OptionPundit

Tag: Oil

  • Markets, Stocks to Watch on Tuesday

    The market started the week on a bearish note and the week has lot more to offer this week; International Trade data today at 8:30am, retail sales tomorrow, PPI on Thursday in addition to the cash index options settlement; and the biggies CPI, Industrial production and US equity option expiration on Friday. Volatility is here to stay at least for this week.

    Though we may term yesterday’s volume below average, the selling was big. According to Lowry’s, the down Volume was 88% of total Up/Down Volume on the NYSE and was 87% of the total on the NASDAQ.

    The bottom line is the markets appear to be approaching important support areas (Dow-8350, S&P500- 850) and as it approaches those areas; some of the technical indicators might as well drop into the oversold region. If however, the markets can’t hold on to these lows and if volume expands, it’s highly likely that it might result in in a retest of the Nov. 20 bear market low. The Dow P&F charts are already pointing a 3 box reversal to 7,800 box.

    Transports are also breaking down. If however, Transport breaks down but the industrial don’t we might have a potential bullish Dow Theory technical signal. On the other hand Gold and Oil continue to sell-off either due to needs for funds or anticipating upcoming deflation. However, it may be too early to link to deflation as Gold needs to go down below $750 areas and Oil probably below $25-$27. However, Most of Gold action is taking place above $800 area and Oil is still above $30. Stay tuned.

    According to briefing- AA reports a fourth quarter (Dec) loss of $0.28 per share, excluding non-recurring items, which is $0.18 worse than the consensus estimate that called for a loss of $0.10. Revenues fell 19.1% year-over-year to $5.69 billion versus the $5.26 billion consensus estimate. Infosys (INFY) and InSteel (IIIN) will be announcing before market opens. Commodities are continuing it’s decline, Oil slipping and most metals losing it’s luster. And be careful of the renewed volatiltiy ahead/after the Commodity Index Rebalancing is done sometime by this week. Here is snapshot of the impact from FT–

    In financial terms, we expect the rebalancing to have the greatest impact in gold, COMEX copper, crude oil, gold, and live cattle. We estimate that the rebalancing of the two indices is expected to result in $877 million of selling in gold, $699 million of buying in COMEX copper, $528 million of selling in live cattle, and $523 million of buying in crude oil.

    If you would like to know what is commodity index rebalancing, check this out.

    While this week is packed with action, this is also filled with lot of opportunities. Theta will be increasing everyday, at very fast pace giving option sellers an advantage. The low time value makes the options $$ cheaper thus a good vehicle of playing earning related speculative moves. Stock pinning will be another area to look for. You may find past candidates as well as conversation on stock pinning here at OP Discussion forum.

    I shall be sharing my updates via InvesCafe real time alerts. If you have not yet sign-up (It’s free) on the InvesCafe, you may want to do so to stay in touch with traders especially in this action packed week.

    Looking forward to profitable week,
    OP

  • Fantastic Four Does it Again

    Mosaic (MOS), CF Industries (CF), Monsanto (MON) and Potash (POT) are my fantastic four of the agriculture and farming sectors. I mentioned those here and then again asked a question about a month ago, when the four were travelling earth from the sky. Whoever has the medicine to manage trading constipation did pretty damn good. And guess what, on Tuesday when crude slipped, it seemed as if these were dumped again. See today’s action and all four are flying CF up +10%, MON +5%, MOS +7% and POT +4%. Those may not sound big % gains, so look at absolute dollars, and if you are an option trader, I think you will be pleasantly surprised. POT has been my 4th biggest profit contributor of the 2008 (so far). They have a particular behaviour and in case, you are on the wrong side, these four could easily be money losing machines. That’s why I called in my last post “Hot is tough to handle, so handle carefully”. These continue to be on my watch list as long as agri and commodities business is booming. They will also be the first ones to get out any signs of “commodity bubble” bursting.

    It’s beautiful if a computer modeling can help you multiply your investments, but I shall be careful. Quant Asset Management, a Singapore- based hedge fund which uses computer models to pick trades, said it plans to double the assets it manages this year after beating its peers Oh btw, The top three countries to invest in now would be the U.S., South Korea and the U.K., according to Quant’s computers, and the industries, marine transportation, general mining and exploration. Read more.

    But I will not leave Vietnam behind. It has excellent potential. Read recent free economic paper from Goldman Sachs (GS) to understand more about the Potential country that could be the next Asian Tiger in the making. Be mindful this is the same Goldman sachs that coined BRIC and also told the world about N-11 so Ignore it at your peril.

    Food For thought– JPMorgan Chase & Co. analyst Kenneth Worthington became the latest to cut his fiscal second-quarter earnings estimates on Investment Banks. This includes Lehman Brothers (LEH), Goldman Sachs(GS) and Morgan Stanley (MS). As per Bloomberg, Lehman Brothers Holdings Inc., the fourth-largest U.S. securities firm, needs more capital even after raising $6 billion to recover from credit-market losses, said David Einhorn, a hedge fund manager who’s betting that Lehman shares will fall.

    Love it or hate it, it’s called WallStreet,

    Profitable trading, OP