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$SPY $QQQ $DIA Where Is the Market Headed?

Stocks were down again today. A nasty late day sell off turned a promising trading session into a losing one for the bulls. Where do stocks head from here? I will share my thoughts about the short and long term prospects for the market in my video.

"Stocks stumbled in the final minutes of trading to end near session lows Tuesday, with the Dow and S&P posting their fourth-straight session in the red, as investors remained cautious amid uncertainties surrounding central bank's stimulus program and budget discussions in Washington."

September 24th, 2013 Watch List

Abhacken

 

A red start to the week as the SPY closed red for a third day in a row despite AAPL adding nearly 5%. Most sectors were red led by financials. Futures are red this morning, and debt ceiling talks continue to add uneasiness to the markets. Again, my worry is for some U.S. debt downgrade, which is what ignited a sell-off in the summer of 2011. The longer this drags out, the more concerned I will become.

Yes, I did buy puts on something other then gold and Apple yesterday, and yes it was on one of my more beloved stocks Netflix. Does that mean the stock is done? By no means, it just looked primed to sell-off based on the Emmy news and the sell-off at the open from the $320 all-time high. I am looking for a rapid pullback to the 50dma. If I dont see weakness today, I may close out the puts I have as they expire friday.

UPB has been very bullish on ANGI, a stock that has run quite a bit since it’s ipo, and has been subject to negative reports by Citron and Seeking Alpha. I did some more digging last night and really like this story. Revenue is growin 50-60% YOY despite the company being in business over 18 years. It took them 16 years to get 1 million subscribers and only 18 months to cross the 2 million mark. Folks will cite the negative reviews and the fact that they take money from advertisers to move up listings as well as charging subscribers to use their service. I would argue that most reviews on Yelp and other avenues are manipulated. Having just been married and I can tell you all the vendors gave incentives to write positive reviews. My photographer gave free photo packages for each verifiable positive review you make, which you have to show them. As far as subscribers paying to be a part of Angies list, the cost is minimal and vendors are required to give discounts so its a win win. Either way, with the huge short interest, and revenue continuing to grow, think this stock touches 25+ in the coming days. Nice call on this UPB.

 

AAPL has been upgraded by at least 5 firms this morning as analysts try to play catchup  on Iphone 5c/s sales.

 

Here are some of the analyst changes for today:

 

 

AOL AOL outlook positive, says JMP Securities
After AOL announced that reserved inventory would be available to its Programmatic Upfront clients starting on January 1, JMP Securities is encouraged to hear that five agencies have already committed ad dollars to AOL, with three other agencies considering an Upfront commitment. The firm thinks that a number of changes made by the company will cause its revenue growth and profitability to accelerate, with the company starting to report better results for this quarter. It reiterates a $44 price target and Outperform rating on the stock

 

AAPL Apple price target raised to $525 from $450 at RW Baird
Baird raised its price target on Apple following its report of its first weekend of iPhone 5S and 5C sales. The firm raised its estimates as well to reflect higher gross margin assumptions and its positioning over the next twelve months. Baird maintains its Neutral rating due to longer term margin and competitive questions

 

RHT Red Hat outlook still attractive, says Wells Fargo
After Red Hat reported lower than expected billings, Wells Fargo still thinks the company is one of the best long-term ideas in software. The firm continues to believe that the company can generate mid-teen percentage revenue growth for the next several years, and it keeps an Outperform rating on the shares

 

FANG Diamondback Energy upgraded to Buy from Neutral at Sterne Agee
Price target is $54

 

AAPL Apple upgraded at Susquehanna
As previously reported, Susquehanna upgraded Apple to Positive from Neutral. The analyst upgraded shares due to the stronger than expected new iPhone launch, healthy backlog, and a likely China Mobile launch ahead. Price target raised to $625 from $440

 

BBRY BlackBerry upgraded to Hold from Sell at Canaccord
BlackBerry is being acquired by a Fairfax Financial led consortium for $9 per share

 

SBUX JPMorgan sees 'more modest' upside for shares of Starbucks
JPMorgan says shares of Starbucks are up 75% since bottoming on August 2, 2012. The firm sees continued upside to shares, but at a "much more modest" pace, and raised its price target for the stock to $80 from $74. JPMorgan keeps an Overweight rating on Starbucks

 

 

Here are the strikes I am looking at for the open:

 

 

Stock Ticker Call/Put Strike Expiration Closing Price Entry Price
ANGI CALL $25.00 OCT 0.55 0.50
NFLX PUT $275.00 Weekly 0.29 0.29

 

 

Lets have a Great day!!

 

- JB

September 23rd, 2013 Watch List

Abhacken

Make that three green weeks to start September albeit last weeks help came via the Fed. Will we see 4? Futures have fallen into the red this morning and the SPY is nearing the 170 level. Talks of the ‘taper’ have been replaced by the jostling over the ‘debt ceiling’. Its only a matter of time before there is some rumor or news of possible debt downgrades...ect. As crazy as it would seem for the U.S. to have its credit rating dropped, its almost hard not to when you see a government that cannot come together to even pay it’s bills. This will probably present another great buying opportunity.

Folks are starting to say the market is fairly valued or over valued on a historical level and say most of the earnings growth has been accomplished via buys backs...ect. With rates near historical lows, why wouldn’t companies use this time to finance stock buybacks as this is one of many ways to add shareholder value?

I had issues with my presentation last night on the week ahead and will do a Webinar on Tuesday. Here is last nights week ahead webinar: https://www.optionmillionaires.com/forum/showthread.php/585-The-Week-Ahead-With-UPB-and-JB-9-22

AAPL sold over 9 million IPhones over the weekend, the news sent the stock up $18. Considering the supply issues, this is very good news. Most phones are not available till October now.

Here are some analyst changes of note for today:

DRI Darden has several positive catalysts, says Sterne Agee
After Darden reported weaker than expected Q1 results, Sterne Agee thinks the company is making positive changes and will cut its costs. The firm believes the company's dividend is safe and creates a floor for the stock. It keeps a Buy rating on the shares

 

TSLA Tesla shares remain overvalued, says BofA/Merrill
BofA/Merrill said Tesla's institutional ownership has fallen to about 66% today from 84% back in January. The analyst said retail investors have had an increasing hand in driving shares higher and will be at risk of a correction. BofA/Merrill said the Gen 3 vehicle would have to be one of the best-selling vehicles in the world to drive 2020 volumes implied by the current share price. The analyst continues to see substantial downside risk and reiterates its Underperform rating and $45 price target

 

CRM Salesforce.com price target raised to $65 from $60 at Stephens
Stephens views the recent announcements from Salesforce.com as reinforcing its thesis that the company's enterprise positioning is improving. The firm raised its price target for shares and reiterates an Overweight rating on the name

 

BBY Best Buy price target raised to $50 from $38 at Barclays
Barclays raised Best Buy price target and estimates again due to continued cost reductions and managements utilization of floor space. The firm's 2014 EPS estimate goes to $2.75 from $2.65, vs. consensus of $2.67. Shares are Overweight rated

 

WAG Walgreens upgraded at Morgan Stanley
As previously reported, Morgan Stanley upgraded Walgreens to Overweight from Equal Weight. The firm upgraded shares based on FY16 growth prospects when the Alliance Boots deal is completed, deal synergies, and coverage expansion. Price target is $70

 

TRIP TripAdvisor upgraded to Buy from Hold at Stifel
Stifel upgraded TripAdvisor citing more positive investor sentiment towards the meta transition, the company's status as a brand leader, and its belief that monetization of mobile users will improve. Target $93

 

CTRX Catamaran recent weakness a buying opportunity, says Credit Suisse
Credit Suisse said Catamaran said exchange risk concerns are overdone and that above average growth is sustainable. The firm expects Catamaran to continue to take share and consolidate mid-market PBMs and recommends investors use the weakness as a buying opportunity. Shares are Outperform rated with a $64 price target

 

NKE Nike price target raised to $81 from $72 at Citigroup
Citigroup raised its price target for Nike shares to $81 and views the company's investor day on October 9 as the next catalyst for the stock. Citi believes Nike could issue annual revenue growth guidance of up 9.0%-9.5% through FY18, which it says would imply revenue of $39.5B. The firm reiterates a Buy rating on the stock

 

SSYS Stratasys initiated with a Buy at BofA/Merrill
Target $116

Here are the strikes I am looking at for the open:

Stock Ticker Call/Put Strike Expiration Closing Price Entry Price
SSYS CALL $120.00 OCT 0.55 0.55
TRIP CALL $85.00 Oct 0.45 0.45

Of course BAC starts SSYS at a buy today with $116 tgt instead of friday when we had calls. SSYS still looks headed to 108-110 so this should help, and will look to grab some at the open. Also like TRIP here on an upgrade this morning and chart looks set for all time highs in the coming weeks. $85 calls look priced right so may try for those. Still love CBRL and SCTY, as well as SFLY, SAM, FFIV and others and may look for some positions in those as well.

Lets have a great day!

- JB

The First Move Is Often False – Beware Of News Driven Rallies!

The Fed should really consider looking at a momentum oscillator some time.  It seems that the market reaction after the Fed makes announcements is largely dependent on the short term overbought/oversold condition of the market.

 

To elaborate, at the September 2012 Jackson Hole meeting, the FOMC on May 22nd of this year, and the most recent FOMC release on September 18th, the Fed made announcements that should have boosted the market, but instead they each occurred at, or near, short term tops.  Why?  They made these announcements when the market was already severely overbought.  See the chart below for examples.

 

http://s11.postimg.org/fakd5ch8z/DJI_Overbought_Fed.png

 

Before delving into this, I will never say that buying an overbought market is a bad strategy.  In fact, some of the lowest risk short term opportunities come from overbought markets (TSLA?).  However, to understand why these short term tops occurred, we need to take a look at the dynamic between supply and demand during these news driven moves.

 

After an extended short term decline, most of the sellers (in the short term) have had already sold.  Conversely, after an extended rally, most of the buyers have already bought.  So, when there is a positive news event after an extended rally, demand is most likely already exhausted, so prices cannot go much higher.  Everybody welcomes the bullish news, but does not buy, since they have already bought.  You get the super high volume on one or multiple days with little price movement as previous buyers sell into the any rally that develops.  That is characteristic of an exhaustion move.

 

On September 18th, when the Fed announced their would be no taper, NYSE total volume skyrocketed over 70% above its 50-day average, giving the day the ominous appearance of an exhaustion rally.  After follow-through was weak on the next day and a powerful, high-volume selloff ensued on the day after that, we mostly have a short term top in place.

 

In conclusion, exceptionally high-volume, news driven rallies, like we saw on September 18th and May 22nd, should be regarded with caution.  This is especially true when these rallies have little signs of continued strong buying in the days after.  I will most likely be shorting the weakest sector ETFs (currently XLE and XLU) on a test of the Sept. 18th high, if it occurs, with a very tight stop in case I am wrong.

September 20th, 2013 Watch List

 

Abhacken

After a green open, the markets faded and closed mostly red with the SPY down for the 2nd time in 14 sessions. The futures have treaded mostly in the red overnight and this morning, with a pop into green, followed by a dip back into the red as St.Louis Fed President Bullards said Octobers meeting could result in a taper. Gold dropped 1% on that remark.

Would be nice to close the week out strong headed into the weekend and see the SPY near $173. Talks continue to heat up around the debt ceiling and the impending Government shutdown. We shall see how that pans out next week.

The scary moment of the morning was seeing this article as the headline piece on Marketwatch : http://www.marketwatch.com/story/the-bulls-are-in-charge-of-the-sp-500-2013-09-20?dist=beforebell

I love bearish headlines, so a little worrisome for me.

AAPL is getting some serious action this morning as the IPHONE 5C/S launch looks to be going well. I checked this morning and the Gold Iphone 5S seems to be the most popular with availability for October, where the rest of the models were 1-3 days. Not sure how far she runs today but a break over $480 and she could run to $490.

TSLA soared out of a channel yesterday and looks poised to continue the run. UPB has been all over the stock :  https://www.optionmillionaires.com/2013/tesla-motors-tsla-going-explode-upside/ One of his many pieces on the continued break to $200. Should provide some opportunities today.

 

Will be hoping for some big moves in SSYS, SCTY, SFLY, SINA, FFIV, RAX, PCLN, GOOG, and some others today to salvage some positions.

 

Here are some of the analyst changes for today:

 

 

UBRN Urban Outfitters upgraded to Buy from Hold at Canaccord
Canaccord upgraded Urban Outfitters based on valuation, mid-single-digit growth, and eCommerce penetration. Price target is $48

 

CF CF Industries upgraded to Buy from Neutral at Citigroup
Citigroup upgraded CF Industries on its belief that nitrogen fertilizer prices are bottoming. Citi sees an attractive entry point into CF shares and raised its price target for the name to $240 from $199

 

PIR Pier 1 Imports upgraded to Outperform from Neutral at Credit Suisse
Credit Suisse believes Pier 1's Q2 miss was due to correctable marketing errors and not the beginning of reduced product demand. The firm upgraded shares to Outperform and views yesterday's sell-off as overdone. Price target raised to $25 from $23

 

FFIV F5 Networks initiated with a Buy at Cantor
Target $110

 

FB Facebook upgraded at Cowen
As previously reported, Cowen upgraded Facebook to Outperform from Market Perform. The analyst believes strong ROI in the newsfeed is sustainable with increasing advertising demand meeting rising inventory and prices. Also, Cowen sees Instagram and Video as additional monetization opportunities that are not fully reflected in shares. Price target raised to $53 from $29

 

BBBY Bed Bath & Beyond price target raised to $84 from $79 at Canaccord
Canaccord believes Buy rated Bed Bath & Beyond's revamped websites are gaining sustainable share and that valuation does not fully reflect growth potential

 

WDAY Workday poised to be next Tier 1 software supplier, says Oppenheimer
After conducting checks at a Workday conference, Oppenheimer reports that the checks indicate that the company is poised to be the industry's next Tier 1 software provider. The firm thinks the company is well-positioned to continue outperforming expectations, and it increased its price target on the shares to $92 from $85 while reiterating an Outperform rating

 

XONE ExOne price target raised to $75 from $50 at FBR Capital
FBR Capital raised its price target for ExOne to $75 and reinstated coverage of the stock with an Outperform rating following the company's recent secondary offering. FBR believes the global market for 3D printing in sand alone could be an annual opportunity of at least $8B, well above recent sell-side reports suggest, it says

 

 

Will be keeping it small today as I have quite a few positions once again:

 

 

Stock Ticker Call/Put Strike Expiration Closing Price Entry Price
TSLA CALL $185.00 Weekly 0.33 0.30
FFIV CALL $94.00 Weekly 0.30 0.25

 

 

 

Lets have a great trading day!!

 

- JB