Markets bounce a bit but still acting murky. I sensed some nervousness from the bulls yesterday and that’s the first time I’ve thought that in many months. One more 150-200 points down day on the DJIA and I’ll likely look to do some nibbling.
Whole Foods -10% today after “disappointing” earnings report. I didn’t see it that way and I will be looking to add another small tranche of common stock in WFM here in the next day or so as it settles down.
Here’s the transcript from this week’s Live Q&A Chat.
Q. My employer was acquired and I had to move my 401K to the to the new plan. I started with everything in cash with the intent to tranch in – lot more money at stake than my individual stock positions so there is a bit more caution – I moved another 10-15% back in today but feet to the fire, do you think head down to the S&P support at 2040 before resuming the long term bull market?
A. Feet to fire, I’m starting to get more bullish about the near-term. If you’re under the age of 55 or so, don’t worry about trying to game a 2040 move on the S&P 500 with your long-term retirement accounts. Just stick with the playbook and move slowly over the next, say, few months or so, on weakness.
Q. Cody, how big of a correction are you expecting?
A. I don’t feel like I’ve got a good feel of the near-term set-up for this market and I hesitate to say that I even “expect” anything from this market near-term. I’ve been mostly saying that we might be rangebound around 17-18k for a while and that’s still the case for now. When I feel like I’ve got better odds in my near-term market analysis, I’ll tell you and sometimes I’ll even trade on such. But for now, I don’t feel like I’ve got much near-term insight about the broader market’s next move for you.
Q. When will nibble on FB and/or AAPL?
A. I might look at nibbling on some $AAPL in the mid $110s, maybe starting around $117 or so. Remember that it’s already my largest position. $FB looks good around here in the high $70s as a small tranche buy, but I’m not in any rush for it personally. I might be personally start buying some $FB around $72 or so. But again, it’s one of my top 3 largest positions and I’ve got huge long-term gains in it and I’m not in any rush.
Q. Like you, my largest position is $AAPL. In addition I dabble in $AAPL options. I’ve been fortunate in buying weekly options leading up to Apple “events”. With the rumors surrounding potential product introductions at the Developers Conference, I would appreciate your thoughts on whether you think there is enough buzz to lift the $APPL pricing heading into the event? (I would unload any options I buy before the actual event.)
A. I doubt anything other than outright iPhone sales will rival the Apple Watch as a catalyst for the stock. I don’t think there’s any product that Apple would announce in the next year that will matter like the Apple Watch and iPhone will.
Q. Ambarella is so strong–why doesn’t it pull back?
A. $AMBA‘s selling HD Video recording chipsets to every wearables, drone, and other video gadget companies around the planet. $AMBA‘s the $INTC of HD Video Wearables. GoPro’s guidance on its most recent report was very strong and the Chinese competitors are starting to ramp up their own production of GoPro knockoffs too….and GoPro and its major new Chinese competition all use Ambarella chips.
Q. XLF puts a complete loss most likely. You looking at other hedges/shorts Cody?
A. I bought $XLF June puts with $24 and $25 strike prices. The $XLF is currently at $24 and the puts are down from where I bought them. But that is far from being a complete loss. They are continuing to serve as a great hedge on a broader market sell-off and if a hard near-term pullback were to hit the markets and/or if any new banking scandal/black swan were to hit the financial sector in the next five weeks, I’ll be glad I have these $XLF puts on as the hedges they were supposed to be. I’m not sure I get where you’re coming from.
Q. I have June $23’s for some reason and they are down over 75% at $0.16. Wanted to see if you were looking at other shorts/hedges. I’m very surprised the market hasn’t had a major pullback.
A. Yes, I have the $23 puts too. That batch is down worse than the $24s and the $25sobviously, but that’s just a small part of a small second tranche of the XLF puts. Not looking for other hedges just now. I’m starting to get a bit more bullish as the markets head towards 17500.
Q. Popular sentiment seems to be that US markets are stalling and Eurozone is ready to pick up – Any thoughts about a contrarian bet against the Euro?
A. I don’t think I’d want to try to game the near-term movements of the $EURUSD or any other currencies right now. I do think there’s a building bearishness in the trader’s deck and if/when the bearishness gets up to bat, I’ll probably take a swing or two on the long side.
Q. with all the cyber security issues we keep hearing. Whats your take security stocks? should we allocate a larger % of a portfolio to our names? $FEYE or $PANW ?
A. I think Cyber Security is going to get much much more important, so yes, I’m looking at adding to our existing basket with a small tranche or two and to maybe add another name to it too.
Ok thanks folks! Rock on. Please tell your friends and family and colleagues about TradingWithCody.com. No seriously, go tell them right now. Forward them this transcript or a link to the site or something. Thanks.