UPB June 29th Option Recap - SPY SINA BIDU MA NKE
UPB June 29th Option Recap - SPY SINA BIDU MA NKE
FACEBOOK Analysts Think The Stock Is Going To Go Higher... Imagine That.
Today, over a month since the Facebook IPO debacle, analysts were able to tell the world whether or not they liked FB shares. Lead underwriter Morgan Stanley was liking shares at $38 the day of the IPO, where do you think they liked them at today? For those who weren't watching FB trade the first day, or were busy funding an account in hopes of backing up the truck on the biggest front loaded dump IPO we've ever seen, you would not have noticed the floor that was put in at $38. The powers that be were not going to leave home that day with egg on their face by letting FB close a tick below $38... and it didn't. So much for a free market. The day after the IPO and over the next few weeks the stock fell quicker than a drunk whose Friends secretly tied his shoes together, and proceeded to laugh furiously as he collapsed numerous times before ultimately figuring out what was causing him to fall.
And like that drunk FB was able to shake off the embarrassment of the IPO and these days finds its stock heading higher.
If Morgan Stanley was protecting that $38 figure and was so confident that FB was worth $38, what possibly could their Analyst price target be for FB? Ok, I'll save all your pent up excitement..... its $38!! Amazing! These guys at Morgan Stanley are simply brilliant. It gets better... the average Analyst estimate is $37.95. Astounding! Below are some popular analysts and their price targets for FB. Notice how all the prices are for FB trading higher. It's like every weatherman calling for the next 365 days to be sunny. Who needs college, a degree, and type of knowledge? Just buy buy buy.
Lets see what transpires over the next 12 months.
According to the average analyst estimate compiled by Bloomberg, Facebook shares “will increase to $37.95 over the next year, 5 cents less than the initial price set when shares began trading in May.”
JPMorgan, another lead Facebook underwriter, initiated coverage with an “overweight” rating and a $45 12-month price target.
“As the underlying social fabric of the Web, Facebook is a unique platform asset with strong network effects, a deep competitive moat, and unparalleled social context,” JPMorgan analysts wrote. “We believe the next phase of the Internet will be driven by data and powered by ubiquitous online access, and Facebook is well positioned here through its large and engaged user base, virtual ownership of the social graph, and unwavering focus on the user experience.”
Here’s a selection of other newly-released analyst reports on Facebook, via The Wall Street Journal. Facebook stock traded early Wednesday at $32.05, down 3% from the previous day’s close, and 13.5% below the IPO opening price.
Making money on options can be a tricky business, as a mere 1% move may result in a losing trade. Finding ones that may move 5-10% in a few day trading window is the recipe for success. Obviously finding them is the hard part. Sears Holdings Corporation (SHLD) came up up on a scan this morning and has a history for some large moves.
Looking at the chart, a break of $57.83 should ignite a sharper rally. We are currently holding the $60 weekly and July calls.
How does that saying go? When it smells like shit, looks like shit, tastes like shit, and came out of an a^^hole... it probably is shit... right? Well yeah. So lets apply those adjectives to the world economy: little to no growth in developed economies, huge debt issues in europe, a slowing china economy, a U.S. fiscal cliff, along with political unrest and change in some of the emerging countries. The world economy sure as hell looks like shit and would probably would smell like shit if DEBT had an odor.
Amongst all the macro economic conditions, the markets has rallied off their lows from October of 2011. Has anything really changed since then? Well yes. What changed is that we learned the world Central Banks will continue to throw band-aids onto the wounds - tricks they learned from the 2008 crisis. While retail traders are fixated on the doom and gloom headlines on CNBC, big money is bidding up stocks, knowing they have a security blanket and a friend waiting to pick them up when they fall down.
If you have read this blog or followed this site for the last few months, you have seen I am a bear at heart, but short term bull. It comes from years of fighting the same thing folks are fighting now. Fighting a tape thats rigged, knowing there is some red button that gets pushed in some office at 3:30pm to protect the markets. Now with the advent of the high frequency traders, you have even more reason to be wary. You have computers trading anything but the fundamentals of the market. It is hard work being a bear, and quite honestly, you can feel a bit evil being one. It sometimes makes me feel like Jack Nicholson in batman.
But here it is June 25th, 2012, and I think my market sentiment has started to change. Usually making money in the market comes from going against the grain. Buying when folks are selling, and selling when folks are buying. Puts now? Sell? Go short? Isn't that what everyone is saying? In a way, yes. But timing is where folks get things wrong. I was talking about SPY $127.75-127.90 as my line in the sand. We break that and I am full on BEAR... buy the ammo, get the canned goods, and run to a bomb shelter. Well not that serious, but enough to get me concerned.
Last thursdays action was the turning point for me. It looked like folks were 'UNLOADING" shares as opposed to "SELLING" shares. Of course we had our ramp up on friday on light volume, but it was not with conviction. Monday's action confirmed my fears. Looks like we will have some type of waterfall sell-off to $120-$122 in the SPY in the coming week or two. Again, if we hold SPY $127.75-$127-90, then we should be ok. But my gut says we have some acceleration of the selling we have seen, and the market will tumble.
Stay tuned for more analysis, and check out our watchlist before the open. Updated SPY chart below...
June 22nd Option Market Recap - SPY, VIX, MA, FB, BBBY, FCX