Wang’s Happy Trading

This market has been just crazy lately. It has been very emotional and event-driven. The techs have been very weak. Earlier this week, the market tried to rally to finally establish the bottom, but, lost all of the gains back on Friday. For the week, the Dow was down 113.63 points; SPX lost 22.48 points; and Nasdaq fell 31.87 points.

Last weekend, in my Market Forecast, I said,

“For the new week, I think if the rescue plans do come through for the bond insurers, the market could finally establish the bottom and rise above the daily MAs. The daily MAs (for SPX) are bunched up so close together that the difference among them is less than 10 points! However, I do think that this potential good news for the bond insurers will need to come in the early part of the week. This market is so nervous right now; I don’t think it’ll have too much patience. If the market does get a rally above the daily MAs, I’ll be looking for the market to first catch the daily upper BBs (SPX: 1390-1400; Nasdaq: 2390-2410). Then, we’ll have to see if the market will need to take time to vent, or, if it still shows room to continue higher. Nasdaq is sitting dangerously on the bottom support (2300). So, we’ll need to see renewed strength in the techs to allow the market to go the distance. The bottom supports that I’m watching are still SPX 1325 and Nasdaq 2300.”

Things turned out to be pretty much as described above. The rescue deals for the bond insurers did not come through last week, although their AAA ratings were confirmed. The market tried rallying, but, as soon as SPX got close to 1390, the market became shaky. The techs were still weak and they did not provide the market the strength that it needed. SPX managed to close above 1325, but, Nasdaq fell through 2300.

Let’s review what had happened:
On Monday, the market cheered as the bond insurers’ AAA ratings were confirmed. The agriculture stocks were particularly strong. On Tuesday, GOOG got downgraded, consumer confidence fell, and the PPI was higher than expected. But, IBM raised its 2008 forecast and announced additional share buyback plan; these seemed to give investors enough reasons to push the market higer. On Wednesday, the market started feeling shaky as SPX approached 1390. AAPL reaffirmed its iPhone sales target for the year, which helped to provide the techs some needed boost. On Thursday, the market saw record high oil and gold. Energy and metals stocks were strong, but, the rest of the market started to falter. On Friday, the market was hit by a string of negative economic news, as it gave back all of the gains made earlier in the week.

We traded gingerly and came away with 100% GR$$N on the closed trades:

BSC ($86)
BVDCQ, March 85 calls, at $5.3, +12.7%

MON ($121.8)
MFPDD, Apr 120 calls, at $9.9, +15.1%

AEM ($68.9)
AEMDN, Apr 70 calls, at $4, +29% (partially out)

RIMM ($111.2)
RULDB, Apr $110 calls, at $10, +7.5% (partially out)

RIG ($144.5)
RIGDI, Apr 145 calls, at $7.2, +7.4%

CTRP ($62.23)
QCTDL, Apr 60 calls, at $6, +22.4%

But, my open trades suffered from Friday’s downturn:
QCOM ($43.55)
AAOGI, July 45 calls, at $3.45 (open)
Friday close: $2.86; unrealized gain/loss: -17.1%

RIMM ($109.35)
RULDB, Apr $110 calls, at $9.3 (open, partially out)
Friday close: $6.5; unrealized gain/loss: -30.1%

ATI ($85)
ATIDQ, Apr 85 calls, at $5.8 (open)
Friday close: $2.5; unrealized gain/loss: -56.9%

MON ($121.9)
MFPDD, Apr 120 calls, at $9.6 (open)
Friday close: $7.2; unrealized gain/loss: -25%

CDE ($4.98)
CDEIA, Sept $5 calls, bought at $0.85 (open)
Friday close: $0.75; unrealized gain/loss: -11.7%

CDE (silver)
common shares, bought at $4.99 (open)
Friday close: $4.82; unrealized gain/loss: -3.4%

BTU ($59.15)
BTUDL, Apr 60 calls, at $4.2 (open)
Friday close: $2.9; unrealized gain/loss: -31%

The market is still very volatile, so, I’m going further out in time, on some of the option plays. I started trading a little more than the past few weeks. But, the market’s behavior on Friday prompted me to hold back and still stay mostly in cash.

Hope you’re having a great weekend. I’ll be back later today with my weekly Market Forecast.

Happy Sunday!
HappyTrading! ™