Sunday, August 14, 2011

Calm week approaching us?

What a wild week it was, hard to believe we are relatively flat to down 1% on the major indexes since Monday after some huge gyrations. S&P began week right on the 1,200 level, with intraday bounces all week of upwards of 100 handles. Volume heaviest since October ’08; HFT’s were a very big contributor. I was mostly sitting on the sidelines, though made one attempt at a trade and came out positive. What I have been doing all week is tracking down earnings reports releases, and positioning myself either upside or downside to make a few bucks. Many of these companies have strong fundamentals and outstanding reports every quarter, but ended up getting dragged down with the broader market. Take Starbucks ($SBUX), for example. The coffee market has been brewing hot for quite a while now, still very high demand with some supply shortages. People need/want their coffee so they will fork over a few extra cents for that cup. There is no reason why the coffee market would drop off due to a S&P downgrade or European Contaign.

Above is a $SBUX chart, in 3 days we saw it move from a 40 handle to a 34 handle, on no particular news about the company at all. P/E of 24 is still respectable for a growth company like this one. Under $35 was basically a bargain after their last quarterly report showed continuing growth. Buyers stepped in and drove it up under $34 intraday Tuesday to over 10% by Friday to a respectable mid-37 handle.

My in-and-out trade this week was Cisco Systems ($CSCO). Looking at this chart, it has pretty much been beaten to death with a lead pole, run over by a truck and thrown into a hot fire pit. Damage has been done, and it seemed impossible for this company to break to new 10 year lows. The $14.00 level appeared to be support (Mar ’09 low). We broke below $14 last wk to under 13.5 then back up on Tuesday. I bought some Wednesday evening limit @ $14, sold out @ $15.75 for a minimal profit after a better than expected earnings report. Picture below shows $14 support

This week: I’m looking for the ES to be range bound between 1,160 and 1,200 as long as there are no new news stories that could have a drastic effect. We saw Friday that the HFT’s were pretty much done bouncing us around, but that can always change. Expect us to move higher or go unchanged on much lighter volume than last week, fear seems to be gone for now. Any long $VXX calls I’d get out of.

Look out for earnings and potential pops in these names to get in-and-out of for a little $:

Be safe this week everyone.

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