Buzz on the Street: How Do You Like Them Apples?
A look back at the happenings on Wall Street this week, as seen by Minyanville's Buzz & Banter.
The first thing I'm going to say is that I really believe Qualcomm (Nasdaq:QCOM) should be up more on its earnings report. Yesterday, I stated the stock should/could reach $65 on the beat I predicted. However, the caveat was that this market is constraining any meaningful valuation expansion.
Intermediate to longer-term, I still feel my low-$80's price target will be hit and frankly $100 would not surprise me. It's just a matter of time and a little help from Mr. Market. The clear risk-off feel hangs in the air and serves to compress the big winning reports. I have essentially had the same thesis on QCOM since mid-2010 (if not earlier) which is predicated on a multi-year cycle from 2G to 4G/LTE and beyond. My last summary point is that while Apple (Nasdaq:AAPL), Google (Nasdaq:GOOG), and Microsoft (Nasdaq:MSFT) get lofty praise on cash flow, QCOM is just as strong. Before the quarter, QCOM had roughly $24 billion in net cash, and it added a whopping $4.3 billion to that number. This is similar to what AAPL has done percentage-wise in its best cash production quarters.
Bottom line, this name remains one of my favorites and in fact is either my first or second-ranked semiconductor name, depending on valuation.
An Apple Buy-Stop a Day
I wouldn't try to bottom-fish a falling knife (did I get that right?). But there are stages where short-squeeze potential becomes compelling enough to buy strength.
Apple (Nasdaq:AAPL) signaled a new downleg was underway when it made two consecutive closes under 625. Today it is testing significant support at 547.25.
What makes a rally compelling is how that support is being tested.
This morning's open gapped up in a downtrend before reversing to extend the downtrend, so relevant sponsorship is available. Since meeting the 547.25 target in the session's first hour, the balance of the session has only ranged around it unproductively. While ranging, RSI diverged positively on the afternoon's retest of the morning's low.
Perhaps most compelling is my Up/Down-crash setup. A sequence of 10-11 directional closes, allowing 1-2 non-consecutive countertrend closes, often precedes either a steep reversal of that trending, or else a significant acceleration.
So, as I said above, I wouldn't try to catch a falling fish (still doesn't sound right). But a buy-stop placed above noon's 552 high shouldn't trigger a relatively tight trailing stop if a squeeze to 573 or 598 is underway.
The trend otherwise remains down. Very, very down.
Friday, November 9, 2012
Apple (Nasdaq:AAPL) is down 24% from it's 2012 high two months ago, almost in a straight line. For those of you looking for a Snapper---which could then feed into upside perforamance anxiety--this is setting up as a decent risk-reward with a stop below $530, per the chart below.
Click to enlarge
New Rule: The Best Trade is the One I Didn't Make
Quick post-mortem on Groupon (Nasdaq:GRPN):
As I suspected yesterday afternoon, the market was underestimating the potential move in Groupon after earnings yesterday.
Unfortunately, I didn't get filled on my order for the $4 straddle on the weeklies, because as of now, the stock is trading at around $3.00, well below the $3.35 breakeven point on the trade. At this price, the straddle is worth about $1.00, good for a 33% one-day gain had I raised my bid price from $0.65 to $0.75.
In hindsight, I should have raised my bid price, but shoulda, woulda coulda!
However, keep in mind that the Groupon move seems to confirm the trend of the market dramatically underestimating the post-earnings moves of controversial stocks.
All this year, we've seen stocks like Facebook (Nasdaq:FB), Green Mountain Coffee (Nasdaq:GMCR), and Netflix (Nasdaq:NFLX) make post-earnings moves that completely dwarfed what the options market was implying going in.
Greece Bonds, ECB
There is increased chatter that the Bank of Greece will fund the bill redemption next week from the ECB's Emergency Liquidity Assistance (ELA) program. There's next to no information available about this, so I will assume it is akin to the Fed's Discount Window. These bills are used by Greek banks as collateral for emergency funding at the ECB, not to mention cash for the Greek government itself.
Oh yea, and did I mention that the EU5b bill coming due next week was used to pay back an ECB bond redemption in August? And now the ECB is saying that this special bill cannot be rolled over.
So next week there are two important events on the Greek agenda. The 2013 budget vote on Tuesday (should be late afternoon in the US) and the redemption on Friday. Keep your eyes peeled for any chatter about the redemption and the ECB. There is also the EU finance minister meeting on Monday, but it has been completely telegraphed that there will be no decision about further aid disbursement to Greece made until later in the month. That means the upside surprise is that something happens.
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