Market Commentary
It is time to continue to hang tight and place trades accordingly. My past posts have had a bearish stance and sure enough the markets have behaved in line with that expectation. Going forward, I am surely not betting on a bullish trend. Expect Volatility to remain high and expect the market swings to the extreme. My post about last week expected to see a relief rally in the first half of the week. Last week turned out to be just that with the rally in the first half and the sell off happening in the second half. We have turned outlandishly oversold in the short term and there is an inkling that we could see a relief rally again in the first half of the week. There are two other factors that may also support the manifestation of rally and possibly lend credence to it. First the Fed Committee's statements and second, the Cisco earnings. A lot of experts and smart money are betting on the fact that given the wreck in credit markets, it is highly likely the Fed will make a statement to show preparedness to fight further onslaught of credit issues, if not cut the rates immediately. Secondly, the tech bellweather Cisco will report its earnings the same day. Wall Street earnestly listens to John Chambers partially because it believes nobody paints a better picture of tech capex spending as the Cisco earnings and guidance. These two could be another reason of the probability of a rally next week if they indicate preparedness to fight and paint a picture of optimism at the same time.
That said, I would still question the sustainability of this rally. Not because I am intrinsically pessimistic. But simply because it is too early to predict until the drama of credit market unfolds further. We don't need to be heroes trying to pick a bottom right now. We could do short term trading on rallies but that's about it. Or we could pick some really strong stocks on the long side and short some weak links.
A quick note on open ISRG position
In a past post, I mentioned we will keep a close watch on ISRG and pocket some profits by taking half off the table at the right time. The right time is not here yet. In a very encouraging move, ISRG has started forming a base just above 200. This may result in another shot at an upswing. We could potentially see this upswing as early as next week. If ISRG falls below $200 support, I will take half off the table and lock in some profits.
A quick note on open BZH position
I picked BZH short in the first post of this blog back in February 2007. It has gained a whopping 72 %. BZH had to face some ugly rumors this week. While the rumors were unfounded, the fear gripping the markets BZH is in is very real and this stock is in a very precarious position not to mention its consistently unimpressive earnings. We will however soon look for cover if there is what I would call a false buoyancy in the housing market
A quick note on Open PLUG position
PLUG will be closed soon sometime this week given the worsening situation. I will provide more explanation with the trade during that update.
No new trades for now. Hold. We will come back with some trades at a good entry point most likely mid week.
The Rathi Portfolio Holdings
Open List
- BZH (Stock) - Sell Short - Opened on 2/14/07 at $41.54. Currently at $11.30 with 72.80% Gain
- ISRG (Option) Jan08 130 Call - Buy Long-Opened on 3/8/07 at $9.60. Current at $87.50 with 811.00% Gain
- GLD (Stock) - Buy Long - Opened on 7/10/07 at $65.61. Currently at $66.69 with 1.65% Gain
- PLUG (Stock) - Buy Long - Opened on 7/16/07 at $3.25. Currently at $2.76 with 15% Loss
- CRDN (Stock) - Buy Long - Opened on 2/14/07 at $56.44. Closed on 07 at $79.37 with 40.63% Gain
- TSO (Option) Jan 50 call - Buy Long-Opened on 7/10/07 at $14.40. Closed on 7/14/07 at $12.70 with 11.81% Loss
- CTXS (Option) Jan 08 30 Call - Buy Long - Opened on 7/18/07 at $6.90. Closed on 7/23/07 at $9.20 with 33.33% Gain
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