THE GUN: NFLX EARNINGS TRADE
I wrote an article recently describing the 3 reasons I think NFLX will report some blowout numbers when earnings are released tomorrow. Once in a great while I will put on an earnings play. I do so when I think the odds are heavily slanted in my favor that I will be right. NFLX meets the criteria. I feel that my odds of being successful greatly outweigh my odds of anything catastrophic to the downside following their earnings report. When I am putting on an earnings play I will always do so in the last hour of trading before the report. I want to make sure I am playing the earnings and nothing else. The last thing I want is to be underwater 5 points before earnings are even announced. Of course, the flip side is that I can pay a premium for the stock going into earnings. It's the yin and yang of trading. I plan on buying the stock outright instead of buying call options. The premiums on NFLX options are insanely steep. If the stock opens up 1 or 2 points after earnings, odds are that out of the money contracts won't move much due to the premiums being built into the stock. I will get out of the position during the first half hour of trading on Tuesday no matter what the result. As the stock rises into earnings the chances of a shrug of the shoulders reaction to earnings begins to increase. This is another reason why I don't want to buy call options into the report. Even with an unchanged reaction in stock price to earnings, the option premiums following earnings will decrease in price. I'll be announcing the trade with a "trade update" during the last hour of trading...
6 CHARTS THAT TELL US WHERE THE MARKET IS HEADED IN THE WEEK AHEAD
click on charts below to enlarge
TOP 3 MOST POPULAR POSTS FROM THIS PAST WEEK
1. THE 3 REASONS NFLX IS GOING TO REPORT BLOW OUT NUMBERS 2. A REAL MONEY SENTIMENT INDICATOR THAT IS FLASHING "DANGER" 3. $250 OIL AND DOW 16,000?...
IT’S ALL ABOUT THE VOLUME
If you are confused as to why you don't see a "Trade Update" on the site despite IPCM hitting the long side trigger...it's listed under rule #2 here. If the volume isn't there, I very simply walk away from the trade. I have found that, generally speaking, a lack of volume opens the stock up to retracements, fakeouts, whipsaws...call them what you want. Volume is what creates the momentum to get stocks out of their respective congestion areas. As for NFLX, I am not putting that on until the final hour of trading Monday. It is an earnings play. Only for those who like to drive fast and take chances. I will do these once in a great while, when I feel the odds are heavily in favor that I will be right. I think this is one of those circumstances for the reasons I outlined in this...
A REAL MONEY SENTIMENT INDICATOR THAT IS FLASHING “DANGER”
Sentiment indicators can burn you just like any other tool used to speculate in the financial markets. I have played with every single one since the mid-90's. Those that I have had the most faith in have burned me the most. What makes the market into the sadistic, whip toting, soul crunching mistress that it strives so hard to be is that it has a formula for compromising any single indicator or tool that gains the faith of individual investors. If it hasn't gotten around to making you realize how worthless you favorite indicator can be, it is only because you haven't been around long enough. In time, every indicator you love will be made to look like a scrap of soiled tissue hanging out of the torn pant leg of a drunken bum. As far as sentiment indicators go, I don't tend to rely on too many these days. I like anything that deals with real money. An actual reflection of where the money is going, not an opinion or survey. Therefore I tend to gravitate more towards put/call ratios, Rydex numbers, and margin figures. I saw a chart today courtesy of Zerohedge that made me wince. It's a sign that the markets are overdue for recalibration. The bids and offers, participants and opinions needs to be readjusted. It's just how the markets work. Rallies need tune-ups. Market corrections provide the tools and the mechanics to the do the work. The chart below doesn't mean we top tomorrow at 11a.m. What it does mean is that you shouldn't be balls to the wall long here with a mix Chinese internet stocks, optics names and chip stocks on margin hoping for Nasdaq 3,000 by July. For the record, I have been and continue to be bullish on the Nasdaq/QQQ. I continue to believe that the QQQ will hit my 58 target before a top of any significance is experienced. Chart courtesy of Zerohedge click on chart to...
IS CHINA THE NEW HOME OF THE PHASE 4 MOMO MONSTER?
This is starting to get frightening. ALL of the Chinese stocks are rallying at once. Either China has developed weaponry that is going to facilitate their takeover of the world by summer or Chinese stocks are the new home of the dreaded phase 4 investor. If you haven't read my article on phase 4 investors and the valuable information they bring to the market, please click here to get some background on this indicator. Here are some of the charts of Chinese stocks that came up in my scans tonight of the market:...
THE BEARS ATTEMPT TO GET GANGSTER HAD THE LOOKS OF VANILLA ICE
click on the charts below to enlarge
DEAR S&P: CAN I HAVE THE HOURS OF TIME I SPENT THIS WEEKEND RESEARCHING SHORT-TERM TRADING SETUPS BACK?
There's nothing good about days like today. You have surprise news events that drop the markets on their heads in the morning, followed by an effort to pick up the pieces for the remainder of the day. What is left are trading setups that become obliterated. Your longer-term positions experience excess volatility that causes mental anguish. What started out as a day that looked like a nuclear bubble bath turns into your run of the mill down day within a bull market. You wouldn't think so by looking at the general market averages along with the financial news headlines...but today was a victory for the bulls. I will be illustrating the reasons why I think so later tonight. Judging my how adamant the market was to close on its highs today in the face of a negative news event, it seems the bulls are still in control. The bears need to seize control early tomorrow morning and retain it for the entire day in order to bring the ball back onto their side of the court. They have had numerous chances to take this market down over the past couple weeks and have failed miserably every single time. This is an example of the market speaking....are you listening? I'll be posting some chart illustrations...