Trade Update: Accenture

I am buying Accenture Options. (If you are not an options trader, you could consider buying the stock i.e. ACN). The purchase was May 35 Calls for a price of $2.15. Accenture is reporting earnings tomorrow close of Market. It is not only a play upon Accenture's impressive quarter over quarter positive performance with positive expectations in the last call but also the weak dollar. Its a quick trade. We might get out of it depending on whether we get a lift off the earnings and how big it is.

Good luck
Krish

Quick Update: Market Notes and Couple of Trades

As I had mentioned in my last post, we did get a tradeable bottom. Today's action has been significant in the sense that there was institutional participation and the indices are making a higher low on the charts. It is still early to say whether the rally will go unimpeded because of major resistance in the soon to be higher planes, but as surmised before we had a tradeable bottom and we are continuing to exploit it. The VIX options trade is turning out to be profitable so far. I am keeping my VIX trade open for intermediate term. I have opened two new trades today:



(1) ISRG Call Options (If you are not an options trader, the trade would be ISRG stock): I bought April calls with a strike price of 310 for $18 per contract. I think ISRG has hit some good support area and looks at least until $325 as its next target within a month or two. This is assuming the market volatility won't shake this stock down. Remember when the indices suffer a lot, ISRG suffers simply because it is a member of NASDAQ 100, unless it is close to its earnings period, which is nowhere near. So I am also going to put a tight stop to take into account any unexpected volatile move down by the indices.



(2) POT Put Options (If you are not an options trader, the trade would be sell short POT stock): I bought April puts with a strike price of 145 for $10.40 per contract. Potash has had a very good run and in my opinion is nearing exhaustion. Couple that with the hit on commodities. I think commodities still have some way to go down. Many offer the argument that because India and China is still strong, commodities and ag stocks in general would do very well. Whether I agree with that argument or not, one thing is clear: nothing goes up in straight line. Besides the rich valuation of the stock worries me. Also take a look at the weekly charts. We have reached a double top on MACD with bearish downtrend initiating and Williams %R, one of my favorite momentum indicators has a downtrending slope that has still some room to go. Once again I will putting a tight stop to counter any major moves in unexpected direction.



Just like last year, I will soon be entering all my 2008 trades into a table and provide that hyper link for performance tracking.



Good luck

Krish

(ps would love to hear from readers on the comments section provided here)

Quick Update on a Quick Trade

As I speculated in my last post, we saw lot of volatility but VIX is settling down to lower levels after spiking up to 36. Given that this was the last time VIX spiked up to and the FOMC meeting happening tomorrow sure to deliver some more positive news to market (they really don't have any other option), I am dipping slightly into some VIX trades as the market is forming a short term bottom here. Please remember this is not yet a complete confidence in Market hitting the long term bottom. But I think we have a tradeable bottom here. I might close this trade as soon as I realize profits of 30% or better which is quite likely as early as tomorrow or by end of this week. I will also put a close stop on this trade so that I don't take a negative hit by more than 20 %.

Here is the trade (please enter this only if you are an options trader. If you are not an options trader, you could bet on index ETFs such as IWW or IWM to play the Russell 2000 index on the long side)

$VIX.X April 30 Put options - Purchase price 3.75 or better (My purchase price as of now is 3.65)

Good luck
Krish

Truly Unprecedented

Folks, its been a while since I last posted. But believe it or not all you missed was a roller coaster ride that would have left you nauseated had you participated in the market actively. In keeping with my message in January to remain on the sidelines, I truly benefitted by not losing more money..phew!

Today I am writing or rather I am inspired to write because of a significant event that has unfolded over the business wires this afternoon. Unless you were living in Mars or had your tv switched off thinking nothing important happens on Sunday afternoon, you probably know that JP Morgan is buying Bear Stearns. That is not the shocking part. It is buying for $2 a share! No that was not a typo. That is not the shocking part either. The shocking part is Bear Stearns seems to be going ahead with it and the transaction would go through. In my books that doesn't sound like a rescue unless Bear Stearns knows where all the yogurt is going to spread after hitting the fan and we don't. This is truly unprecedented! Back in October, it was surmised that if credit problems were truly as bad as some had thought, we would see at least one major investment bank and one mortgage company go belly up or sell themselves at a flea market. With the Countrywide and the Bear Stearns transactions, we finally have a confirmation on those ominous predictions.

By any means or by any measures, the Bear Stearns collapse is not only stunning but also too rapid. It happened before I could blink my eyes and say "buy 10,000 BSC puts!"

Big daddy Ben shares the emotion of the significance of this event. Fed just announced a discount cut and made borrowing available to primary dealers. And they are doing this just two days before the regularly scheduled FOMC meeting. If this doesn't spell the sense of urgency I don't know what does. This is most likely going to cause a havoc in the markets on Monday instead of actually helping it to bounce. Do not be surprise with more emergency actions and even a concerted action globally by central banks of other countries on Monday and Tuesday. (The dollar has already plunged to a 12 year low against yen.)

I just checked out the monthly charts of XLF, an ETF that tracks the major financial institutions. It is obviously no secret that XLF has been in a downtrend and its been a while since it already broke its 200 day moving average and even 200 week moving average. It has also recently broken down its 200 month moving average on the monthly chart, which stands currently at 25.6.

You would either have balls of steel, or you are a genius long term investor with no worries for margin calls because you are loaded, or you are plain stupid to actually put some money in financial stocks on Monday.

That said, if you still have an itch to put money in financial stocks, the safer bet is asian banks who have ADRs listed here. The reason is simply that the asian banks, especially Indian banks have different liability structure compared to US and European banks. Unless the contagion spreads into other areas and generally sags the global economy, these banks will most likely not face the lack of confidence or stress tests that the US banks are facing left and right. One such star is IBN (ICICI Bank Ltd). My strategy would be to allow it to fall a little more as it will in sympathy with what would happen in US markets and especially financial stocks in the next 48 hours. There will come a point then when IBN could become a great bargain once again.

So what should be the general strategy in terms of handling your portfolio you ask? I think what I said back in January still holds unfortunately. Lets watch the blood bath from the sidelines. Do not be surprised if there is a hard rally within 48 hours of market eventually finding a bottom. But you should participate in it only if you are a day trader or an active trader. Otherwise given the general downtrend, the market could still fall down until we see a convincing confirmation and those rallies could be used as an excuse to sell some of your profitable positions.

Fundamentally though, it would be senseless to predict anything for intermediate term after what transpired today. What we know is there are uncertainties and based on the purchase price of BSC, we don't even know the depth of uncertainties. The positive side is that such kind of events usually indicate a market bottom over a longer term horizon.

Hang in there, folks and yes, no new trades for now.

Good Luck
Krish