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Bought back the July calls at 05/contract, and wrote the August 27.50 calls at .30/contract.
Originally posted by Jack Haddad
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Monday's plays
On monday texas instruments and merck both report earnings. I think they will both beat. I also think that the AMD deal will get done, completing the purchase of ATYT for $5.5 billiion. I recently read an article about Microsoft releasing their Zune sooner to compete with the iPod, which could pose as a short setup for AAPL but I think the stock is way too strong to short now. So, as of now for Monday I am looking at longs in TXN, MRK, and I think AMD will get a pump, as well.Comment
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Further to this post 2 trading weeks ago, the AMD:INTC bearish bias was correct (see below chart).Originally posted by spikefaderRemember that AMD:INTC chart I posted ... well it actually gapped down through the support and has made a large island cluster and the pattern favors INTC now. ...I think the patterns as they are show support for Jack's bullish FA (for INTC).
Why should anyone care about ratio charts like this???
Well, check out the portfolio screenshot below!!
It's an example of how one can exploit the chart bias no matter what the broader market is doing. It's a portfolio of 2 stocks, short AMD and long INTC. The idea is to benefit from the weakness of AMD over INTC.
In just 2 weeks one could have made a nice gain in bearish broader market conditions. The Dow and SPX are both down -2.2%, the Naz and the Russell -5.5% each. The below port in contrast is +5.4% over the same period.
Earnings news whacked AMD and provided +23% profit for the short. INTC on the other hand is only down -7.7%. It's money in the pocket for clever ratio chart traders who want to profit from a ratio bias no matter what the broader market happens to be doing....in a nicely hedged position without messing with complicated call or put options.
And had the broader market rallied and our candidates risen, the portfolio still will profit as long as the bias in the ratio chart proves to be correct; as long as INTC remains stronger than AMD.
So for example let's say it's a bullish market. INTC may rally +10% while AMD only rallies 5% because it's weaker. The long profit in INTC is going to exceed the losses in the AMD short.
The bottom line though is that you've still got to get the ratio chart bias correct. Get that wrong and you're going to experience losses. But the value of having a hedged portfolio in these bearish and uncertain times justifies thinking about trading in this way.
Comments encouraged.Comment
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Spike,
How do you factor in the effect of the AMD announcement of ATYT acquisition in addition to the poor earnings ? Incidentally, my eldest son bought ATYT a few months ago and stands to turn a loss into a nice gain if the 5.6 billion buyout figure stands up.
------------billyjoeComment
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Intc
Here are events that materialized during the 2nd quarter of 2006 for Intel:
1. Intel opened its third 65nm, 300mm wafer fab during the quarter. The company’s advanced technology is sustaining record high yields and is on track to enable a shipment crossover to 65nm processors during the third quarter.
2. The company began a major transition to the energy-efficient Intel Core microarchitecture, the most significant design improvement since the architecture of the Pentium® 4 processor was introduced in 2000. For dual-processor servers, the company launched the Intel® Xeon® 5100 family, setting a broad range of new world records in X86 server performance and performance-per-watt. The Intel® Core™ 2 Duo processor for desktop PCs began shipping during the quarter ahead of its formal launch July 27 and has already set performance records across dozens of industry-standard PC performance tests. The mobile PC version of the Intel Core 2 Duo processor is also shipping now, one month ahead of schedule.
3. For large enterprise servers, Intel launched the Dual-Core Intel® Itanium® 2 processor, bringing as much as twice the performance of earlier models while using 20 percent less power.
The company announced that its next-generation Intel Xeon processor for multiprocessor (MP) servers is shipping now, approximately two quarters ahead of schedule. Intel also notified customers that its first quad-core microprocessors for server and desktop systems are ahead of schedule, with shipments expected in the fourth quarter of this year rather than the first half of 2007.
4. Intel ramped production of new chipsets on its 90nm, 300mm technology. The company launched the Intel® 965 Express chipset, formerly code-named Broadwater, which supports advanced manageability, power management and memory control features. One version of the chipset family will offer programmable fourth-generation integrated graphics.
5. Under an ongoing program to improve operational efficiency and results, the company announced the planned sale of its communications and application processor business to Marvell Technology Group. The company also eliminated approximately 1,000 management positions within the company.Comment
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Good luck for your eldest's trade; ATYT looks like it wants 21.00 to me.Originally posted by billyjoe
Do you mean to ask "How much do I think FA is responsible for those TA-based profits?"
I wonder whether one should even try to factor those things in. Whether the TA was predictive of poor earnings news, or whether the FA was the unforseen force that leveraged profits in a way that TA otherwise could not have predicted, or whether it's just a crazy combo of the two, isn't going to be proven one way or the others any time soon!
I think one should accept that poor earnings news provides a motive to sell and sell quickly, especially if institutions dump. Perhaps had the chart been technically stronger it wouldn't have been so bad?? One can never know the true and complete motive of "the market". One can try, one can hypothesise, one can argue, one can site this observation or fact, or that observation or fact......but one can never know the final truth. Thus is the market I guess
Personally, I think it was a combination of things; major break of support/island reversal in the ratio chart, whatever bearish TA appears in the AMD chart (quick glance shows a failed fuzzy C back in June jejeje) combined with poor FA news. Down she goes in an impulsive manner.
There will always be people who take a stand and say TA is predictive of news, and in their faces will be people who think fundamentals lead technicals, and in their faces will be people who say it's a combination of the two. I personally think all 3 happen in an unpredictable manner and the important things to focus on are price action relative to support, resistance, and volume
Thanks for prompting the thoughts billyjoe! Have a great weekend.Comment
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Amd
Bought 5 blocks at 17.38 and wrote 500 August 1.50 calls for 1.05/contract. The stock very cheap now, much cheaper than intc fundamentally...and the selling is way overdone.Comment
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Jack,
I agree AMD seems cheap to me. Since they announced they're paying approx. 20.46 in stock and cash per share of ATYT and ATYT is selling for about 19.47 right now , would you consider buying ATYT or would it tie up the cash for too long to gain a point ?
-----------billyjoeComment
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I wouldn't simply becuase I don't follow the compnay and I''m not familiar with its trading patterns.Originally posted by billyjoeComment
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Bought 1 block of TSO at 71.39 and wrote 100 Aug 70 calls for 3.90/contract.Comment
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Ebay
Ebay was upgraded this morning, also look for MMM, MO, and LM to beat earnings.Comment
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Amd
Do you think AMD has hit "the bottom?" I ask because I don't know. I see a lot of risk here, and for me, the upside doesn't seem all that strong.
Chart has conflicting signals. Yesterday's 3x normal volume "could" be a capitulation day (whereby AMD finally ran out of sellers). It's like a reverse of a market "blowoff top" where a stock rockets up on huge volume, but the uptrend is over because everybody that wants to buy has bought. That's a possibility, but we won't know for a few days.
On the other hand, Dow Theory says a gap down does not exhaust the selling, and marks only the first half of it. If that signal is the true one, then AMD is looking for another $4.50+ drop or so (bear flagpole starts at $22!). AMD could become a $12 stock!
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Chart says "buy EBAY" and hold for at least 3 to 15 days. Look at what happened the last time it happened . . . don't hold too longOriginally posted by jcohen918
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Let me tell you that no theory or TA can call the bottom. That siad, I suggest hedging your underlying shars with options, coverd calls. The Aug 17.50 pasy a good premium and has still have good time value.Originally posted by New-born babyDo you think AMD has hit "the bottom?" I ask because I don't know. I see a lot of risk here, and for me, the upside doesn't seem all that strong.
Chart has conflicting signals. Yesterday's 3x normal volume "could" be a capitulation day (whereby AMD finally ran out of sellers). It's like a reverse of a market "blowoff top" where a stock rockets up on huge volume, but the uptrend is over because everybody that wants to buy has bought. That's a possibility, but we won't know for a few days.
On the other hand, Dow Theory says a gap down does not exhaust the selling, and marks only the first half of it. If that signal is the true one, then AMD is looking for another $4.50+ drop or so (bear flagpole starts at $22!). AMD could become a $12 stock!
The stock is very oversold, primarily due to the 5.4 billion buyout of the canadian company, and not their recent earnings... If you read and examone closely their report, they didn't do bad at all.Comment
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Kft
Out of KFT at 32.01
Bought yesterday after hours at 30.50
1.51 profit per shareComment
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