Market Summary (continued)
Friday was a quiet session, trading on the flat line, at least until the tail end. A last-hour burst of buying due to end-of-the-month portfolio bookmarking sent 2010 top stocks higher and closed the indices out with 1% (or better) gains. A quiet session turned into quite a rip-roaring session by the closing bell.
The early news did not do much to excite investors. GDP came in at -5.7%; that was less than the -5.5% expected, though it was better than the -6.1% previously reported. Consumption was down 2.2% - originally it was reported down to 1.5%. It was not a very encouraging report; we did not see any kind of revisions that showed things are getting better, and that is what everyone is looking for and talking about in the economy. As you know, we have been saying that things are not getting much better - they did look promising for awhile, but things are turning back down.
Oil was up again. It closed at $66.31, up $1.23. Gold surged up to $978.90, up $17.40 - back near that magic (or maybe not so magic) $1K mark that it hit in February. With the dollar getting shredded again, closing at 1.4160 Euros, there is no surprise at all to see gold and oil spiking higher. The 10 year bond yield was really the only surprise on the day. It fell to 3.46% after hitting 3.71% this week. This was mainly some backfilling due to such a tremendous rise over the past three to four weeks, where the 10 year bond yield rose 150BP.
SU (Suncor Energy, Inc.)
Company Profile
In the inflation-conducive environment established by the world central banks and our fiscal policies here in the US, an investor has to start looking at those top stocks for 2010 that are going to provide returns in and because of such an environment. As we have seen, oil prices are surging because of a general commodities inflation trade as well as the U.S. dollar shredding as our policies debase the currency. So, top stocks of 2010 that play off a price rise in oil make a lot of sense.
That is why, along with its solid technical pattern, we were looking at SU this month. SU is one of those companies whose value is basically tied to oil prices as it is all about reserves and the ability to get its tar sands to produce in an environment with higher oil prices. Thus as SU pulled back to test near support from a surge higher, we were looking for an entry point to ride it higher. The best stock for 2010 had gapped lower in October and was now bumping up against that gap down point. It failed its first attempt at breaking through, and that is nothing unusual. We saw it come back and test the 10 day EMA near support on 5-21 and put it on the report, looking for SU to make a higher low and bounce. If it did that showed us it was going to make a serious run at taking out that resistance.
The next session the best stock bounced higher on rising trade, giving us what we were looking for. We moved in, buying some top stocks at $31.33 and some September $30 strike call options at $4.60. Now all we had to do was see if SU could make the move. The near support and the proximity to the resistance gave us a good stop loss point and made it a good risk/reward play. SU moved higher the next session, posting a new closing high on the run. A gap higher on 5-27 added some more gain on high volume; it finished off the high but held the fill of the gap. Thursday SU added to its gain yet again with some more strong volume. Friday SU gapped up yet again, its third straight gap, and rallied to $36.53.
It started to stall after that early run, and after 5 straight upside sessions that cleared major resistance, SU was showing a candlestick chart doji right near our initial target. That is a recipe for a pullback and thus we sold some of our position to lock in some gains. We sold some top stocks for $36.30, just off the session high, locking in some 15.8% gain. We sold half of our options for $7.80, netting $3.20 per option or 69.5%. Taking partial gains takes the pressure off as we bank some solid gain and allow a solid play to continue to work for us and produce really big gains in a stock that should, based upon the inflationary environment established by world central banks and our fiscal policy, continue higher and make us some outsized gains.
Playing stock splits can be very profitable, but it takes know-how. Our stock split service focuses on three main types of plays:
1) pre-announcement (where we forecast an upcoming split prior to the company making the announcement); 2) pre-split (these plays are made in the days leading up to the actual split day); and 3) post-split plays (plays made after the actual stock split where the stock is showing continued or renewed strength).
For post-splits, we can play them as we would pre-splits (very short term), but we prefer to stretch our horizons, playing the trend. When playing options, we look further out, 2 or more months at least. We let the trend carry us along if there is one, but we will also take profits if the technical pattern degenerates, e.g., breaks a trendline. The main difference between post-splits and pre-splits plays is that we really have to like the pattern. Pre-splits can run right before their splits even with poor technical indicators. For post-splits, we are looking at the top stocks 2010 from more of a longer term "would I buy this stock at this juncture?" position. Now there are times when a hot stocks splits and investors pile in to get in while the stock is 'cheaper.' We play those, but with more of a short-term, pre-splits mentality in that we will be ready to get out fast if the momentum fades.
Remember, everything we do has to pass muster with the market that day ... don't fight the market on these plays.
SYNA (Synaptics--$35.12; +0.03; optionable): Business software
Company Profile
After Hours: $35.12
EARNINGS: 04/23/2009
STATUS: Flag. SYNA surged higher off the 50 day EMA (30.46) starting in early May and peaking Tuesday. it faded back to the 10 day EMA (34.25) Thursday and Friday, tapping at that level on the session lows. This is part of a much larger and longer term double bottom or 'W' base spanning late 2007 to April 2009. Plenty of consolidation to set the foundation for a new move higher. Looking to pick it up off this test.
Volume: 1.153M Avg Volume: 1.432M
BUY POINT: $35.84 Volume=1.6M Target=$41.95 Stop=$33.33
POSITION: QYG IG - Sept. $35c (56 delta) &/or Stock
HITT (Hittite Microwave--$35.80; +1.21; optionable): Semiconductor integrated circuits
Company Profile
After Hours: $35.79
EARNINGS: 04/23/2009
STATUS: Test 50 day EMA. HITT broke its late 2007 to early 2009 downtrend with the March to late April surge. Rallied up to some resistance at 37.50 and tested back to the 50 day EMA (33.35). After several attempts to move off that support it caught some serious volume Friday, clearing the highs of the past week. Good first test and a good position to get in as HITT continues upside.
Volume: 319.249K Avg Volume: 237.827K
BUY POINT: $35.97 Volume=325K Target=$41.88 Stop=$33.45
POSITION: QDH IG - Sept. $35c (59 delta) &/or Stock
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