Wednesday, July 2nd:
Protective Puts - With the stock market as crazy as it is right now, you have to think about ways to protect your portfolio. Many investors do not play with options and they can be a little confusing for sure. They do however present a great way to protect gains on stocks you hold. There are of course many strategies and different kinds of options to purchase or write but for today I will just talk about protective or married puts.
It can be very hard to part with stocks that have pulled in some nice profits for you. We have all done it, stayed with a stock after it was up a significant amount and watched it fall and fall and fall until you are now sitting with a loss. We get an emotional attachment to a stock that has, over a period of time, performed well and just do not want to part with it. Well if you do not want to sell a stock right way but would like some insurance to make sure you at least walk away a winner then you can buy a put. If you own a 100 shares of stock ABC and it is up 25% but you are a little worried about he state of the stock market, then purchase 1 put with the strike price around the same price as the stock is currently. I will not go into the details but by doing this, if setup correctly, you are a guaranteed winner and you can hold the stock longer while the stock market finds it footing.
If you want to learn more about options checkout some of these sites: The Options Industry Council (my favorite) , CBOE and Investopedia .
Tuesday, July 1st:
Eventless in New York - Nothing exciting happened yesterday and the way things have been going that is not necessarily a bad thing. I am guessing the rest of the week will see more ups and downs just to keep your heart racing.
Research in Motion continued its downward spiral today and it is about time to start buying this bad boy. The stock does not break through the 200-day moving average very often and is 4 bucks away from breaking that barrier. The economy may be on ice a little longer than people expected but the Blackberry is here to stay. Their market share will only increase despite the increase in smart phones. They have the new Blackberry Bold coming out later this year and I think it is a safe bet in saying it will be a hit. It may hang around this level or even retreat a little more, but I would look at this as a huge buying opportunity.
Monday, June 30th:
Adios June, We Won’t Miss Ya - The last day of June is upon us and stocks will be happy to put this month to rest. It was an ugly month to say the least, but July brings new hope. It is a short week with the Forth of July falling on Friday, but I doubt it will be short of excitement. You would normally not see much activity on July 3rd and especially when the 4th falls on a Friday, but I will be interested to see the volume on Thursday. The European Central Bank (ECB) will announce on the 3rd if they are raising interest rates, so it could be a volatile day. If they do raise rates it would again send the dollar lower, which in turn could send oil higher.
This weekend we had a very strange event occur and that was the Los Angeles Dodgers winning a game in which they had no hits. We will see if the strangeness continues this week in the stock market.
Friday, June 27th:
Stock Beat Down - Stocks were massacred yesterday as Research in Motion , Nike and Oracle started the ball rolling downhill. We then had Goldman Sachs come in and downgrade General Motors and Citigroup. Oil did not want to miss the party and decided to go higher, which helped move stocks lower.
One of many things about this market that has me concerned are analysts and company earnings estimates for the rest of 2008. It was pretty much a given the first half of 2008 was going to be dreadful, but the second half was expected to be strong or at least turning the corner to the upside. It is looking less likely that the second half turn around will occur and that will lead to missed earnings or companies adjusting their forecasts. There are still ways to make money in a down trending market and it might be a good time to look back at an article I wrote a few months back. This is by no means a complete list, but a list none the less Click Here to view.
Thursday, June 26th:
RIM Ripped - Today is not setting up very well with the earnings releases of Research In Motion, Oracle and Nike yesterday after the close. The problems were not so much in the current quarter, but it was the forecast for the rest of the year. This might not be a great sign for technology stocks or any stocks really with these misses. I however hope this is more a case of using conservative guidance, but we will have to stay tuned for the next few months to find the answer to this. This will certainly make the upcoming earnings from any companies you own stock in fun to watch.
Wednesday, June 25th:
Stocks Will Move Higher? - An interesting breach has occurred on a stochastic chart for the DOW and it has actually been great news for stocks of late. I was looking at a weekly chart of the DOW, 14 on %K, 3 on %D and a smoothing of 3. I have a chart so you can see what I am talking about – Click Here . This of course doesn’t mean the DOW will go up, but I will tell you what I found and let you decide. Going back to September of 2005, 20 has only been penetrated 4 times and was extremely close to braking it a 5th time when another rally took place.
- 10/16/05 – We had a 7 month rally after hitting 18.39
- 3/11/07 – We had a 3 month rally after hitting 19.57
- First 3 weeks in January of this year we were below 20(18.29, 5.00 and 11.47) – This was the weakest of the rallies and was only a 4 week rally. The market was very volatile for 2 of the weeks, but it did go higher.
- 3/9/08 – We had a 2 month rally after hitting 18.77 in March
The other time we almost broke below 20 was back on July 16th of 2006 when we hit 21.09 and had a great 7 month rally. We, as of 6/24, are sitting at 17.67 which in the past has been great news for the stock market. We will see what happens in the next few weeks, but at least the stochastic chart is giving us something to smile at.