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Merck, Apple, Gold: Did We Make the Right Trades?


A quick recap of how some past trading ideas have developed and where they currently stand.

Good day Minyanville readers. No great changes to the macro landscape from last week, despite the Friday credit downgrade of several European countries. My weekend scans also revealed very slim pickings for new trade ideas. So rather than "force" trades that are not there, especially as we approach the bulk of earnings releases, I decided to put together a quick recap of how my past trading ideas have developed and where they stand. So here we go:

From Shorting Apple, Going Long JPMorgan, November 30, 2011: Apple (AAPL) -- the weekly technical set up failed, but the monthly remains intact pending a "price flip." Since the highlighted position was put on for a credit, we will let it ride to expiration unless the price action turns sharply in our favor, i.e. the stock gets hit hard. The JPMorgan (JPM) position so far is working nicely as the stock price bumps up against our maximum profit level of $36 a share. With earnings out-of-the-way, I'd be inclined to wait a while before closing the position, to give time for the short leg of our call spread to decay.

From Ride the SPX Wave, Behold the W.W. Grainger DeMark Trifecta, December 7, 2011: The short term S&P 500 (SPX) mo-mo trade using a call spread going into year-end expired worthless, while the dark side shot at W.W. Grainger (GWW) is still a work in progress, and I entered the last third of the position yesterday. The mental stop level around $202 is now close by and if it is breached, it may force me to start cutting my losses.

From Juniper Searches for a Bottom, W.W. Grainger Shorts Get More Fodder, December 14, 2011: Through various warnings and a dire attitude toward telco tech suppliers Juniper Networks (JNPR) stock price continues to grind out a bottom and the July 15 calls at this point are nicely profitable. This was meant to be a longer term position and I'm going to continue to hold it. Should we get price spikes near a given month expiration I will not be shy in selling out of the money calls to scalp some premium.

From BMC Software Is Long on Value, Gold Could Be Heading for Tradable Drop, December 21, 2011: The long position in BMC Software (BMC) is a long-term -- meaning, multiple quarters -- trade which so far has been a whole lot of nothing. I'm continuing to hold and watch. Meanwhile, the bearish gold trade has probably been the most disappointing of the lot, and with February and March expirations coming up, I would use weakness to cut losses and move on.

From A Bottom for NatGas and a Top for Mastercard?, January 4: NatGas and Southwestern Energy (SWN) continue to get pounded with a commodity down an eye-popping 16% since my January 4 article. However, with the timeframe of a year and put options protecting the stock, I'm actually harvesting some of the profits in the options (hence getting longer the stock) since the natgas price action is looking more and more like capitulation. On the short side, MasterCard (MA) started getting pounded immediately after the article posted. The butterfly spread position is not showing much of a profit because the violence of the move has caused the short leg, the 320 puts, to swell up in value, but both time and price are working in the right direction.

From Looking Through the Macro Landscape: Long Green Dot, Short Merck, January 11: Lastly, last week's selections, Green Dot (GDOT) as a long, and Merck (MRK) as a short. Green Dot once again did respond to the DeMark signals, has printed a "price flip," and is up a couple of dollars from last Wednesday. Merck, on the other, hand remains unchanged.

Editor's Note: At Minyanville we often argue that markets and stocks are driven by four primary attributes: the fundamentals, the technicals, the structural, and psychology. In this weekly piece, trader Fil Zucchi will attempt to digest these four measures to come to actionable recommendations, but with a couple of twists: Rather than relying on standard technical analysis, he will examine the technicals through the lenses of "DeMark" indicators. And rather than highlighting straight entry and exit points for stocks, he will use options to gain long / short exposure, control risk, and generate cash flow. Investors should note: This column will be written 1-2 days prior to publication, so by the time it appears the prices of the securities mentioned may have changed.
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Positions in GWW JNPR BMC SWN MA
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