Still feeling bullish

The bulls and bears continue to battle for control of the market. Will we get a year end rally, a fizzle, a sideways drift? I don't know, but I am betting on the bullish side, adding to my long positions and going on margin. Here are some of my recent buys:

* WFII - $2.45
* ICE - $105.19
* EPP - $125.55
* PCP - $76.83
* GRP - $44.43
* HP - $27.59
* DO - $81.85
* DRQ - $44.05
* CHK - $32.15

Pink Sheet Stocking Stuffer

Every once in while, I like to take a flyer on left-for-dead company showing some recent strength. This time around, the company is Calpine. CPNLQ is selling off generation capacity at a time when utilities are scrambling to ramp up. Recent sales have been at premium prices and the stock is responding accordingly.

At less than $1/share, CPNLQ is going to be quite volatile. So I am limiting my downside risk by taking a small position. My goal will be a 50-75% gain, for which I am willing to risk a 25% loss. It won't make or break my holiday season, but could be a nice stocking stuffer.

Stay with Station

On Friday, I recommended going long STN at $68.40. Today, they received an all-cash buyout offer from their management for $82.00.

While I love a 20% gain in one day, I don't think the play is done yet. $82 is roughly the 52-week high, meaning the offer doesn't really provide much of a premium to the market's valuation of the company. I think the offer will go up.

Just trail a stop around $81 to protect the windfall and let it run.

I'm Either Really Clever or Really Stupid

The market took a serious dive this morning after the second regional Fed manufacturing report in two days showed a greater-than-expected slowdown in the economy. Being in a bullish frame of mind, I took the opportunity to add to my long positions. This will either turn out to be a brilliant move or a costly one. If you'd like to play along, here's what I bought:

* TYC - $30.48
* STN - $68.4
* LMT $90.68
* BA - $89.55
* ID - $16.61
* GS - $193.02
* TRF - $79.05

Recent Purchases

As an indicator of where I see opportunities in the market right now, here are several long positions I've established/added to in the last 24 hours:

* LNG - $31
* VLO - $55.15
* HOG - $74.3
* RIMM - $134.12
* AAPL - $92.25
* COGN - $39.37
* SSO - $87.4
* QLD - $89.6
* SLW - $11.75
* EWW - $48.25
* XHB - $36.36
* NTES - $18.37
* IIH - $5.62

The rally remains intact

On Monday, the market corrected pretty hard, but in the last two days, it has rallied right back. This leaves the uptrend in tact.

Even better, there are plenty of Bears out there and they are piling on risky bets. The open put interest on the S&P is growing even as the volatily spreads increase. If the market continues to rally, these bets are going to unwind, pushing it even higher.

Watch the SPY - if it remains above $140 (the strike price of greatest open put interest), stay long the market. The bears will have to start becoming bulls and we'll get that Christmas/Chanukah/Kwanzaa/Eid ul-Adh rally everyone loves to talk about.

The (fake) Boobie Prize

On Friday, the FDA approved the use of silicon breast implants, reversing a 14-year ban. The big winner in this move is MNT, the leading maker of silicon implants.

The stock reacted to the news immediately, going from $46 to $53 in the Friday aftermarket. I think it will come back in to test recent highs in the $50-51 range, at which point, it will be a good buy.

Adding MRVL to the Semis list

The semis continue to look good. So, I am adding more of them to the mix. Yesterday, MRVL took a dive at the opening, then came back strong. I picked some up at $19.12 on the rebound. I see downside of no more than $1 and upside of $6-7.

Play Gaming w/ IBM

Video game companies have been on a roll lately. ERTS, ATVI, MSFT, GME etc. are all at or near 52-week highs. So, is it too late to jump on this bandwagon? Well, you can wait for a pullback in the names above, OR, you can jump on IBM now.

IBM makes the chips that run all three major gaming platforms. Along with ERTS, it's the 800-pound gorilla arms dealer in this war. However, IBM sports a P/E of 14.3 and PEG of 1.5 - a bit more attractive than ERTS' P/E of 43.6 and PEG of 2.8.

With growth in most of IBM other business segments, incl. defense and business tech, now looks like a great time to pick some up.

The Next VFCorp

Back on June 2, I recommended VFC, when it was trading around $64. My thesis was that the 80s were coming back into style and that VFC - with its great 80s brands like Vans, Reef, Nautica, Tommy Hilfiger, North Face, Wrangler, Lee, etc. - would benefit.

Now that VFC is up over 20%, it is time to move into the next 80s comeback story - KTO.

Anyone who did any outdoor activities in the 80s knows KTO's brands - K2, Volkl, Marker, Marmot, Rawlings, Shakespear, Brass Eagle (this last one is probably only know by the paintballers, but it's dominant in its space).

In addition to it's great brands, KTO has improving fundamentals and a huge short ratio (16+ days) that could make for a nice run. Jump in while the getting is good at $14.

Oil Bottoming

Oil prices seem to be bottoming, making this a good time to start nibbling on energy stocks. For stability, go with the majors via the IYE. For beta, go with the oil services via the OIH.

India Breaking Out

Late last week, the Indian stock market broke through resistence created by the monumental down-turn it suffered during the Summer. There has been good follow through this week and Indian stocks appear to be in full break-out mode.

The easiest way to play is with one of the ETFs: IIF, IFN

You can also play with:

Banks: IBN, HDB
Tech Outsourcing: SAY, INFY, WIT
Generic Drugs: RDY

Stick with NKE

Back on November 2, I suggested adding to NKE holdings. Since then, the stock is up 5% and today we found out part of the reason why - Warren Buffet's BRK is building its position in NKE. This puts a floor under the shares, so let the position run. We'll probably see some "me too" investors jump in based on the Buffet disclosure.

1389 is the magic number

If the S&P500 index closes above 1389 today, expect another leg up in this rally before we see a pullback.

Two Semi Plays

BRCM - Announced new line of GbE Switches w/ on-chip MIPS for the SMB market. In English, this product line will make it easy for small and medium businesses to move to the high-speed ethernet, opening up a lucrative market for BRCM.

AMAT - Announced a new CVD Platform capable of 150wph. In english, this product will enable semiconductor manufacturers to increase their throughput by 50% and reduce cost by 30% - that's huge. [Caution: AMAT reports earnings tomorrow, so could be volatile]

Continuing to Nibble on Tech and Industrials

The uptrend in the market continues. I am essentially fully invested, but continuing to nibble on new longs as I take profits in areas that have already had good runs.

My two favorite areas to continue buying are technology and industrials, particularly enterprise software and industrial chemicals. I am playing with ETFs - IGV, XLB - and individual stocks - ORCL, DD.

CSCO Kid Rides Again

Monday I suggested going long networking. Today CSCO reiterated that call by beating already-raised analyst expectations (and jumping 8% in after hours trading). Both their core business and the new set top box business showed strong growth. If you don't already own CSCO, I still see upside in it.

Dems Should Benefit Biotech

There is tons of chatter this morning about what yesterday's election results mean to the stock market. Without turning this into a political diatribe, I would like to highlight one sector that I think will benefit from increased Democratic presence in Congress - Biotech.

As you know, I have been bullish on biotech for quite a while, but the prospect (and now reality) of the Democrats gaining seats has caused me to increase my leverage to the sector, mostly through short-term and LEAP calls on the BBH.

I will continue to add selectively to those positions (beware of the countervailing trend against high P/E stocks as the economy slows) in the coming weeks, making biotech my second largest sector weighting (Business IT is first).

For those looking to jump in now, but without the resources to buy the BBH (which trades in $19,000 increments) or the desire to use options, I recommend the PBE.

Networking is back

Technology has definitely been showing leadership of late - enterprise software, Internet, gaming, all doing well. Now, networking is joining the party. CSCO, JNPR, NT, FNSR are all starting to move as telcos and Fortune 500s ramp up their network investments.

The easiest way to play is with the IGN ETF.

Use this dip as a buying opportunity

The last several weeks I have been doing more profit taking than buying. Now, that is about to change. I expect the next 12-18 months to be excellent for the stock market (barring a major geopolitical snafu) as we finally get some multiple expansion, so I am treating the current pullback as a buying opportunity.

I particularly like information technology (aimed at businesses), biotechnology, telecom, late stage cyclicals, healthcare/pharma, and emerging markets.

A few of my favorite individual stocks:

* ABB
* AMGN
* CMCSA
* GOOG
* MSFT
* NKE
* ORCL
* WMI

Taking More Profits on Spain, Moving to EM

At the end of Sept., I took profits on the EWP at $46.7. Yesterday, it hit $51, so I sold 25% of my remaining holdings.

Spain has been on fire, but I am now moving from European to emerging markets positions for my overseas holdings, in search of some additional beta. The money coming out of EWP is primarily going into EWZ and FXI.

Adding to Emerging Market Holdings

2 weeks ago, I started building up my emerging market positions (with the EEM) again after the downturn they took this Summer. I am now adding to specific country positions, primarily holdings in China and Brazil. The easiest way to play those two countries is through their ETFs - FXI, EWZ.

Gold Looks Ready To Shine

For those who follow technical analysis, gold is setting up nicely for a big rally. It tested (and held) support around $570 twice in the last several months (June and October) and is now rallying above recent resistance levels. With uncertainty regarding the outcome in Iraq and other geopolitical uncertainties increasing, I see the upside potential in gold far outweighing the downside potential.

The easiest way to play is through the GLD ETF. I am buying at $59.5-60, with a stop at $59 and a price target of $62.5-63. If GLD breaks $63, I'm going to take some profits and let the rest run to around $67.

Better Living Through Chemicals

With natural gas and oil prices remaining relatively low and industrial production remaining strong, I am going to take this opportunity to add some major chemical names to my portfolio. My favorite plays are the best-of-breed names:

* DD
* DOW
* ROH

The '09 at-the-money LEAP calls look particularly attractive.

Gotta Sell Some GOOG :-(

OK - it's my favorite stock in the world. I tout it several times a quarter. Nonetheless, even I have to sell some of my GOOG when it goes up more than 15% in 3 days. I sold 20% today around $475 and hope to buy it back in the $430-$450 range. I also closed out my November 06 Calls and plan to buy some '09 LEAPs on any major pullback.

Taking Initial Profits on Comcast

On Sept. 22, I recommended going long CMCSA at $35. That position is up 10% in the last 2 weeks, so I sold 30% of my position at $38.5. I will look to buy back in at $36.5-37, or sell 30% more at $42.

Emerging Markets & Copper Back in Play

Today's Beige Book report painted a Goldilocks scenario of a slowing economy with no recession and tame inflation. As a result, stocks that had been pounded on the belief that the global slowdown would be more severe (think commodities and emerging markets) are starting to recover.

My two favorite plays in this category:

* PD
* EEM

SMH joins the party, healthcare weak

Nice rally today. Best of all, semis joined in. This is comforting since tech rallying without semis is generally a sign of doom to come. I am back long the SMH with short- and long-term options. I am making room by trimming my healthcare and consumer products holdings which are showing relative weakness.

Nibbling on Cyclicals

I recently recommended HD as a play on cyclicals recovering in a "soft landing" scenario. Now, I am nibbling on a couple of other cyclical plays - IR, ASD, ABB.

Best to take half positions until we get through earnings season, but if the Fed's next move is to cut rates (and you believe in a growing global economy), these companies will do quite well.

If you really want to bottom feed, you can also consider the XHB - homebuilder stocks have about as much bad news built into them as possible - they may not go up any time soon, but they will go up.

Home Depot looking cheap

I recently began establishing a position in HD using 2009 LEAP Calls. The company is trading at a forward P/E of less than 12 and a PEG of less than 1. Technically, the stock recently held support at $36.5 (it's 2004 resistance level/2005 support level) and looks poised to test resistance at the $40 level.

If you're in the "soft landing" (vs. recession) camp, now is a great time to lock-n-load on HD.

Defense Contractors Back on My Radar

Even before N. Korea's nuclear test this morning, the stocks of U.S. defense contractors had been creeping up in anticipation of continued global conflict, remilitarization of Japan, increasing militarization of China and India, etc.

The defense contractor ETF - PPA - recently held support in the mid $17s, after recovering from its Summer doldrums. There are now several levels of substantial support for the PPA, which looks poised to resume its long-term uptrend.

I am going to keep an eye on the defense contractors as we enter earnings season. Any upside earnings surprises from the big names and I will be jumping in with both feet. The stocks to watch:

• BA
  
• COL
  
• GD
• HON
  
• ITT
  
• LLL
  
• LMT
• NOC
  
• RTN
  
• UTX

Taking Initial Profits on Insurance ETF

Back in mid August, I suggested going long the PIC (insurance ETF), just below $17. It is now just below $18 and I am going to start taking profits.

I am rotating into the KIE (more liquid, lower expense ratio, more concentrated on best of breeed) on any dips and selling PIC on any strength.

Long-term, insurance is still a good place to be, I just want to cash in on the recent run and move to an insurance ETF with less downside risk.

MU+MRVL=Sell SMH

MRVL warned, MU disappointed and I am out of semis. If you own the SMH or IGW, I would get out now (or put a tight stop on them).

This market really wants to go up

The market had another break-out day yesterday. I've been looking for a pullback to pick up some bargains before the end-of-year rally, but it just isn't coming. It could come during earnings season beginning next week, but strong earnings could also serve as a catalyst to drive the market higher. With energy prices remaining low, retailers reporting strong same-store sales growth and analyst raising their targets for the S&P, I am now leaning toward the latter.

I still have some cash on hand (and stops in place) in case the pullback does finally come, but over the last week I have topped off most of my major positions and added a few leveraged long bets. If you're looking for some places to put money (either now or in event of a pullback) - here are a few ideas:

Domestic Stocks:
* CMCSA
* ORCL
* JNJ
* MA
* PG

Domestic ETFs:
* XLF
* KCE
* KIE
* XLY
* PEJ

International ETFs:
* EWK
* EWN
* EWP
* TTF
* ISL

Profit taking feeds new longs

The last 48 hours have provided some good opportunities to take profits and move the money into leveraged long positions as sector momentum continues to rotate.

Specifically, I took profits on:

* PG $62.7
* EWP $46.7
* TTF $9.7
* TTH $33.5
* IYZ $27.9

[I told you the telcos would be coming down soon. :-) I will be buying back TTH/IYZ over the next week, after they are done pulling back. PG may take a bit longer, since it hasn't started pulling back yet.]

I rolled this money into the following LEAP calls:

* VMFAC (MSFT '09 $15) - $13.3
* OHGAC (BDH '09 $15) - $5.3
* VMKAG (MRK '09 $35) - $10.3
* VKOAD (KO '09 $20) - $25
* BBHDF (BBH '09 $130) - $58
* OOBAH (WAG '09 $40) - $11.9

[FYI - now is a great time to lock in long-term option contracts on defensive names if, like me, you believe that the economy is slowing].

Concerned About Today's Leadership

The S&P made a new 52-week high today. The Dow came up just short and the NASDAQ has another 10% to go before it hits the mark. What concerns me is that the S&P broke out on the backs of sectors that have rotated out of favor.

Here are the sectors that lead today's action:

Metal Fabrication	+4.57%
Copper	+3.27%
Farm & Construction Machinery	+2.91%
Silver	+2.83%
Steel & Iron	+2.79%
Industrial Metals & Minerals	+2.56%
Drug Stores	+2.07%
Oil & Gas Drilling & Exploration	+2.02%
Entertainment - Diversified	+1.96%
Personal Computers	+1.96%

With the exception of Drug Stores, Entertainment and Personal Computers, all of these sectors have been in heavy retreat in the recent rally. This makes me think that their upturn today might simply be a matter of an oversold bounce and some end-of-quarter portfolio beautification by money managers.

Now, it's possible that all of the talk of a slowdown in the economy has been wrong and that the heavy cyclical sectors that lead today's run deserve to be bought by the bucket, but imho, that's a bit of wishful thinking. I'm taking this as an opportunity to add to my "slowing economy" holdings, waiting for dips in the highest flying sectors like telco and technology.

Adding to Broker/Dealers

Back in late August, I suggested going long the broker/dealers (KCE is the best ETF). Now looks like a good time to add to those positions. With the recent upturn in the market, both their trading volume and investment returns are going to be great this quarter. With low P/Es and plenty of institutional buying support, I see good upside and limited downside. That said, they have had a good run the last few sessions, so buy in increments on dips.

Taking profits on major telcos

It's window dressing time. Money managers are scrambling to clean-up their portfolios before the end of the quarter, so they don't have to show clients that they are sitting in oil instead of tech, underperforming the market. This means that the leaders for the quarter (namely major telcos) are being driven up even further - well into overbought territory.

As such, I am trailing extremely tight stops (we're talking a fraction of a percent) on all of my major telco holdings, including the TTH, IYZ and PTE.

I am going to roll this money into other areas of telco - like the BDH, WMH and PXQ - that haven't run as far yet.

We Have Our Pullback

Back on 9/12, I mentioned that I would be taking profits as the QQQQ approached $41 and waiting for a pullback to $39 to get fully invested again. Well, we only made it $40.67, but that was close enough for me. I took profits on the way back down in the $40.30-40.50 range. In addition to my tech holdings, I also took profits on some real estate and healthcare names.

Now, as the market officially begins its pullback, I am building my shopping list. I expect the pullback to continue through early next week, so I am in no big rush. The areas I'm planning to buy remain the same: Tech, Financials, Consumer Staples, Healthcare/Biotech, Utilities. A few tickers to consider: GOOG, MVL, WAG, RKH, PBE, UNH, TXU.

One name I bought today, because the chart and fundies just look too good to pass up:

CMCSA ($35)

WAG Off, WAG On

Thanks to a WMT announcement regarding pricing for generic drugs, WAG took a major hit today...and I'm lovin it. I've been taking profits in WAG for some time, and had a stop loss around $48.6 on the remainder of my position - that triggered this morning, before the stock continued down to $46.5.

Now, I can buy all my shares back and enjoy the ride back up to $51+. I'm going to ease back in, in case there is a little more downside, buying 1/3 today below $47 and the rest over the coming week.

This is a great example of why we take profits, why we trail stops, and how to profit from short-term volatility.

Adding to the Medicine Cabinet

With all of the attention tech has been getting, the last two days have been a good time to add to healthcare positions. Here are a few of the positions I've been adding to:

JNJ
IHI
IHF

HANS good for a swing

HANS broke above $34.32 today (the bottom of its 8/4-8/5 gap). If it holds $35 tomorrow morning, I am planning to play a swing trade to $40-$45 range (next resistance level), with a stop around $32 (just below the area of greatest volume over the last 5 days).

Unfortunately, there are very few options available on HANS and there is no option volume in-the-money. So, the only play is with the stock itself.

Oh My ORCL!

Quarterly profit rose 29% to $670 million (13 cents a share) from $519 million (10 cents a share) a year ago. Per-share profit, adjusted for items, rose to 18 cents a share from 14 cents - beating analyst estimate of 16 cents a share. Revenue jumped 30% to $3.59 billion from $2.77 billion a year ago.

This is not only good for our ORCL holding (which is now up 20%), but for the tech industry as a whole. In other words, stick with the QQQQ, IGV, SWH, SMH and other tech plays I've mentioned over the last 2 months.

Thai Coup Could Be Good News

A few hours ago, the Thai military seized control of the country while Prime Minister Thaksin Shinawatra attended a UN meeting in New York. The U.S. stock market tumbled on the news. However, the coup could actually be good news.

From what I've been able to gather online, the coup was designed by Deputy Prime Minister Somkid Jatusripitak and Thai King Bhumibol Adulyadej to get power back from the Prime Minister, who is suspected of massive corruption. Since Thai King Bhumibol Adulyadej is a long time ally of the U.S., this coup could simply involve cleaning house while remaining on the path toward industrialization and globalization. The Thai stock market seems to be taking it this way.

In any case, I wouldn't look at this coup as a destabilizing event. The Thai people are infatuated with their King and will give him more than the benefit of the doubt when it comes to matters of national importance.

Buying GOOG on overreaction to YHOO news

YHOO plunged today when their CFO announced at a conference that revenues for the quarter would come in at the bottom of the range. GOOG dropped in sympathy from $415 to $394.

Imho, this drop in GOOG is unwarranted and will correct itself, particularly since the stock has been running nicely of late, breaking key resistance at the end of last week.

I still consider GOOG a value under $430. This chance to pick up some sub-$400 shares was simply too good to pass up.

Thanks Yahoo! - for sucking so much!

PG, WAG, JNJ nearing buying opp

Over the last several months, it's been tough finding a place to jump in on the blue chip consumer staples. Don't get me wrong, I've enjoyed the ride up and have had several opportunities to take profits. That said, I'm always looking for oppotunities to buy back in and take those profits again.

That time appears to be coming - stocks like PG, WAG and JNJ have finally started pulling back in the last few days. Another few days and they could be ripe for the (re)picking.

Watch your overseas holdings

As domestic tech, healthcare and other defensive stocks heat up, money appears to be flowing out of international funds. This may be a temporary phenomenon, but I recommend keeping a close eye on your foreign positions, particularly emerging markets.

As SMH/QQQQ approach $36/$41, take profits

Did I mention that I LOVE tech right now. Between the QQQQ, QLD, IGV, SMH and call/LEAP positions on all of the above, the last few days have been better than the last few months.

That said, all good things must come to an end (or at least pause, pull back and resume). So, I am going to use the levels of the SMH and QQQQ to tell me when to accelerate my profit taking.

The SMH is going to start running into resistance around $36, the QQQQ around $41. So, as we approach/break these levels, don't be too greedy. I have a strong suspicion you'll get the opportunity to buy these same positions back when they retest $34 and $39, respectively.

Taking initial profits on ORCL

After breaking out last week, ORCL had another nice up day today. It has now moved over 10% since we bought in at $14.90 at the end of July. So...time to take initial profits.

I am selling 10% of my position, using a $0.10 trailing stop. That means that the next time ORCL goes down by 10 cents - could be today, tomorrow...who knows - my order will trigger.

Respecting my stops (except one)

The downturn in the market this morning took out a few of my stops:

* SLV
* IGN
* PTE
* EWQ
* EWU
* EWP

Until I see how the day ends, I am going to respect these stops, even though the market started rebounding mid day.

I did buy back one position right away - SMH. I also took the money accumulated by the other stops and threw it into October QQQQ options and the QLD. Yes - I am bullish on tech!


p.s. - Did you see ORCL today? Breakout!!!!

Taking more profits on WAG

Time to take some more profits on WAG. I sold 10% at $48.5 back on Aug 4 and sold 10% more today at $50.6. Trailing my stop at $47.6.

Go Seniors! - Keep poppin' those pills.

Don't forget the porn

When most people think of consumer staples, they think of food, medicine, eletricity, etc. They often forget than vices are often staples too. When was the last time you heard a smoker or heavy drinker say, "I better cut back with gasoline prices being so high and all?"

Of course, alcohol, drug and tabacco stocks are easy to find and can be played using common ETFs. Porn is a little harder (no pun intended). So just a reminder that my two favorite plays in this area are:

* RICK (has pulled back recently and is trading at a very attractive PEG)
* NOOF (is generating great cash flow and subject to a takeover)

When building the consumer staple portion of your portfolio, don't forget to add in a little skin.

3 Tech Plays for Q406

September is generally a good time to position yourself for Q4. The market tends to pull back in September, then rally into the end of the year.

One of my favorite areas for Q4 this year is big tech. Here are 3 ETFs that give you broad diversification across the tech industry:

* SMH (semiconductors)
* IGV (enterprise software)
* PHW (hardware and electronics)

Short Term, Tech Looks Better Than Energy

Energy stocks rallied today, but stopped just below levels that had previously served as support. These levels are now going to act as resistance, at least for the short-term. As such, I am taking profits on my energy positions and moving the money into tech, which is performing nicely right now.

I may reverse this trade in a week or two, if energies start to rally and techs start to pull back. For now though, as a technical trend following idiot, I feel compelled to go where the money is.

Long term, I still think we'll see $100 oil before we see $50.

Lock In Gains

Thanks to yesterday's action, pretty much everything in my portofilio is now flashing green. Since many of these holdings are just breaking out from bottom-forming patterns, now is the ideal time to lock in gains by moving stops up to just below recent lows.

As an example, here are 10-day/15-minute and 3-month/daily charts, respectively, of the GS Software ETF (IGV).

This first chart shows how IGV bottomed just above $39.5 about a week ago, then rallied strongly. A closer look at the green bars on the right shows that $39.7 was where the trading volume really kicked in. That makes $39.5-39.7 an area of support going forward, allowing you to place a stop just below $39.5 to lock in your gains to that point (about 8% since the August 2 break out) and protect you against a major market reversal.


10-day/15-minute



3-month/daily

Patience Pays

Back on June 23, I recommended FUR at $6. Since then, it has been on a slow, painful drift upward. At least 3 or 4 times, I thought to myself, "why not cash out and move the money to something with a little more action" - but, I didn't. I stuck to my plan and today the payoff came. The stock broke above it's Fall 1998 high (yes, it's been 7 years since the stock traded to $6.40).

I think the stock has plenty of room to run (even into the teens), so I will just move my stop to break-even and let it run.

Gotta love it when discipline pays off.

SLVer Bullet

As I mentioned on Monday, gold prices have been weakening lately. It looks like that gold money is making it's way into silver. The prices of the two commodities had been diverging, but now they are converging. While I remain long the gold miners (GDX), I have moved my money out of the commodity itself and into silver (SLV).

SLV is currently trading at $126-$127. I see downside limited to $118.5 and upside of $145-$150.

Lock-n-Load on Biotech

Biotech is looking extremely strong. I am now fully loaded on my key positions. For those looking to play with ETFs - here are a few options (in order of my preference):

PBE(extremely balanced)
BBH(focused 75% on DNA, AMGN, GILD)
IBB (overweight AMGN)
XBI (most diversified with lots of small caps)

MSFT back on my radar

Back on May 3, MSFT traded below $24 and I bailed out of my '08 LEAPs. The stock continued to struggle through June 13, where it finally bottomed at $21.50. Now, Mr. Softy is on his way back, clearing the bottom of the April 27-28 gap on August 18th. I expect the stock to bounce around in a $24-27 range for a while before clearing the $27 top end of the April gap. Nonetheless, I do think it will clear $27 by the end of the year, with a flood of new products in 2007 serving as the catalyst.

So, my play is to buy deep-in-the-money '09 LEAP calls - like -VMFAC (Jan'09 $15 Calls) - whenever Mr. Softy drops below $25. This trade offers limited downside, with some great upside potential.

Financials and Energy Getting Shaky

While I still like the financials and energy stocks, they looked a little shaky today. No need to make major moves, just tighten your stops and avoid putting new money in these areas.

Keep an eye on gold

Gold has been lagging lately. While it hasn't broken down completely, the technicals are not looking great. Long term, I am still bullish on gold as a contra-market hedge in any portfolio and a way to profit off of a weakening dollar. For now, I would be cautious and stick to playing the gold miners (GDX is the ETF to use) as opposed to the commodity itself.

What a Problem to Have - Too Much Cash

As a shareholder, I hope they use the hoard for a buy-back until they figure out how to use it effectively for growth. Of course, with 40%+ margins (which they definitely don't want to dilute) the latter will be more challenging than many people think.

Google Seeks Exemption for Cash Hoard
Friday August 25, 11:33 am ET

Google Says It's Not a Mutual Fund, Seeks Regulatory Exemption for Cash Hoard

WASHINGTON (AP) -- Search-engine giant Google Inc. has piled up so much cash that it is in danger of being mistaken for an investment fund.

The company, which wants to diversify its investment strategy but doesn't want to be regulated as a mutual fund, has asked the Securities and Exchange Commission to exempt it from regulations that can apply to a company with a lot of marketable securities on its balance sheet.

To that end, the Mountain View, Calif., company made a filing on July 20 to persuade the SEC that it exists not to make investments, but to conduct an "Internet and new media business."

Google's most recent quarterly balance sheet listed assets totaling $14.4 billion, including $4 billion in cash and $5.8 billion in marketable securities. Under the Investment Company Act of 1940, a company with more than 40 percent of its assets in certain types of securities is subject to different disclosure and operating rules.

"Google states that it is not in the business of investing, reinvesting, or trading in securities," the company told the SEC in the filing last month. Google, which reported $1.5 billion in income for 2005, said that about 8 percent of that amount was investment income.

To help make its case, Google told the SEC that it will only invest for "bona fide business purposes" and won't invest "for short-term speculative purposes."

In the absence of an exemption, Google disclosed that its executives are authorized to create an investment mix for the company that ensures the 1940 investment-company law won't apply.

An SEC spokesman declined to discuss whether Google will receive the exemption, and a Google representative didn't return a call seeking comment.

Pay attention to today's movers

The market again found a bottom at mid-day and is rallying into the close. More importantly, both the energy sector and the general market are rallying simultaneously, indicating that investor concerns about rising oil prices are already baked in.

The sectors that lead today's action are likely going to be the leaders as the rally continues. Pending a reversal before the close, those sectors (via their ETFs) are:

IGN
PXE
DBC
XLV
IIH
PPH

Broker/Dealers ready to rally

The broker/dealer index (XBD) - held support at 215 recently and looks ready to rally. The easiest way to play is with the sector ETF - KCE.

Since these stocks are extremely sensitive to any Fed activity, be sure to trail a stop just below this support (around $58 on the KCE).

$70 looks like the short-term bottom for oil

As you know, I've been buying oil stocks through the latest correction - particularly the E&P companies. Last week, as oil went from $77-78 down to $70, I started seeing a parade of talking heads on TV saying it was headed to $50. I don't know what these folks were smoking, but I've been on the other side of those trades and now it's starting to pay off. Oil is rallying again, after bouncing off $70 for the 3rd time this year (May, June, August) and I only see it heading higher.

For now, I'm treating $70 as the floor and $80-$85 as the near-term target. When I see Ahamdinejad give Olmert a big kiss, then I'll believe that oil is going to $50. :-X

Even a down day can be a bullish sign

After last week's rally, it's no surprise that folks decided to take some profits this morning. That said, all of that profit taking did little to drive down the major indices. They found their bottoms by mid day and have been rallying strongly since. Although it looks going into the close that all of the indices are going to finish slightly down for the day, I'm taking their resilience as a bullish sign.

For months, folks have been selling on the rallies, now they are buying on the dips.

So, my suggestion - stay long, take profits on any major moves and enjoy the first up month since Spring. That said, don't get drawn into heavy buying in this rally, since I still think we'll see another retracement before we see the major indices all break out to new highs.

Play the rally with Semis

Over the last 2 days, the semi HOLDRs - SMH - have taken out a key resistance level just below $33 and turned it into support. For those looking for another way to play the tech rally, playing the SMH to the $36-38 level is a great option with limited downside risk.

This rally looks real...for now

Thanks to some technical problems, it's been a few days since my last post. In that time, the market has broken out of its near-term trading range and we have a bonified rally on our hands. My gut tells me that the rally will last until we approach the Mar-Apr highs:

* DJI - 11,670
* SPX - 1327
* IXIC - 2375 (still has to get through 2270 on the way)

At that point, I think we'll see some profit taking and restest previous resistance levels:

* DJI - 11,300
* SPX - 1300
* IXIC - 2375 (if it breaks 2270 in this rally - otherwise 2233)

So how am I playing the rally?

On Wed (8/16), I went long the DDM and SSO - this complements my option straddle on the QQQQs (I've already started taking profits on the Call side of that one). Yesterday and today, I also added IGN & EWJ, along with upping my ORCL stake.

Since I still believe that the economy is slowing down, I am also taking the opportunity to continue nibbling on defensive plays, like PUI, PIC and IXJ.

Over the last 2 weeks, I have gone from 50% cash to 10% cash. As the rally moves, I'll be taking profits to build cash back up, for what I believe will be a final pull-back in late Aug/early Sept before the market rallies into the end of the year.

Stick w/ ORCL

About two weeks ago, I recommended going long ORCL at $14.90. Today, the stock broke out and is trading right at its 3-yr high of $15.50. I think the techs are going to run for a bit here, so I am not ready to take profits yet. Stick with the trade and trail a stop just below $15.

Another down day for oil

After an up day on Friday, oil is down again today on the Israeli-Hezbollah cease fire and partial resumption of oil transport from Prudhoe. I'm taking the opportunity to nibble on some of the exploration and production stocks: DVN, APC and the ETF PXE.

Good Day To Nibble On Oil Stocks

Oil stocks took a hit today as traders used the foiled London-US terrorist plot as an excuse to take profits - the idea being that people will be scared to fly, which will lower fuel use by airlines.

I am taking the other side of this trade, believing that Middle East instability and BP incompetence in Prudhoe Bay will keep oil prices up.

Call me a contrarian. ;-)


For those who like ETFs over individual stocks - my favorite play right now is the PXE.

Taking initial profits on PG

Back on June 15, I recommended picking up some PG around $54.5. That poisition is now up over 10% (most of that in the last 5 days), so I took a little off the table today.

Since I consider PG the gold standard of slowing economy stocks, I only sold 10% of my position at $60. I will trail a stop at my cost basis on the rest, guaranteeing an overall gain.

What The Fed Will Do Today

I have no idea! I have been enjoying watching the parade of talking heads on TV who are certain of what this afternoon holds from the Fed, though.

My play:

* Double-check my stops - make sure that they are all in place at the right levels - in case the market reacts violently to whatever the Fed does.

* Keep nibbling on the sectors that can do well in a slowing economy (utilities, energy, consumer staples, pharma, etc.).

* Take partial profits on anything that has run 10-15% in recent weeks.

* Keep a chunk of cash on hand in case the market tanks and some buying opportunities present themselves.

* Use QQQQ straddles and VIX options to make profits on any wild swings.

Nibbling on Utilities

Over the last several trading sessions, utilities have been pulling back. Today, they appear to be finding some support. As such, I am nibbling on the utility ETFs: XLU, PUI, IDU

Still Waiting On A Direction

Still looking for follow through one way or the other....


* DJI - A break/hold of 11,300 = bullish Dave. A break/failure of 10,700 = bearish Dave

* SPX - A break/hold of 1300 = bullish Dave. A break/failure of 1200 = bearish Dave

* IXIC - A break/hold of 2270 = bullish Dave. A break/failure of 2060 = even more bearish Dave

Taking initial profits on WAG

Back on June 15, I recommended picking up some WAG. That poisition is now up about 15% (5% in the last 3 days), so I took a little off the table today.

Since I believe that baby boomers will continue to age and take prescription drugs, I only sold 10% of my position at $48.5. I will trail a stop around $45 on the rest, guaranteeing a mininum gain of 10%.

Saved by the Stop

On July 18, I mentioned a medical device company called KCI when it was trading in the $45 range. I got stopped out of that trade after 3 days when a break-out failed and my 5% stop triggered. At first, I was unhappy that I had set my stop so tight because the stock rallied back to my cost basis 3 days later.

Then, today, word broke that KCI suffered an unfavorable ruling in a major patent infringement case and the stcok got cut in half. Suddenly, my stop out doesn't feel so bad.

The point - don't regret your decisions. What seems like a bad call one day, might not seem so bad the next.

Rolling Steel

Steel stocks are showing great relative strength lately and look poised for a big rally. My two favorite plays:

CHAP
OS

QQQQ Straddle Attractively Priced

The Q's have been vacillating around the $37 level today - below it in the morning, above it in the afternoon, below it going to the close. Why does $37 matter? Because, that level had acted as support 4 times since October of last year and since being broken on July 12, has now acted as overhead resistance 3 times.

My gut tells me that if it fails to close above $37 again today, the QQQQ could be headed to $35ish. But, if it is able to rally late day and into tomorrow, it could continue up to $39ish.

How do I play this either-or scenario - a QQQQ $37 straddle. Thanks to the narrow-range dance the QQQQ has been doing for the last 6 weeks, the put-cal spreads are quite reasonable. You can play the Aug $37 spread for max risk/reward, or use the Sep $37 spread for a little more leeway, in case the Q's continue moving sideways.

-QQQHK (Aug $37 Call)

-QQQTK (Aug $37 Put)

Total Cost = $1.20

-QQQIK (Sep $37 Call)

-QQQUK (Sep $37 Put)

Total Cost = $1.90

p.s. - Despite stellar fundamentals, GOOG broke down technically today. I'm trailing a stop just below $360. I hope it doesn't trigger, but even with the company making money hand-over-fist and handily beating analyst estimates on a regular basis, I can't fight the tape.

Gov't Cheese Remains for Medical Device Players

So, it looks like government reimbursement rates for medical devices through the Medicaid and Medicare programs are not going to be reduced as much as expected. This makes it a great time to get into the battered medical device companies. You can play the individuals - JNJ, MDT, STJ, ZMH, BSX - or get them all in one ETF - IHI.

I bought some IHI today at $47.50 (I already own JNJ). There is decent support in the $46.50 range, so downside is pretty limited.

Out of QLD

The rally in the Nasdaq stalled yesterday afternoon, so I bailed out of my QLD trade at $65.70. Better to make a dollar than lose two...I always say. In reality, the QQQQ's look like they may fail again and I could move back to playing the short side.

In the mean time, I added to my energy holdings - primarily NBR, DVN and IEO.

Viva Mexico

Back on July 5th, I mentioned some international ETFs that I was in the process of buying. I am now adding one more to that list: EWW. It looks like the Mexican election fiasco is going to be resolved positively, with Calderon declared the winner. This will be great for the Mexican economy and owners of the EWW.

Taking initial profits on MRK

Back on June 15, I recommended picking up some MRK around $34. It is now at $41 and it's time to take some profits. Plenty of room left to run, so I am only selling 20% of my position. I will likely buy some of that back on any dip to the $38 level.

Taking initial profits on CEO

At the end of June, I recommended going long Chinese oil with CEO. That position is now up more than 10%, so I am going to take 10% of my position off the table. I still love this play, I just want to make sure that I take profits as they make themselves available. This market has been really tough and a 10% gain in a month is worth protecting. I'll trail a stop above my cost basis on the remainder.

Taking additional JCG Profits

After selling half of my JCG position at the IPO for $25 (a nice 25% profit), I am now ready to take my second chunk of profits. I am selling 20% of my remaining position at $27. I will trail a $2 stop on the remainder in case retail turns lower as the economy slows.

Taking initial profits on TTH

A month back, I recommended going long the TTH around $29 That position has been on a tear of late (particularly the last 5 days), so I am going to take a little off the table. I am still very bullish on major telcos, so I am only selling 20% of my position at $31.30.

QLD Day/Swing Trade

The market started rallying about 45 minutes ago, so I picked up some QLD shares at $64.67 for a quick trade. How it behaves going into the close will determine whether or not I hold it over the weekend. I'm looking for a move to $68+, with a $2 trailing stop.

When the moment's right...

At some point (hopefully soon, historically during Summer) the market will bottom and start rallying again. There are likely to be some big up swings and corrections as stocks find their new equilibria.

There is a new way to play these market swings for those who prefer not to use options and shorts - ProShares Ultra ETFs:

Ultra QQQ ProShares	Double the NASDAQ-100 Index	QLD
Ultra S&P500 ProShares	Double the S&P 500 Index	SSO
Ultra MidCap400 ProShares	Double the S&P MidCap 400 Index	MVV
Ultra Dow30 ProShares	Double the Dow Jones Industrial Average	DDM

UltraShort QQQ ProShares	Double the inverse of the NASDAQ-100 Index	QID
UltraShort S&P500 ProShares	Double the inverse of the S&P 500 Index	SDS
UltraShort MidCap400 ProShares	Double the inverse of the S&P MidCap 400 Index	MZZ
UltraShort Dow30 ProShares	Double the inverse of the Dow Jones Industrial Average	DXD

Keeping My Powder (Mostly) Dry

After closing out my shorts last week, I returned to a roughly 50% cash position. I've been nibbling away at a few defensive sectors (utilities, pharma, biotech, energy, consumer staples), but they now look short-term over-bought to me, so I am going to wait for a pull-back before buying any more.

I am also keeping an eye out for some battered tech giants that could do well as businesses begin to spend more.

Here's my thinking - companies flush with cash, growth is still pretty strong, labor is getting tight, so what do you invest in - technology that increases productivity!

My play - though just 1/3-sized position at this point - ORCL at $14.90.

Closing out shorts

Since I have been using July puts to short big tech, I am closing out my short positions today.

-QQQSN (bought on 6/20 @ $1.90, sold half on 7/13 at $3.60, sold remainder today at $4.40)

-MSQSX (bought on 6/29 @ $0.15, sold one-third on 7/13 at $0.40, sold one-third on 7/19 at $0.30, sold remainder today @ $0.05)

If the QQQQ ends July with a failed rally, I'll go short again with the August puts. Other sectors worth shorting in August if the market dynamics don't change include: Broker/Dealers, Oil Services, Industrials, Consumer Cyclicals.


p.s. - I will continue to make money on the downside with my Aug. VIX calls.

One for your medical portfolio

KCI - These guys sell over $1B a year worth of hospital beds, ICU equipment, etc. They are recovering from a guidance hiccup last Fall and the stock is performing nicely. Unlderlying fundamentals are strong and improving.







At $45 bucks (forward P/E of 15, PEG of 1), I like it.

If you're looking to gamble

July options expire this friday, which makes them subject to extremely volatility. The underlying market volatility makes them even more so. These are optimal conditions to do a little gambling. Small in- or near-the money July options positions, with the expectation of hitting a homer or losing it all.

Here are a few ideas for those who think the rally will continue for a day or two:

-SQQGF (SCHN July $30 Call) - $5.80
-PCUGR (PCU July $90 Call) - $1.40
-LVSGN (LVS July $70 Call) - $0.60
-IGXGG (IGT July 35 Call) - $2.10


For those who think it won't or want to hedge, short techs, emerging markets, oil services or broker/dealers.

A reminder on levels to watch

* DJI - A break/hold of 11,300 = bullish Dave. A break/failure of 10,700 = bearish Dave

* SPX - A break/hold of 1300 = bullish Dave. A break/failure of 1200 = bearish Dave

* IXIC - A break/hold of 2270 = bullish Dave. A break/failure of 2060 = even more bearish Dave

Take your dogs out....and shoot 'em

We're getting a nice over-sold bounce today. With few exceptions, everything is up. Today is the best kind of day to ditch those laggards in your portfolio. Take those dogs out and shoot 'em.

Today is not a good day for buying - wait for the inevitable pullback that always follows a big rally, then pull the trigger.

Today, just take advantage of the tide lifting all boats (even those with severe leaks).

Stops, Stops and more Stops

Gee - I guess we now know the answer to that age old question, "how many Middle East wars does it take to crush the stock market?"

I've been stopped out of about 1/3 of my positions over the last 24 hours. Hey, that's what stops are for and why I set them extra tight over the last few weeks. Maybe I will buy those positions back next week, maybe in August - we'll see.

For now, it's enjoy the upside on the few things that are working:

* VIX call options
* Shorts (particularly big tech)
* Gold
* Oil
* Porn (yup, RICK is up again today)
* Select small-cap metals/mining
* Cash (5% ain't so bad, huh?)

Volatility is back

The markets are edgy right now. That's why after a week of almost no movement, the VIX shot up today. With all of the geopolitical issues, uncertainty about the fed, etc., I think the volatiality is going to hang around for a little while. So, why not make money off it.

My play:

-VIXHV (Aug 12.5 Call) - $4

Taking Profits on 2 Shorts

The markets tumbled this morning after a rather ugly day yesterday. Oil is back over $75 thanks to geopolitics and Wall St. is worried about lackluster earnings reports and the likely need to trim back earnings expectations for the rest of the year.

This perfect storm presents me with the opportunity to take initial profits on 2 shorts:

-QQQSN (bought on 6/20 @ $1.90, selling half today at $3.60)
-MSQSX (bought on 6/29 @ $0.15, selling one-third today at $0.40)

I remain short both the Nasdaq 100 and Microsoft. As long as the Dow and S&P stay above 10,700 and 1200, respectively, I see no need to short the market overall and think nibbling on some longs in Healthcare/Biotech, Energy, Utilities and Consumer Staples (incl. porn and gambling) makes sense.

Some Offensive Defense

Along with consumer staples, healthcare and energy, another sector that has performed well recently is aerospace and defense. Companies like LMT, RTN, UTX, GD, etc. are looking great right now.

If you prefer to play with an ETF, PPA is the way to go.

A 5 Stock Portfolio

Here are five stocks that are on fire right now, but sufficiently diversified to make a great (though high beta) portofolio:

CELG
FLR
GRMN
TXU
LVS

We'll check in periodically to see how they are doing. My prediction...a volatile march up to a 10-15% gain by year end.