Review of Our Recent Trades

January 17, 2013 (8:30 pm)

See below for a quick round-up of the stocks we’ve been trading this week. We’ll update our views on the market tomorrow. As for Apple, we’ve explained that $500 is the likeliest closing price tomorrow given the number of calls above $500 and puts at and below that level. So, for now, let’s review our trades…

Boeing: We’ve made a couple of quick trades in Boeing over the past few trading sessions. We took our first position after news came out that there could be problems with the Dreamliner. The shares bounced off the lower trend line, and we took a short position as it later fell through it. We missed a great opportunity to get out when it continued to plummet, but were able to get out at a nominal gain the next day. We took another position as it struggled to re-take the wedge and capitalized on the strong negative sentiment in the pre-market when their premier plane had further problems. The chart is very messy now, and we will stay away from BA until there is some clarity.


Broadcom: We took a position in BRCM as it briefly touched the upper trend line and neared overbought territory. After a subsequent re-test, the shares began to fall. The shares struggled to breakdown through the green trend line it has formed since the start of the year, so we covered our shorts there.


Chipotle: We took a short position in CMG as it broke down from a multi-week rising wedge. The shares quickly re-tested the lower trend line on two occasions before reversing in a big way after failing to live up to its pre-earnings hype. We covered our short position in the pre-market before the shares began recovering.


Gold ETF: GLD broke out of an intermediate-term falling wedge, and we took a long position when it did so. The shares successfully re-tested the top trend line twice before reversing upwards. This is an intermediate-term holding for us.


Google: We took a short position in GOOG as it reached the upper trend line of a rising wedge and formed clear negative divergence on the RSI. We covered our position as it hit the bottom trend line and entered oversold territory. We’re looking for another entry (long or short), but see no clear pattern at this time. We may enter a long/short position here by going long Apple and short Google into earnings. While Google has run strongly into its upcoming report, Apple has done the opposite. If both company’s come in near expectations, we expect those trends to reverse.


Starwood Hotels: We took an initial position in HOT as it hit the upper trend line of its rising channel and entered overbought territory. We expected a quicker drop than we were given. As the shares tested the lower trend line, we covered our position. Our thesis failed, and it was unclear whether that trend line would hold or not.


Looking at HOT’s longer-term chart below, it’s clear that the $59 level is fairly significant support/resistance and the shares have been consolidating above that level. Don’t fight the trend…


Netflix: NFLX finally broke down from a rising wedge that it has been forming for almost three months now. We took a short position as it reached the upper trend line on overbought conditions. It has since broken down and we expect lower prices from here.


It’s clear from the longer-term charts that NFLX has been forming a much longer rising wedge than you can see in the chart above. So we decided to include that chart below. It’s been in the forming for over six months and the shares have broken down over the past two days. There may be a re-test of that lower trend line, but we do expect significantly lower prices ahead.


Nike: NKE has formed an ascending triangle since the successful resolution of the fiscal cliff legislation. We took a long position as it broke to the upside. It has re-tested that level and began to rise over the course of today’s trading session. We’ll see where this one takes us.


Let us know if you have any thoughts or questions in the comments.