Trading Places: Research In Motion and Facebook
Crossed swords in the city of bulls and bears.
I had a business breakfast this morning -- since I'm juicing, my "breakfast" was two cups of coffee -- and while it was one of the better meetings I've had in a long time, it was a costly klatch from a trading perspective.
As discussed in detail the last few days, I entered yesterday's Facebook (NASDAQ:FB) earnings on the short side of the stock (playing the downside with a $28 trading price target) and we flagged Research In Motion (NASDAQ:RIMM) $12 as meaningful support -- a 50% Fibonacci retracement of the recent rally -- after warning of a "sell the news" reaction on Monday.
True to the path of maximum frustration, Facebook traded to $28.80 this morning and RIMM, not to be outdone, slipped to $12.15 before I could get to my turret (to cover the partial exposure on the former and initiate a long position on the latter).
What did I do? You mean, other than give my coffee cup a dirty look?
I bought a partial position in RIMM at $12.93 (with the hope that I can add to it closer to $12) and I've yet to punt any of my Facebook puts as the stock rallied more than a dollar as I was writing my first Buzz post today. Fifteen minutes earlier, I would be having a pretty profitable morning. Now, I'm fighting the good fight (which will be updated in real-time on the Buzz).
Am I complaining? Nope -- I learned a long time ago to never complain when your P&L is green, as that's the fastest way to morph it into a creepy shade of crimson. So let me be clear to the trading gods who wander the markets, whispering to "stay humble or I'll do it for you" -- we're on the same page and I am not complaining.
Away from stock-specific situations, market breadth is flat, gold is again lower (after yesterday's hot-popper) and sitting on the 200-day moving average (1663), the banks are pretty in pink with the exception of Deutsche Bank (NYSE:DB), which is up smartly on earnings (after holding the $47 level we fingered last week) and the pain in Spain is raining pain to the tune of a deuce (2%).
In other news, some of the cannabis stocks I own (that I can't mention by name but you know the industry) continue to ramp higher, and I'm layering out of most of my exposure before those profits go up in smoke. Just trading, and no, I'm definitely not syncing my time horizon with my risk profile!
Watch the trannies and the Russell (INDEXRUSSELL:RUT) -- both of which were weak yesterday -- for signs of follow-through or traction. Sometimes we can learn a lot just by watching.
- Hoofy and Boo chewed through The Bull-Bear Debate on Tuesday, lest you missed it. See both sides; always see both sides.
Yes, I think the tape is extended and potentially vulnerable, but sector rotation, which is what we've witnessed of late, is on-the-margin bullish (vs. outright migration) and the longer we meander, the higher the probability that the overbought condition will be worked off as a function of time rather than price.
Tape-wise, I wouldn't be shocked to see a probe of S&P (INDEXSP:.INX) 1450, Fletch, but I'm trading more setups (with perceived advantageous risk-reward) and less "pure market."
Earlier this week I spoke of an upcoming "Full Circle II" that was planned for March, and my dad was gonna meet my wife and his grandkids for the first time. That trip has been cancelled due to his health concerns so we'll have to wait a bit longer for a dinner that has already been 43 years in the making. White light....
- As always, I hope this finds you well.
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Todd Harrison is the founder and Chief Executive Officer of Minyanville. Prior to his current role, Mr. Harrison was President and head trader at a $400 million dollar New York-based hedge fund. Todd welcomes your comments and/or feedback at firstname.lastname@example.org.
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