Order Of Magnitude » Scans

Sirius

wdevauld — Mon, 27 Apr 2009 03:56:49 +0000

Equivolume: SIRI

Sirius showed up on two bullish weekly scans this week. Appears that it has been enjoying the ride up all equities have been experiencing. Sirius rose to the top of our scans because on a percentage basis, it is up by orders of magnitude from it's 0.05 Feb. low. A very small speculative position is in our future, with a stop out at 0.30.

Tweet This Post

Bio-Tech?

wdevauld — Fri, 20 Mar 2009 06:36:23 +0000

Only four equities showed up on our bearish scanner, and two of the equities were in the field of Biotechnology. Amgen Inc. and Gilead Sciences Inc. have both exhibited price action pointing towards waning interest.

They produce the following charts:

Equivolume: AMGN

Equivolume: GILD

Support Resistance: AMGN

Support Resistance: GILD

GILD is a more favorable play for us, as it appears to have more solid support a little bit under the $44 level. If a breach below these levels can be held, then look for a fall down to close to the $42 level. We are going to limit loses with a stop to fill the short if the stock moves above recent highs.

Tweet This Post

The world still appears bearish

wdevauld — Mon, 09 Mar 2009 06:17:32 +0000

Our Freeport position we wondered about, and eventually jumped into, has been profitable so far. We've adjusted our stops to a hair below $32 so at the very least we can come out profitable. There is a lot of volume in the $40-$45, which is where we are looking to get out. The final rule for exit: we'll close it after 8 more weeks. We know that a volatile day could stop us out, and we are fully prepared for that. It is, afterall, a long position in a bear market.

The rest of the long positions the scanner turned up ultra-short funds like SDK SRS and QID. The Bear-o-meter, on the other hand pulls up a pile of names. Most of these equities and funds are well below the $10 mark, which isn't that rare these days. Finviz is saying that 116 of the equities in the S & P 500 are below this psychological line in the sand.

A lot of the names with high negative scores coming out of the scanner were of the full blooded financial variety, or some trust, loan or holding variant. An old friend, Las Vegas Sands, made an appearance again. Our entry never happened, and we figured that we sidestepped a landmine. Putting on the glasses of hindsight, we can see that by not adding LVS to a long term list, and watch for more entries, we missed out on a very profitable trade.

Tweet This Post

Mid-Bear

wdevauld — Fri, 27 Feb 2009 07:39:13 +0000

Currently, everything showing up on our mid-term scanners is showing the Dow, S&P and NASDAQ are headed downward over the medium and long term.

Being long helps you if it is ultra short real-estate, or the dow or S&P indicies.

If you are looking for an investment that doesn't involve intricate investment mechanics, we are looking at Freeport-McMoRan Copper and Gold, as well as the recently slaughtered Pothash Corporation of Saskatchewan. Nibbling at these companies as long as you can afford it, may prove to be profitable on the long term.

Tweet This Post

What We’re Watching this Week

wdevauld — Mon, 26 Jan 2009 06:03:30 +0000

Bullish

Micron Technology. Same plan as last week.
Valero Energy. Same plan as last week.

Skeptical

Wyeth. This drug manufacturer saw volume fly through the roof as everyone started telling the story of Pfizer wanting to pick the company up at a little over $50 a share. Already the price has made a substantial move to the upside, and the deal currently is not concrete. Front month options went crazy, and normally on this type of news we'd try to get some 2010 LEAPS at around $40 - $45, but our calculators all show uphill battles with too much risk. Volatility is very high, so buying options right now is a bit crazy, and selling put contracts in this market environment may be an open invitation to pain. If you eat risk for breakfast, going short a straddle at $45 strike expiring in Jan 2010 will net you $10.90 per share, and you'll be profitable if the price stays between $34.10 and $55.90.

Bearish

The financials, and related companies. State Street got murdered last week, Capital One and American Express are starting to feel pain as consumers stop spending. Most of our financial plays have netted copious amounts of money for us already this year. Looking forward, one can argue that the bad stuff is already priced in, and that traders are actually overshooting to the downside. We believe, however, that there is still a good scandal or two left out there.

Tweet This Post

Covered Call: PLD

wdevauld — Mon, 12 Jan 2009 08:21:28 +0000

The third week of the month is usually crazy, when short term pressures overwhelm logic and reason. Our weekly scan produced an interesting gem: ProLogis. Being as options expire this week, we found the bid/ask spread for the in-the-money $12.50 calls to be a bit out of the ordinary. Examining the Equivolume:

It would appear that this REIT has been going for a bit of a run and big volume appears on the right kind of days.

Now for the 50-50. We have an upward moving stock, that is due for a pullback, and in 5 trading days the options expire. PLD has a 15 trading session average true range of $1.75, which is pretty large for a stock holding the Friday's end of day price of: $14.12. Yes, 12% of current trading price.

Now, if a covered call position could be entered under these conditions, you would lay out $1412 for 100 PLD shares, and then sell a single covered call at $12.50 strike for $2.50 a share, or $250 total. If the price falls below the strike in the next 5 days, your cost basis is $10/share to offload, so we'll have a still profitable stop at $11.75 to exit the position. If the equity remains above $12.50 until Friday, you'll get called away, along with all the fees that produces. The only thing you get to take home is the premium.

So let's say your broker lets has a $10/transaction fee (hopefully you can do better). Your initial outlay is $1412 (equity) + $10 (commision) - $250 (option premium) + $10 (another commision) = $1182 (total expenses). You get called away, so you sell your stock for $1250 (minus $10 again, that broker!), and take home $1240. That mean $68 dollars in your pocket, after fees, on an outlay of cash equal to $1182 (you'll lose way more in buying power) in 5 days, if the shares stay above $12.50. If they go under, get out, and keep whatever premium erosion you have accumulated at that point. So on the upside you can get 5.7% on your money in 5 days, and there is safety net down to $10 before you start to lose money.

If your greedy, or want to take on more risk. The February call options have high volatility priced in. Have a look at our premium chart:

Tweet This Post

Exploring: HIG

wdevauld — Tue, 18 Nov 2008 06:44:06 +0000

Hartford Financial Services Group showed up on our scanner again today. Since we've recently taken to trying to improve profits by taking smaller bearish positions in the financials, we turned this one over try and see how we could profit from HIG's further decline. We started with a look at the Equivolume chart:

click for larger version

There was a substantial move to the downside about 3 weeks ago (13 trading days). After the move downward, there was still elevated volume at the lower price before the price popped back up. Now the price has been butterflying lower. HIG is sporting support at around $8.25. Next we looked at the premium charts for options:

click for larger Put Premium chart

click for larger Call Premium chart

The January options are premium in excess of 25% of the current stock price. Not surprising considering the 21 period average true range is $4.20 which is 45% of the current price. We're going to be looking selling a tiny parcel of naked Jan $10 calls at around the $2.30 mark. Stops will be set at $3.25. If price breaks below the strong support, we'll sell a few more naked calls at whatever the bid is at the time, adjusting our stops accordingly. If we manage to get a bidder with either transaction, we'll hold onto them until we get stopped out or the New Year rolls around.

Tweet This Post

Another Week

wdevauld — Mon, 10 Nov 2008 05:43:27 +0000

Scanning again this week did not yield a single positive score. While we don't live or die by the scanner, it would not be prudent to ignore this symptom. That said, here's the top five negatives for the week:

General Growth Properties closed friday @ $2.07. Considering the average true range over the last two weeks of trading days is still over $1, the volatility in this one coupled with it's super low price will keep us on the sidelines.

Genworth smashed support which was a bit above $4 and slid downward on 3 times average volume. There may be a quick short play here. We will short a small position if the price gets back into the $3.50 to $3.70 range.

Level 3 is again a no touch. The price's average true range over 15 trading sessions is more than 25% of the price.

Tenet Healthcare had a bad week last week. Their price smashed through support when they released earnings; they turned a profit, but not as much as the market expected. As usual the market punished. There has been a lot of downward momentum, and a little bit of a rally is in order. If the bounce happens, we'll be looking for an entry around $2.75, taking half profits at $3.00 and closing at $3.25. Stop placed solidly at $2.60.

General Motors is currenly sitting at major support. If it drops below $4, we'll enter another small short. This one is even more dangerous as it's one of the majors, and the government may get involved. Be sure to enter your stops and stick to them.

Tweet This Post

Well, now what?

wdevauld — Wed, 29 Oct 2008 05:19:24 +0000

Interesting action was all over the market today:

The difficulty is that this counter trend rally has erradicated any positive trend scores from our system. Previously, the Ultra Short Index Funds like: SDD, QID, SDS and SKF were the only things packing a positive trend score on our scanner. Now with the Dow, S&P 500 and Nasdaq all pulling in gains around the 10% mark, nothing is showing up with a positive score.

On the flip side, however; after a huge market rally like we saw today, more and more attention should be paid to the negative trends. Anything still showing negative trends on days where the market rallies like this are candidates for our short list. Here's what we have:

E*Trade. Upon putting out earnings and having over twice the deficit in profits that the market predicted led E*Trade to the chopping block. An analyst downgraded price targets, and the market pretty much moved the price to that target. Given our recent 'avoid financial companies' policy, this one is a no touch for us.
Advance Micro Devices. Selling activity has been all over this semiconductor company since September. Our plan here is to watch early morning action, and if waters are favorable, we'll initiate a small short position with a stop above $3.20.
Las Vegas Sands. Guess the market doesn't think a whole lot of people are going to be vacationing in Vegas in the near future. Same plan as AMD, with a stop at $7.50
Nabors Industries. No surprise that this company's price tracks the price of oil. Normally we'd buy some deep in the money puts for this one, but because of the ludacris volatility affecting the pricing of options, this one we're just going to sit on the sidelines.

Remember: This isn't advice, just our observations and our plan.

Tweet This Post

The Bears have Eaten the Bulls

wdevauld — Sat, 04 Oct 2008 21:12:02 +0000

After a week of mainly sitting on the sidelines, we ran the weekly scanner to see if any new trends have developed. It is quite sad, that of the 4900+ Canadian and US equity instruments that feed our system, only two: QID and SDS pulled out a positive score. Being that these instruments are Ultrashort large indexes, the news is pretty grave for anyone that thinks the market is heading higher based on the money the US Fed has been printing and shoving into the economic fire. Looking at long term trends, however, we will share the top negative:

The political chaos at the moment means we have a hard rule to not touch Financials, Insurance or any sort of Banking stocks for the time being. That rule wipes out half the list, leaving behind Agricultural Chemicals (Mosaic), Broadcasting (Sirius), Communication (Rimm), Materials (Freeport-McMoRan) and Utilities (Dynegy). The plan is to watch the market open on Monday, and set some aggressive price targets for entries to the downside. If they get filled, we will rest with the comfort that stocks appear to be strongly trending in our direction. If they don't get filled, we'll probably be safer out of the quackery.

Tweet This Post