Michael: Here is our second issue of the Market Blog! Please email me with any comments or corrections.
Indices:
- DJIA: Up 1% to close at 17,574.
- S&P: Up 0.65% to close at 2,032.
- Nasdaq: Flat, closed at 4,633.
For our members:
Right now, our club is tracking the technology, healthcare, and financial sectors for the most part.
Look at almost any technology stock and you will see a parabolic run upwards that hugs the upper Bollingers (other than FB and GOOGL – more on that later). This is great, especially if you had a long position, but what do you do now? You could wait for a small pullback and buy on the pullback, or you could just buy into the strength and ride out any retracements. Facebook, however, has not been performing on par with the market. This is probably because of its recent earnings, in which management said they expected more costs later on. No fundamental shift has occurred, so I am bullish on the stock. Since Facebook’s implied volatility is low, I will be carefully looking at prices and risk/reward ratios for near-the-money naked calls on it.
Aabhash, great job on predicting which way Alibaba’s earnings would turn out. In future meetings, we’ll be looking at many strategies with which we can play earnings. Although Facebook did not rise much over the past week as you said it would, I remain bullish on it for the longer term. The medical sector also has not seen the large gains you had predicted, but that was just a guess on your part. We’ll also talk about sentimental analysis in later meetings.
For next week, I am expecting a small pullback, and a continuation of the trend higher. Also, email me where you think the S&P is going to close next Friday with an explanation. If you are right within a small margin, there might be a small award.
Remember that the stock market is open the entire week, but the bond market is closed Tuesday because of Veteran’s day. Have fun.
– Michael Trehan