The idea for this post comes from @Legacy_Trades who graciously contacted me over the holidays to be part of a "Twitter Pros" list of opinions and Best Longs, Shorts and Year End S&P target for 2013. Unfortunately, I was traveling over that time and as soon as I returned, I came down with a severe dental emergency that took me out of the game for a few days and I missed the deadliine. But I am ever so humbled and honored to be part of such a great list of traders and I graciously thank @Legacy_Trades for the mention in the post.
OK I know I have pounded the table on this one a lot, but my favorite long for 2013 is $PWER. I have been a champion of this company for a few years now and I believe they are a candidate for buy out in 2013. I am holding $4 calls in my long term account that will exercise next week and I will own the common from $4.Read more...
Trust yourself and not some goofy sell sider.
When you are valuing a company, you need to have an income statement, or model, as the hedge fund folks call it. (Just a quick sideline here; when I ask my analyst friends what they are doing, they love to say that they are “working on models.” They are all men, of course…the analysts, not the models.)
When I first started in this wacky business, I was working for a hedge fund manager who required me to learn how to create models. I would painstakingly look up the historical numbers for sales, costs, cash flow, debt, etc. on the 10K filings and enter them into an Excel worksheet. I found this to be a tedious and miserable task. I always struggled to see the little cells that I had to put the numbers into. In those days, for whatever reason, we didn’t magnify everything so that it was easy to read and see. I had quite a bit of accounting under my belt, but this frustrated me.Read more...
This is a piece I wrote two years ago. Some of the details are dated but the points are still quite relevant. I hope you enjoy it.
From the archives 12/27/2010
This post was originally going to be about oil and it will appear to be about oil, but I will get to my point eventually. I spent much time over the past two weeks researching oil as I had been hearing much bearish sentiment on the matter. There have been many write-ups on oil in recent months but I have not seen a recent, objective post. What I did see fascinated me. One trader's highlighting of seasonality in OIL in January; another colleague's account of abandoned rigs in Oklahoma; and yet another's first hand thoughts from someone who works in the industry and knows it well.
As I delved further, other colleagues sent me articles on the subject. One said that our reserves were so high that oil naturally had to come down; another said that the state of the economy would bring the price of oil down because of our lack of jobs and housing troubles; yet another said that the price of oil must go up which will then account for more joblessness and housing troubles; finally, another said that while there is plenty of oil in the ground, the cost of extracting it is going up and therefore would push the price of oil higher.
Many of these accounts contradict each other.
Which ones are true ?
The true oil bears were naturally shorting it two months ago as the price has soared upward from mid $70’s to it’s current price over $90 not unlike the stubborn bears who have been shorting the overall market since September invariably getting slapped in the face and defiant of the price action. Others say that the time to short will be January because seasonality dictates so but does it ? As it turns out, if you look at say the last 4 years, yes, oil does drop in January, but when you look at historical prices over a longer term, 27 years to be exact, I find that oil is up in January 51.85% of the time with an average return of $1.59 and down 48.15% of the time. Sorry seasonality traders, I don’t think the seasonality play works here.
What about the idea that rigs are being abandoned in Oklahoma. Are they ? According to Baker Hughes, rig count is actually up in Oklahoma. Of course these are more likely natural gas rigs but I questioned, are we abandoning rigs to build new ones ? Wouldn’t this drive costs and thereby price higher ? Not necessarily, as it turns out, some basins are more expensive nat gas shale plays to operate in and in this case, the rigs are more likely being moved to less costly basins. When the price of nat gas goes up, these basins can come back into use. On the other hand, areas that are more oil based are doing very well at the moment.
Then there is the argument regarding housing and unemployment, suggesting that oil will go up and also suggesting that it will go down, depending on who is doing the arguing, but I have a really difficult time believing that these are not improving as many of the perma bears intone. Everywhere around me, people are getting jobs, not the least of which was thehusband recently and housing is clearly making strides in the right direction.
Still there is the argument that we have tons of oil in reserves so it should go down ; then again, once we get through that oil, the oil in the ground will cost more to extract, so oil should go up.
As I look at the broader market, I hear many say that January will be a huge correction. There are the perma-bears of course, who are whining incessantly that it hasn’t already. There is the idea that that 2009 correlated with 2003, and 2010 correlated with 2004, so it is reasonable to consider that 2011 could correlate with 2005, though some traders are too smart to consider in absolutes. Certainly, we could use a healthy correction and so we hope for a reasonable one and likely we will get it, but will it hurt enough to incite fear ?
By now you are wondering what my point is, and I refer you to my title. Jack be nimble. My point is that as traders we must be nimble. Elasticity is key to banking coin because we can’t predict the market or the price of oil, no matter how good we are at research and analysis. We must wait and see. Price action will be our tell. As such, my intention is to reduce my short term holds extensively by week’s end on strength so that I can be ready for a correction or a buying opportunity in January.
BTW – the answer to which argument is true ? All of them.
And in case it is somehow not clear, I am bullish going into 2011.
The sequel to the "NOT oil" piece describes how I got into technical analysis. When this was written, I still used mostly fundamental analysis to trade. But have since moved to mostly technical analysis and only use fundamentals for long term holds. I will follow with the simplified fundamental posts I mention at the end of the article.
From the Archives: December 2010
You may have read my post entitled “Jack be Nimble”. If not you can see it here Jack Be Nimble
At first the post seemed to be about analyzing the price of oil until I eventually stated that my point was to wait for price action. Some colleagues teased me for churning up the very noise I suggest that we ignore, but I feel there is a place for that noise. Some of you prefer to make only short term trades based on price action alone and feel overwhelmed by large amounts of data and I respect that completely.
Personally, I enjoy looking at both styles of stock trading in order to get a bigger picture. I have a value investor/fundamentals background and I have mentioned that as a fundy trader, I had noticed that even if my analysis for valuation for a stock was correct, I still didn’t feel I had a strong sense of where to get in or out of a stock; I would guess at a bottom, worse I would often sit on a stock and ride it down into a grotto of losses waiting for it to return because I was sure I had the value right.
When I decided to add in shorter term trades based solely on technicals, my ability to bank coin grew exponentially. And so my current style is to do a combination of both.Read more...
The S&P might be in a cup & handle or an inverted head & shoulders, but one thing is clear, it's trending up. Now sitting with a doji above the 50 day moving average, it would seem $SPX is making another run for the top of the channel, somewhere above 1440 I would venture.
This keeps longs attractive!
I chose to take profits today in my $NFLX Put Credit Spread.
I had sold Dec 75 Puts and bought Dec 70 Puts.This gave me a credit spread of $1.67 or $167 before commissions per lot. I chose to cover this spread today for 0.25 giving me profits of $142 per lot.Read more...
It has been a great start to the month of December at Shareplanner.
I took nice profits in $CREE & $CLVS last week. This week I profited with $OEH and my short $TZA position that I had put on in light of the Small Cap Power Period. The second sub period ended yesterday when I took profits; I will look at returning to that trade for the third sub period of the year: the last 7 trading days of December.Read more...