morning. I’m short on my goal of 1% by just a bit, but I can blame that on myself for my purchase price, and the fact I did not want to extend out to the $55 strike price which looks like it would have been a good move at this point anyway. Still been a solid winner for me each time and if I had traded this one last week it would have worked as well. Trader as you mentioned in your other post I’d be surprised if we don’t have a few down days here, and maybe hit a 3-5% pullback. At the very least trade sideways for a bit.
        Also one of my holdings BRF is having a good move today. Up over 2%. Bought this one after the late March breakout at 28.76. This one still looks strong, and I think Brazil stocks will outperform the US this year due to the fact they have been so beaten down.

  6. bought DSW today for 27.52

  7. I just sold the idcc I bought last week at 48.26. It was a nice 6.6% gain. I still like the company and will consider buying on pullbacks. I did see today that another stock I sold for a quick profit. (KERX) is up 5% today. I made 4.7%, but have now lefty 10% additional on table.

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