Let’s do a poll: Will the $DJIA see 16k or 18k next? Hit reply on this email and let me know what you think.
Here’s the transcript to this week’s Live Q&A Chat.
Cody opening comment: Glad we’ve still been avoiding trying to game any bottom in energy prices! My gosh. Brent oil -5.82% the global benchmark, tumbled to an 11-year low on Wednesday. As energy and commodity prices have crashed, they are now at levels where most fill-the-blank (drillers, rigs, pipelines, miners, etc.) all have way too much debt to be serviced. I would expect oil to be rangebound between the low $30’s to the low $40’s, staying at levels which will force many formerly multibillion dollar energy companies to file bankruptcy. Okay folks, ask me anything.
Q. I understand your trading when trimming at the highs, then buying back on the dips. My question: Do you have a plan to get out of a stock instead of riding it down 20-30-40%. I have tried now to keep loses small. I can always buy back, but seems hard to come back from such large losses.Thank you and hope all is well with your family.
A. You’ve seen me bail early enough to avoid more losses on losers like $TWTR,$ICON, $GPRO and others after getting hit on them. The flipside is that we’ve been able to scale into more winners than losers and make a lot of profits using the buy-weakness strategy when we’ve bought dips in $FSLR, $GOOG, $AAPL, $FB, $NFLX, $SNDK, $EZCP and others. Look at that list of stocks from my article earlier today (https://twc.scutify.com/trade-…) and you’ll see that we bought five stocks that day and had four big winners and one big loser, making it a pretty great risk/reward in hindsight to have bought the weakness in the stocks we own. The stocks from that article that we bought more on weakness of that day in August when the $DJIA was down -1000 points early in the morning as I wrote were: “So, my daughter Amaris has a doctor’s appointment this morning and I’ll be there with her early and then I’ll be back before the midway point of the trading day. This morning, I’ll be nibbling on some: AMBA below $80. AAPL below $100. GOOG below $590. FSLR below $42. EZCH below $20.” And four out of the five trades worked out very profitably with one, $AMBA, being the loser.
Q. My question is in regards to the correlation the market has with oil and why oil going down is forcing the whole market down. Is it tied to the expectation that jobs and bonds and debt will cause a ripple effect? And, is that concern warranted?
A. I’m not sure if the recent near-term correlation between oil prices and the broader stock markets isn’t just coincidental. I hear pundits and reporters say “where oil goes, there goes the market” but it doesn’t actually work that way, in my experience. Look at a five year chart of oil prices vs the Nasdaq for example.
Follow up Q: I recall you had the percentages with return for the NASDAQ and S&P 500 vs oil performance, but I guess more specifically, is it to the point where the companies that will go bankrupt impact the economies and all the bad debt that they carry become a bigger issue?
A. Yes, there’s gonna be some ripple effect from a wave of energy/commodity bankruptcies, but it’s “only” a couple trillion dollars worth of debt.
Q. Netflix just announced #netflixeverywhere. India and around the world (except China for now) https://t.co/DeHWKvZHXV.
A. #netflixeverywhere is a big deal for the company as it’s announcement today basically triples the company’s distribution. The stock rallied 5-6% on the news.
Q. I just saw a link where the India expansion was expected to be announced today, but #netflix everywhere sounds better.
A. Pretty incredible: At his CES keynote today, Reed Hastings announced that Netflix was going live in 130 new countries. The list includes massive new audiences like Russia, India, and South Korea. “Today you are witnessing the birth of a new global internet TV network,” said Hastings. “With this launch, consumers around the world — from Singapore to St. Petersburg, from San Francisco to Sao Paulo — will be able to enjoy TV shows and movies simultaneously — no more waiting. With the help of the internet, we are putting power in consumers’ hands to watch whenever, wherever, and on whatever device.”
Q. Just took a position last week in SYNA. Down 20% in very short time. Do I ride out? Buy more? Cut losses?
A. I’m a little gunshy on $SYNA after having nibbled on some a few days ago, only to get hit for 20% in a straight line down. I’m putting it in the penalty box til we see some stabilization. Mea culpa on having nibbled more.
Q. Happy new year! You say you like FFIV’s CEO and know him. I’m assuming this is the new CEO and not the old one? They had a management weird shuffle recently. Thank you.
A. I have known and liked the incoming $FFIV CEO John McAdam, who used to be the CEO for many years. As I noted a few weeks ago: I didn’t know Manual Rivelo. “*“F5 Networks names John McAdam its new pres. & CEO, replacing Manuel Rivelo who is resigning due to ‘personal conduct’ not related to the company.” Well-handled by $FFIV. I wonder what the now ex-CEO did but regardless I’ve known John McAdam for many years now and I think he’s the right guy to be running the ship there again anyway.”
Q. Picked up some of those $AAPL March 105 calls. Are you anticipating that the earnings release later this month will reverse the downward pressure on the stock?
A. I probably should have gone out at least a couple more months on those $AAPLcall options. I wouldn’t be surprised to see some more volatility including a $5 pop or two to the upside in the next three weeks before the earnings report on January 26, 2016. We’ve all seen$AAPL get hit hard and we’ve seen $AAPL rally hard after any given earnings report, but for now I wanted to get a bit longer Apple for a trade here.
Question from Cody: Anybody else excited about being able to finally order the Oculus Rift Virtual Reality hardware from Facebook’s subsidiary? https://www.oculus.com/en-us/
Responses: 1) I am more excited for FB stock. I don’t have the time when I get home with a 3 year-old and a 1 year-old to escape virtually or otherwise! haha
Cody: Well, since I do this tech revolution stuff for a living and am planning to write a book called “Stocks for the Virtual Reality Revolution” in the next few months, I’m going to get to call my Oculus Rift purchase and usage “work.” 🙂
Let’s do a poll: Will the $DJIA see 16k or 18k next?
-hmmm thats tough. Probably should do a TWTR poll too. Looking at the charts the oversold levels we are at…. Sentiment is very negative. All the CNBC articles I see, hardly any, if any, are optimistic. Tough. I think we bounce from here. Earnings expectations are low as well. I will go with 18k.
-You are closer to the markets than me but I would have thought we would have seen some earnings warnings by now if things were as bad as the current indices are predicting. Since no earnings warnings, $DJIA up to 17,500 by the end of January. After that, depends on China firming up.
Ok folks, that’s a wrap. Thanks! Be sure to post your answer to the poll: Will the $DJIA see 16k or 18k next?