Mylant's Money Blog

SanDisk Corp Upgraded! Popular Options to Buy

SanDisk Corp (SNDK)

Options on the manufacturer of data storage products are popular after analyst upgrades sent shares of the underlying stock. An analyst at UBS upped his share price target on SanDisk to
$55.00 from $50.00, while analysts at Morgan Stanley reiterated their 'overweight' rating on SNDK with a share price target of $49.00.

Options expiring in December are the most active. More than 4,200 calls changed hands at the December $46 strike, surpassing volume represented by previously existing open interest at that strike. Call buyers stand prepared to profit in the event that SanDisk's shares surge 5.05% over the current price of $45.18 to surpass the average breakeven point to the upside at $47.46 by expiration day in December.

 

 

 

 

 

S&P 500 ETF- SPY Weekly Analysis (11/28/10)

S&P 500 ETF- SPY Trading Analysis

Technically Speaking-

The SPY is fairly easy to read with no surprises. This is expected during the season we are in. Over the last week or so we have been in a very tight trading zone and have been unable to break through the 120.20 resistance zone that has formed as it continued to push up.

Stochastics and RSI both are supporting the zone. After a 10 day swing down, both indicators support the move with no news that is standing out at all. We are either resting in a consolidating zone, or we are trying to push through but do not have the momentum anymore and will now turn down.

Influencing the Markets-

Asian stocks are negatively influenced by the Korean conflict but that is short lived. Sovereign Debt issues continue to plague European markets.

There are talks of corrections coming in the market, either by spring of 2011 or earlier. Last spring we saw a 16% correction. Talk of this next one has a much better outlook of 3% to 5%.

Another good point, many leading growth stocks are bucking the weakness and grinding higher.

To wit, check out F5 Networks (FFIV), Rovi (ROVI), OpenTable (OPEN), Acme Packet (APKT), iGATE (IGTE), Netflix (NFLX), Chipotle Mexican Grill (CMG) and Apple (AAPL). These stocks have proven very resilient and shown the ability to quickly brush off any negative news and continue higher despite the overall market. This shows positive long term signs.

 

 

Where do I invest my Money? Try Healthcare

Sector Detector: Healthcare Making Post Election Surge IYH

by Scott Martindale

The resolution of uncertainty last week around the elections and FOMC announcement allowed the market to release some pent-up energy and finally break out of its consolidation pattern. After the normal head fakes in both directions, it rallied hard such that the S&P 500 reached a 2-year closing high. The Republicans took over leadership of the House, which will assuredly bring a measure of gridlock back to the political scene, and many market observers think the market prefers that. I said in last week’s column that I was expecting a significant market move one way or the other, and indeed we saw a nice little jump.

Although, the GOP victories were likely welcomed by the market, it is more likely the $600 billion QE2 that is bringing joy to Mudville. The Fed has stated that it will continue to do its part by pumping money into the system through “quantitative easing” (i.e., printing of money to buy back Treasuries from the primary dealers who then use the money to buy equities and commodities). Any other country would endure hyperinflation if they did such a thing, but the U.S. can get away with it because the global economy still depends on the American consumer and a healthy U.S. economy to thrive. The dollar has actually been strengthening since the FOMC announcement.

It continues to intrigue me how closely the chart pattern for the past 3 months is matching up to the 3-month timeframe at the beginning of the year that culminated in the May selloff. You can see in the chart that mid-January through mid-April produced a very similar Price and MACD pattern to what we have seen since early August. After a sustained bullish run coming off a bottom at SPY 105, both periods came to a multi-week price consolidation zone with a lengthy period of overbought MACD, followed by another brief surge and consolidation. The current MACD tried once to crossover bearishly, and is  now trying again – just like its behavior in mid-April. Also take note of the 20-40 moving average lines. If history is to repeat, it should happen by early December.

 The charts have been repeatedly flashing signs of an imminent trend change for the worse, but the macro story is somewhat different now than it was in April, and with the Fed’s support, the bulls just won’t let it happen. Every apparent start to the much-needed correction is quickly bought and turned into yet another head-fake that squeezes the shorts.

Read more: click here

Signs the Markets may turn South

Nice article here by Mike! He points out events happening in Europe as well as the CRB INdex that may want us to take a sobering look at oour positions so that we are not caught looking at stocks and suffer a huge defeat if the markets are going to be turning south on us soon!

Market Sector Outlook: Beware of Sharp Turns Ahead

by Mike McDermott

Friday’s action offered a dramatic wake up call for the bulls…

It wasn’t really the magnitude of losses as the Dow only lost 90 points and the S&P 500 was off just a bit more than 1%. No, the real surprise was in the areas of the market which got hit the hardest:

As Jack mentioned here, the commodity-heavy CRB index took its worst loss in 18 months. Chinese stocks were also hard-hit as traders reacted to new expectations of tighter policy as officials look to put the brakes on a possibly overheating economy.

European markets were also back in focus as Ireland now takes the spotlight as the “most likely to default“ peripheral country. For the last two months, traders have naively set European troubles on the back burner, but it appears we must once again face the potential for a destabilizing event on the other side of the Atlantic…

All of these issues are now colliding and trapping bullish traders in heavily extended and now quite vulnerable positions. When faced with this type of situation, there are usually two primary options for traders to pursue:

1) Get the hell out!

or

2) Stand pat and bet the farm!

So far this year, we have seen institutions ignore dangers and escalate their commitments to a recovering economy and a successful QE approach by the government. But at this point, it looks like the majority of traders’ ammo has been spent.

As we enter this pivotal trading week, Jack and I share increasing conviction that we are headed for a significant shakeout. The odds favor a major shift at this point and we are positioning our trading book to take advantage of what appears to be the beginning of a dramatic reversal. So let’s take a look at the field and see what kind of points we can put on the board…

 

Commodities Front and Center

For the last few months, hard assets have represented rock-solid trading positions as traders and investors alike looked for ways to capitalize on a widespread currency war.

The solid trends and attractive fundamentals have attracted value investors, swing traders, momentum players – basically a vast majority of market participants. The result is that “long commodities” has become an overly crowded trade that is extended and overdue for some profit taking.

“Profit taking” may be too kind of a word as we look at the dynamics which surround this trend. For one, the weak US dollar has influenced prices which are primarily dollar denominated. As the USD regains traction in the wake of European fears, it is natural for commodity prices to come under pressure.

At the same time, expectations for tighter policy decisions in major EM countries such as China could significantly affect the demand curve for many resources. We’re still in the early stages of seeing just how the new developments will shake out, but based on the heavy bullish sentiment, it would not be surprising to see a multi-week bear market in some key commodities.

Read more: click here

S&P 500 ETF- SPY Trading Analysis

S&P 500ETF- SPY

The S&P 500 ETF ,” that uses the symbol “SPY,” has been influenced by the stock market this week. Its stock price stands at $120.19 As we learn in MSN Money Snaphot they write this about the Fund: “The investment seeks to correspond generally to the price and yield performance, before fees and expenses, of the S&P 500 Index. SPDR Trust is an exchange-traded fund that holds
all of the S&P 500 Index stocks. It is comprised of undivided ownership interests called SPDRs. The fund issues and redeems SPDRs only in multiples of 50,000 SPDRs in exchange for S&P 500 Index stocks and cash."

We had a down week, but make no mistake, there is no sign yetthatwe have reversedcourse and are now ina down trend.

Stochastics & RSI are still strong. This week may have not been our best week, but we still only dropped to the middle of the Bollinger Bands. This has defined the strength of our move all along. We are going to have to fall below the middle of the Bands before we identify a weakness in the move. We will watch this week, but, technically speaking, we are still moving up!

There are some thigns for us tocontinue to be aware of as we look at the markets and what is happening around the world!

• European sovereign credit is still deteriorating in a messy way
• Very high sustained levels of call buying
• Bullish Sentiment is unbelieveably hi

 Then we have the unknown factors of what lies ahead toward the end of the year with own own, and world politics:

• The uncertainty over the Bush tax cuts
• A dust-up over reports about the indecision that dominated the Group of 20 meeting in Seoul over the last few days on matters of so-called global imbalances
• The re-energized debate about U.S. fiscal policy and the government's debt load in the wake of details released from President Obama’s bipartisan debt-reduction commission

There is a huge amount of uncertainty in the near calendar of the markets. For this reason be cautious in your trading.

Gold's Bullishness will Only get Better!

Gold- Our Largest Gains are Ahead of Us!

by Chris Mack

With gold up over 25 percent and silver up more than 64 percent year to date, many investors are wondering if they missed out on the bull market in precious metals. Even if you already had a substantial allocation towards precious metals, it's easy to kick yourself from not buying more. Silver has tripled since its 2008 lows and some stocks such as SLW have risen 10 fold in a short two years.

click to enlarge images

While smart money and early investors have enjoyed large gains over the decade long bull market in precious metals, the big money and mania money is yet to be made. The bull market is now in the institutional phase, also known as phase two, where hedge funds, banks and pension funds are bidding up prices of metals and miners. As the bull market has matured, investment strategies should be modified to accommodate the phase two bull market, with a pending phase three mania.

Phase two and phase three bull markets are driven by increasingly larger volumes of incoming capital flows. This can be seen in the rising trend of open interest as well as stronger bids on corrections. Price movements upwards will get larger and corrections will become shallower in duration as can be seen in the October precious metals correction. This presents challenges to both new and veteran investors.

Investors already in the market will have a tendency to want to take gains, but should resist the temptation to sell everything. As Jesse Livermore once said, "throughout all my years of investing I've found that the big money was never made in the buying or the selling. The big money was made in the waiting." The fundamentals are still in favor of much higher gold and silver prices and until that changes the long term trend will remain upwards. Real interest rates are in double-digit negative territory, and money supply growth is still in double-digit positive territory.

Despite the real possibility of waking up tomorrow to find that silver has doubled or gold is up $200, investors new to precious metals would be prudent to avoid buying in a lump sum. Both gold and silver are technically overbought and could succumb to a sharp correction. Thus the best strategy kept by professionals is to accumulate using small orders over a period of time and keep on buying where cash flow permits. If prices do correct, then increase the size of the planned purchase by pyramiding orders based on price.

Investors should also consider diversifying the type of precious metals investments that they hold. While the physical metal has outperformed gold stock indexes in recent years, this is expected to change. The financial meltdown of 2008 left many companies unprofitable, and without the credit to continue business. PAAS, SSRI, AUY and others are still well below their 2008 highs despite gold prices of $1400 and silver prices of $28. Price premiums were shifted from explorers and junior producers to large, well capitalized, producing miners. Now that credit is more available, and metals prices are much higher, capital has just begun to flow into the smaller juniors and explorers as investors realize that they hold the future supply.

While the easy money in gold and silver has been made the largest gains are still ahead. Long term investors should sit tight and continue to accumulate, and those who consider gold and silver insurance should not even consider selling as the global decline in fiat currencies is just beginning.

 

 

APPLE (AAPL) a Nice Bear Call Option Trade

Last Friday we layed down a Bear Call Spread on Apple. Now, a Bear Call Spread is desnigned to make money when the stock is going down. The rule of thumb is to execute an option strategy like this when the as the stock is moving in a bearish pattern. AAPL is definitely in a bullish pattern. 
But, we like practicing trading the stocks we watch in both directions when possible for the purpose of constantly being able to make money nomatter which way the stock is moving.

On this trade we sold the 340 weekly calls and turned around and bought the 350 calls. This is a credit trade, so we recieved our money up front.

We sold the 340's at $22 a contract. Then we bought the 350's at $15 per contract. This gives us a $7 credit spread per contract. How much money is that? Ifyou sell 100 contracts, it is $700 and if you sell 1000 contracts, it is $7000.

Since we are presently trading at 316.80 our trade should expire Friday with no problem. These types of profits are good for such a short term trade.

Are you interested in trading like this on a weekly basis? You can recieve trade recommendations or be instructed in how to become highly successful in these types of trades. Click here to learn more.

 

 

 

EMC Corp...Ready for Breakout!

EMC Corporation

EMC Corporation develops, delivers, and supports information infrastructure and virtual infrastructure technologies and solutions. The company’s Information Storage segment offers networked information storage systems and software, which are deployed in storage area network (SAN), networked attached storage (NAS), unified storage combining NAS and SAN, content
addressed storage, and direct attached storage environments. Its Content Management and Archiving segment provides software, which optimizes business processes, as well as creates, manages, delivers, and archives information from documents and discussions, e-mail, Web pages, images, XML, reports, records, rich media, and application data.

We have a nice move up and it looks like we are getting ready for a breakout here with EMC. We just slightly pushed through the past hi yesterday. Here is a very good stock to watch and make a short term option investment in.

S&P 500 EYF- SPY Weekly Trade Analysis (11-7-10)

Technically Speaking…

We had an interesting week. The SPY jumped from 119.07 to 122.72 at the end of the week. That is a 3.65 jump for the week and that is not normal for the SPY to move that high in one week. But we are now at major resistance level. And if we breakthrough this, then we can fly clear up to the 130 level before facing any significant levels again.

Volume- has been steady. 10 of the last 15 days have been bullish and this gives credence to the
continued bullish move.

RSI- shows strong signs of a continued bullish move. Very over bought at the present though way up at the ‘80’level. This could lead to consolidation next week. Not necessarily backward movement. We could move sideways for a bit.

MACD- still a very strong pattern. The Histogram floating right in the middle and the levels at 1.49 is steady. We are strongly bullish still.

Bollinger Bands- this is where the strength of the trend can really be identified. We continue to remain above the middle band and this shows a very strong move.

Technically speaking we are still in a very strong bullish pattern. There are no signs of stopping long term and turning around. If we were to give credence to any signs of a bearish move, it would have to be two things. First of all the, we are at major resistance. Secondly, the RSI is over bought and this could mean a slowdown. I do not see a turn around but we can make the case for a slow down now and a bit of consolidating.

Chris Ciovacco confirms what I am seeing in his article on “Seeking Alpha.” He writes: “While the pressures for a correction are building, the long-term outlook for investors remains favorable… The CCM Bull Market Sustainability Index [BMSI] has moved back into healthy bull market territory…We are prepared for both bullish and bearish outcomes. Our bias is to the bullish side of the ledger because, despite the incessant bearish calls, the market’s bias remains bullish from a longer-term perspective.”

Cam Hui writes about the market movement based solely upon momentum because of the Feds intervention. Momentum and momentum alone! My inner trader says, "Don't worry, be happy! These policies are bubblicious. They are supportive of the asset bubble that the Fed wants to blow, so relax and go with the flow. In that case, this will mean a momentum driven market where fundamentals don't matter.”

All that is going on in Washington right now will more than likely reveal our long term future in the months ahead. With the lame duck congress and Bush tax cuts needing to be addressed soon, “all of this creates the potential for legislative and regulatory uncertainty. Many business executives have refrained from expanding their permanent staffs or pursuing costly capital projects because of the ongoing uncertainty about the economy. If there is gridlock in Washington, it could compound matters. On the other hand, if the politicians are able to provide clarity on taxes, major legislation and regulations (many of the details concerning both the health care and the financial reform bill have yet to be determined), the economy could be helped.” – (AALL)

Qualcomm, Inc.- Nice Collar Play

Qualcomm, Inc. (QCOM)

The better-than-expected outlook from the San Diego, CA-based company inspired a number of analysts to up their ratings and price targets on the stock.

An equity collar initiated in the January 2011 contract was a nice strategy play today.

• The investor responsible for the trade sold 12,500 calls at the January 2011 $52.5 strike for
  a premium of $0.60 apiece
• He partially financed the purchase of the same number of puts at the January 2011 $44 strike at a premium of $0.80 each
• The investor paid a net premium of $0.20 per contract for the collar, which was tied to stock purchased at $48.45
• The purchase of QCOM shares indicates the investor is bullish on the mobile-phone chip maker and hoping to see the rally continue ahead of expiration next year

Selling the calls to buy puts is a nice strategy because the puts offer downside protection in case the price of the underlying shares slides lower, while the sale of calls cheapens the price of this protection. Additionally, selling calls provides an effective exit strategy on the long stock position. If the calls land in-the-money by expiration, the investor may have the shares called from him at $52.50 apiece. In this scenario, he exits the position having gained roughly 8.35% on the rally in the price of Qualcomm's shares to $52.50 from $48.45.