Not Everything Blue Is Ugly
My wife likes those little blue boxes you get from Tiffanies. Well we got one this morning from them. In looking at the earnings report due out this week we saw TIF headed our way and did some homework. Fundamentals looked good and we expected them to beat earnings estimates. We put our Momentum, Relative Strength Index and MACD filter and we did not like what we saw.
When you look at the chart below, you can see we were in a sell pattern from about 11 trading sessions ago.
That kinda told me that maybe the casino pit bosses might be rigging the game a bit because they knew more than I. The MACD and the RSI were definitely not pointing towards a strong upswing.
Over the weekend I put an order if for some expensive January IN THE MONEY PUT orders for TIF with the strike price of 77.50. In essence I was betting the stock would be below 69.80 a share by January 2012. ($77.50- the 7.70 I paid for the contracts.) Now they reported earnings this morning and handsomely beat earnings. (.70 vs.67, I believe) so the stock should have gone up and I should have lost money on the options, BUT they (the management) warned that their margins were contracting and that they would have to lower their earnings guidance for next year. The stock came out of the blocks today 9% down. We sold the options at $12.31 each, a 59.8% gain in about 8 minutes trading time.
We really did not have much of a chance to watch the market today so we had to read about it tonight. It looks like we kept the tail winds of the one day late black Friday rally going even though there was VERY LITTLE conviction. The decent consumer confidence number was better than we expected, but more importantly better the analysts expected. With the dollar weakening and the unrest in The Middle East we are seeing ERL start to creep up. (About 9 readers just went to look up the ticker ERL. It was Texan for oil.) We need to keep an eye on the greasy stuff because that kind of lubrication is not needed in the global economy.
We were busy this morning so let me tell you what other trades we made to augment the fantastic TIF option trade.
We closed out the ECA Jan $19.00 Calls we mentioned her on ?Friday at 1.25 each, a 21% gain.
We bought CHSP at 29.50 a share. We are looking for 31 in about 3 weeks. There were no attractive calls to buy or we should have. As a preferred stock, there are no options available.
We bought back some Jan $49 call options we sold on Nov 25 and took a 29% loss. Looking back at the chart, we got in too later and missed the down side we were looking for.
This morning we bought some Jan 37 dollar HD PUTs for 1.44. At the end of their first day of trading the it is looking really ugly, but from the looks of the chart I would do it again and we are going to ride it out. We are down 32%, but will ride down to 50% before we think about bailing.
In the category of what to do tomorrow, take a look at THOR, the RV people. They missed earnings but had some nice things to say about the future. Take a look at the January 28 calls for under $3.00. We are thinking maybe 21-32 by Christmas.
Keep an eye on Colgate Palmolive as it seems ready to break out of an 88 dollar range. If we can get one more day above the MACD line look at the Jan 80 calls at about 10 a contract.
We just screened about 30 possible trades and don't like anything we see. Look for the market to open soft tomorrow and probably finish down about 50 points on the DOW and 5 on the S&P. We do not expect any big pops tomorrow on the options we have.
Salve Lucrum
