Saturday, June 29, 2013

07/01/13 Monday Watchlist (2 hot stocks, 2 worthless stocks)

Market: $SPY is still consolidating from the Fed's sell-off as it tries to correct the overreaction from the Fed/stimulus news. Fundamentally, the market has not changed as the Fed will continue to pump $85 billion/month until the end of the year, which means we should expect more of the same: bear trap. So in this market we can: (1) buy and hold good/profitable stocks (esp earnings winners); and (2) short during market consolidation

LONG Watchlist
AAPL - I can write a chapter on why I think AAPL is due for a bounce about 380/400 support zone which can turn into a rebound/recovery towards 500, 600, etc... But I will keep it brief. Technical analysis 101 says you should dip-buy a stock at EMA's 20, 50 or 200 (as they are the most commonly used indicators) esp when the stock becomes oversold. AAPL is currently oversold on the daily chart and testing EMA 20/50/200 on the  quarterly/monthly/weekly charts, respectively. What this means, from a technical perspective, is that everyone who wants to dip-buy AAPL is doing it here at these 380/400 levels, so expect some heavy volume buying this week. Because AAPL found support at EMA50 to end the month of June, you can expect some shorts to cover and a technical bounce to at least as high as 415 (which is key resistance). AAPL is still one of the most well known companies in the world (formerly the most valued company worldwide), I doubt that it will crash thru 380/400 levels without a strong negative catalyst (perhaps earnings which is not until 7/22/13). As of now, AAPL is still fundamentally solid and has no reason to crash, therefore I firmly believe in the bounce. Because I am so confident in this bounce/potential rebound, I plan to buy more than $10-80k in call options contracts with mixed expiration dates (July13 Aug13 and Sep13). If I am right about the rebound, I plan to sell the contracts when the stock price is near 440 (the next key resistance) for as much as 10 times my money ($100-800k). If I am only right about the bounce to 415, I could still double or triple my money. This will be our biggest play yet, one that could change our lives. 

Risk/Rewards: We can't control the market but we can control our risk and rewards (r/r). The best r/r entry would be to enter the trade near 385, which is AAPL's 52wk low.

TTWO - These guys are the makers of Grand Theft Auto 5, which is one of the most anticipated games of the year. They are fundamentally solid, have nice chart pattern with high short interest (19% shares short). Over the last 3 weeks the stock has been hit hard after announcing its offering of $250mil convertible senior notes (which is essentially like a secondary offering, which are usually followed by a sell-off like we saw), but I believe its an overreaction as the stock still remains fundamentally unchanged. [Read this seeking alpha article and the first few comments for more background on the convertible senior notes]. So, we see this as a dip-buy opportunity esp as it finds support at EMA50/200 on the weekly/daily charts, respectively. This is potentially a long-term play (in anticipation of GTA 5 September release date) but our goal is to buy near 14.25 (which is key support) and sell for $2/share gain. Potential upside to 22 longterm.

Risk/Rewards: The best r/r entry would be near 14.08 which is the low from 4/18/13.

SHORT-sell Watchlist
NOR - This stock is completely worthless for many reasons: (1) its no longer profitable as it recently started losing money; (2) Morgan Stanley downgraded it last week; and (3) the chart is terribly bearish as it trades near its all-time lows of $3.15 (its currently trading at 3.23). There is key resistance near 3.25, which is best entry for solid r/r.

XIDEQ - this former pump has been crashing since forever and could crack big nxt week as it continued to fade into the close of the week near all-time lows as it closes at day low 0.127. Other's in my team nailed a partial short at 0.148 but I missed it because my order did not get filled at the same price. I expect it to drop to test 0.10 but it could keep dropping towards zero as it is likely a worthless stock. Potential short into a morning panic.

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