Thursday, July 30, 2009

Second stage bases...IBD TV

IBD TV mentioned GMCR tonight. They said the stock continues to be caffeinated, the stock gapped down on better than expected earnings, but lower than expected revenue for the quarter, but investors soon changed their view higher along with the company’s increased guidance. It is a very bullish sign. It’s up 8% from the buy point of the cup shaped pattern. They also said that the stock doesn’t quite meet the criteria of being a railroad track pattern, which is a bearish pattern. The next thing to look for is for the stock to pullback and offer an alternate buy point assuming the stock advances some more.

OK, folks we have a few stocks setting up second stage bases. For you William O’Neal Investor Business Daily people, second stocks that surge out of second stage basis tend to be the most powerful. GMCR, NTES (Netease), and STEC all seem to be meet this criteria.
If the market refuses to go down, it is going up.

GMCR turns around

I can't believe what I saw today. Yesterday, I wrote:
Of course, we never know what tomorrow could bring. A few weeks ago a company missed their numbers and opened down hard the next morning, but by the end of the day closed up.
Today, that happened. Green Mountain Coffee Roasters went down 8% in the after hours after their earnings release. This morning, the stock was set to open down around $59 a share when I checked the morning bid. Before noon, today, the stock was reaching a new 52 week high. Not only had it reverse all of it's loses, it soared! GMCR has very high short interest so I suppose many of the short sellers were covering their loses. This may have been a simple short squeeze. Nevertheless, the stock performed well today considering the after hours action yesterday. Simply amazing to me.

The overall market was very strong today. The Dow Crossed the 9200 mark for a short time and the 1,000 psychological target for the S&P was almost reached before the market pulled back to settle into the close.

In the after hours, Disney reported earnings. They were not great, but it was no surprise to me considering we just vacationed there 2 weeks ago and did not have any lines longer than 30 minutes to ride a single ride at the Magic Kingdom! No crowds anywhere. We had a great time, but I knew sales would suffer. Room rates at the Holiday Inn were $30 a night! That was another tip that things were not going well there.

Wednesday, July 29, 2009

Oil, markets, and the economy

CNBC is really getting on my nerves with this oil business. Last year, they told us that the high price of oil is hurting the stock market. High oil prices is like a tax hike. Oh, how bad high oil prices are says CNBC.

Then oil prices drop hard.

Now CNBC is saying that oil prices are dropping due to the economy. Since the economy is so bad, the demand for oil is low. On those days oil prices go up, they say, since the economy is improving, the demand for oil is increasing.

CNBC needs to make up their mind. Is high oil good or bad for the economy? You can't have it both ways.

2007 Summer Earnings Reports

I have noticed that many companies are meeting or beating their EPS numbers, but missing their revenue numbers. This has me concerned about the health of the market in general. Although we are currently in a confirmed uptrend according the Investor's Business Daily, those top line revenue numbers have to increase in order to EPS numbers to stay high. The numbers seem to suggest that companies are trimming expenses to keep their earnings up which is a great thing, but you can only trim expenses so much and if the revenue isn't increasing eventually, the EPS numbers will start to suffer because you can only trim expenses so much.

GMCR earnings release

Today, the long awaited Green Mountain Coffee Company reported their earnings. The first odd thing I noticed was the 3:48 ET trades, had set GMCR back about $2 per share. I sent out a Tweet stating that I wondered if anyone 'knew' something ahead of earnings since the activity seemed odd.

Sure enough, after the bell, the earnings report came out GMCR beat the bottom line, missed on revs and said it would meet or beat expectations for the next quarter. The stock initially dropped 8 points in the after market. It appears to have closed down 5 points for the night from the 4pm close. After viewing PEETs earnings report the night before, I was concerned this would happen, but didn't alter my positions because of the following reasons:
  1. They have a Wal-Mart deal, PEET doesn't
  2. The company would not have done a 3/2 stock split if they knew wouldn't have a great earnings report
  3. I've seen GMCR in several stores, I've never seen PEET anywhere.
Looks like my analysis was very wrong. If I could have done it all over again, my thinking should have gone as follows:

  1. Sell all my position in GMCR to lock in my earnings.
  2. Buy small near the money call options with some of my earnings
  3. Sit back and watch
If GMCR were to report good earnings and soar, I can eventually exercise the call options to get back into the stock OR if we got action like today, just enjoy the earnings I had already locked in and consider the call option purchase an insurance premium.

Of course, we never know what tomorrow could bring. A few weeks ago a company missed their numbers and opened down hard the next morning, but by the end of the day closed up.

Thursday, July 23, 2009

Just Starting

The purpose of this blog is for me to share my ideas and my trading strategies including lessons learned, mistakes, etc.

As of today, the stock market has had the largest run it's had since 2002. I just got rid of the last of my short positions this afternoon (SPLS). However, it appears that the market run is tired right now and even though BIDU beat expectations, it was down in the after market. MSFT reported today and missed expectations which has put pressure on the market.