Another Day At The Office

The market meandered through the day with no conviction. That said, volatility did not shale things up so it was tought to make a dime. Good news about Spanish and French Bonds kept things steady early on, but all the good news out of the US regarding economics (ok jobs were a little weak) really did not get anyone's heart a flutter. It was a ho hum day at the races.

The Continuing Saga of Gold

Edel Tulley, strategist at UBS did a great piece today on the shiny stuff. He takes us through demand issues and geopolitical issues and even micro and macro economic issues. When you get done reading, you get the sense that there is a long term upside, possibly substantial, but when? Because of the dollar fluctuations and now easing in China, the volatility may be the way to play the commodity. We came very close to an early buy signal today, but then backed away. We will be patient, look for the MACD to pass through the signal line for at least two days then buy some deep in the money February Calls.

Excuse Me Your Shorts Are Showing

We looked the reasons for the big spike on Wednesday. We may have missed one. There was probably a considerable amount of buying to cover short positions aka a short squeeze. As a quick reminder, if you play both sides of the coin, making money on the way up and making money on the way down, it will require you to sell stocks short. If you have ABC stock at $100.00 and all of your tea leaves say its headed for $80.00 you can ask to borrow that stock from you broker, sell it to some one else and buy it back when it hits $80.00. You have reverse engineered a profit of $20.00 a share. WE DO NOT RECOMMEND YOU DO THIS. THERE IS NO END TO YOUR LOSSES IF YOU ARE WRONG.

A Teeny Tiny paragraph in today's IBD pointed out an obvious fact, but one not picked up in mainstream financial reporting. Wednesday the NYSE short interest (positions that had sold short stocks) was at a 5 years high. Here is a clip of the chart.

With short interests so high and a market surge, many managers were buying their way out of ugly short positions. That helps an upward movement and could trigger more upward program trading. We mention it because when that happens with such velocity, it can snap back very quickly.

Yummy Yummy Yummy

The Ohio Express made it to number 5 in 1968 with that one.

We are hoping for just little short run as we picked up some January $50.00 calls on YUM after seeing their technical's point to something exciting in the next couple of days. Now just so you don't think I have completely gone to the dark side of voodoo and tea leave reading, UBS had a nice piece about the stock this morning as did TheStreet.Com. The stock is trading in the 56 range so our call was deep in the money and we paid 6.68 for the calls. (That would make the break even 62.68 by January 21, 2012) Same store sales in China looks very impressive and they should improve margins with recent price increases. Hopefully they will have some nice things to say about 2012 guidance. That will make these calls POP.  

We also liked the set up for TRP Transcanada Corporation operates as an energy infrastructure company in North America. The stock kinda tripped over itself when this administration decided to hold off on making the Trans Canada decision. Apparently this administration did not want to take a step towards energy independence. The stock rand down from 42 to 38 when we weenied out. (The company is now in talks with China about running the pipeline over the Canadian Rockies to Vancouver. China is rumored to have offer to pay for much of the work? Good move Washington. Anyway, that bit of news and an attractive dividend throw (3.96%) as well as a sexy chart, helped us decide to get in with a long position at $41.98. (If you were wondering we could not find a call option we liked. They were what traders call roach hotels. You can get in but you can't get out. If an option is traded too light and there is a big spread between the bid and the ask, avoid them. Get it, you get into the trade, but even if it goes up, finding sellers can be tough.)

DIY Losses

We had to pull out of a nasty put position in HD. The downward trend made a nasty reverse yesterday and we missed it. We took a 51% loss.

And in a desperate attempt to par some losses on ARO AeroSpatle PUT gone bad, we bought some deep in the money January $11.00 calls. This really is a suckers bet that can go very ugly on me very quick, but I like the game.

We also found some nice downward entry points for FNSR Finisar Corporation designs, develops, manufactures, and markets optical subsystems and components that are used to interconnect equipment in short-distance local area networks (LANs), storage area networks (SANs), longer distance metropolitan area networks (MANs), fiber-to-the-home networks, cable television networks, and wide area networks. We bought some very short term (Dec 17) 16 dollar PUTs as this looks to headed to 14 rather soon. We got the PUTS at 80 cents each. We will be out at 1.40-1.50, hopefully tomorrow.

Then during lunch we may have jumped a little early, but liked what we saw on a deep in the Money $50.00 call on TDC Teradata Corporation provides enterprise data warehousing solutions, including enterprise analytic technologies and services, and integrated marketing software. We got in the January Calls at $5.60 each contract. We are looking for a quick 20-25% gain before the weekend.

That was about all today. Ain't it enough?