PALM- (trade revisited)

PALM: Bouncing off strong support around $14. Apparent buyers when stock trades $12-14 range -- a level that has offered buying opportunity. This is exhibited in the weekly chart coinciding with a bottoming momentum.
Above $14, stock remains attractive given recent correction and heavy sell-off from April highs of $24. Despite broad technology rally and competitors RIMM exceptional upside move - PALM clearly lagged the sector but showing a bottoming signal.
Street appears too bearish on this name. -And there is opportunity from what appears to be over pessimism. 7 buys/ 8 holds/ 2 sells -
Company has : No debt and $4.82 excess cash, and upcoming buyback of $250mil.
Extreme oversold reading in the weekly data presents an attractive opportunity a long position.

Avaya: Worth a look

Although, CSCO –gets the front cover and positive mention on Barrons; I have noticed AV on the positive momentum list.

In the same article the following was mentioned on AV.

Sticking to the discipline: Positive weekly momentum and a breakout from recent range make this name attractive.

Building momentum given the fundamental action on this group. Not fresh or timely idea as a trade here but actionable on pullbacks.

Worth adding to a watch list. postive above $10- use as exit....but for longer-term investors actionable.

All this said , same goes for csco - the leader in the group.

DD: attractive basing pattern

DD: Since 2000 stock trades in a narrow range between $50-40.

Aattractive consolidation pattern: suggesting a favorable odds for a pending breakout above $50. An upside move above $50 can trigger upside momentum.

Longer-term bet and might carry an opportunity cost of capital. A set up for an attractive reward given an emerging cyclical theme. (Chemicals and other large cap basic materials/industrials).

Near-term entry point: after a run up from $40-44--- not timely but at early stages of recovery. Not a trade but a 3-6 months play with an exit at $40.

fundamentals outlook: lower raw material costs and higher average prices will offset softening demand, and also thinks the stock is modestly undervalued. **JP Morgan comments**

I also like this name because of a value like approach and nice to have those names in the portfolio in an uncertain / less trending market.

Beta short / Long VIX

Chart Explanation:
Blue: Beta index (OSX, SOX, HUI and XBD)

Black: VIX Index:

Takeaway: Since 2003 as volatility declined; beta related themes appreciated.
Further Thoughts:
Equally weighted beta index suggests that oil services, brokers and gold stocks have all contributed to significant upside move. These groups have outperformed other areas in the marketplace. But leadership will be challenged.
We are at key junction as volatility remains oversold and due for recovery. Chart suggest in the upcoming months shorting beta themes might be worthwhile. OSX has shown recent declines tied with Oil weakness in the past few weeks. Brokers have had a sharp run up and benefited greatly in the low interest rate environment. Earnings were positive, but not sure if higher expectations await. Plus various strategies in the marketplace might be too crowded with similar tactics in minimizing risk. Therefore, beta index glory days of outperformance are worth a sharp look. As liquidity is drained out of the marketplace with rising rates from central banks, beta strategies risk or at least the game might change. Any change leads to uncertainty - not to be confused with general risk. Uncertainty caused turbulence which can result in a rising VIX - As commodity related themes reshuffle their outlook and hedge funds restructure their strategies – this can cause a shift in the market place.

Trim / short - Bank holdings - Oct 3, 2006

BKX Index: Showing signs of slowing with peaking momentum at these levels.

Strong run since Oct 2005 -(given new fed announcment)

Use Sep 29 highs as resitance level -of 114.

Vulnerable area in the market place - and usually has served as a good gaudge for broader market direction.

Stock specific area worth a note here as we start october -

Revisiting lenders short…..AHM (American Home Mortgage Investment Corp)

Revisiting lenders short…..AHM (American Home Mortgage Investment Corp)

AP STORY READS LIKES THIS:

The long-expected first sign of cracks in the mortgage loan market may have surfaced this week, as the Mortgage Bankers Association issued their quarterly report on home loan foreclosures.

MBA said Wednesday that loans entering foreclosure during the second quarter rose 29 percent from the first quarter. While analysts have long anticipated an uptick in mortgage defaults, Merrill Lynch analyst Kenneth Bruce said this report may mark the beginning of an era of weaker credit.

Lets make it actionable:

Revisiting the fundamental short on credit lenders as highlighted several times. A short which materialized heavily on HRB’s earnings announcements last month.

NOW….actionable trade with an attractive risk/reward enables us to short AHM.
Assuming that the recent rally in September is not sustainable.

AHM – stock has run up recently from $30-35 range – as October begins, here is a shorting opportunity given the overbought momentum levels. Timely entry point, in a fundamental biased call.

Looking for an attractive risk/reward trade here along with macro declines heading into earnings season. Also, a rising yield can help the case with further econ #’s pending especially this Friday. – Worthwhile, to get ahead of the trade despite attempted recovery.

Other names in that space also worth a consideration but at this point recommending short on AHM – trim candidate for long-term investors. (FED, BKUNA, CFC )

Additional industry perspective:

"This is the first sign of meaningful weakening in the prime mortgage space," Bruce wrote in a note to clients Thursday. "A downturn in credit may be just around the corner."

What does this mean for mortgage lenders? If consumers start defaulting on mortgages, investors who buy mortgages in the secondary market through loan-backed bonds will lose their appetite for risky loans. Mortgage lenders will then either make less profit when they sell their loans through securitizations or be stuck with portfolios of undesirable loans.

MKT THOUGHTS 9-27-2006

Looking at the BKX index - Approaching -May 8th highs - a full recovery from the equity sell-off.
May critical resistance level, given BKX weakness has been an indication for the broader market.
It works key barometer of the market given the dominance of financials in the S&P 500.

Technology :focused on three shorts that offer beta: AMD, NVDA and WFR.- A near-term trade.

Decline in commodities markets has fueled a return back to bonds sparking this near-term rally. A defensive rotation that compiled staples and healthcare to move higher. Nickel for some reason has survived the storm.

Crude Factors

1) Global central bankers are lifting interest rates in unison, and slowly draining global liquidity.

2) Beijing is tightening its grip on the yuan money supply, leading to exaggerated fears of a hard landing for China's economy.

3) Crude oil traders unwound a $15 per barrel Iranian "war premium" after Europe's big-3 signaled a split from the Bush administration's campaign for UN economic sanctions against Iran.

4) Weaker crude oil prices triggered a rout in the gold and silver markets.

Gary Dorsch: http://safehaven.com/article-5916.htm

Crude: Search for Support

Crude: Accumulate closer to 58-60/ in the next two + week.

A sharp decline from 77 to 61 ---clearly catches the attention of both bull and bears. Given a bearish stance on crude, I am glad to see this decline. I must say as a rational investor this downside action is highly surprising.

Near-term recovery pending as stated last week but clearly buyers are stepping away and selling near-term bounces. At this stage, looking for consolidation with worst case scenario of $58.

One has to look at current levels closer to February 2006 and October 2005 levels to get a clearer long-term perspective.

Again crude did go from 20 – 70 and that move is still intact. I wonder if the summer mid-east conflict was a key contributor to a climbing irrational move closer to$77.

Perhaps, $68 is the key resistance level and $58-60 is an area of interest in the next two weeks.

Net/Net: Next two weeks I would stay away from this trade and find further downside extremes. Then one can step in and accmulate or bail out of a trap.

Commodity vs Stocks: 9-20-2006

Oil has declined over 20 % in the summer. Tech and Consumer related names have recovered signifgantly since the July lows. There has been a rotation into technology.

Tech, consumer and financials dominate the US markets and early signs of rotation out of commodities and into stocks.

Chart demonstrates recent sell of in Oil and Gold - and the recent diveragence. Woth a look:

Black: CRB VS SPX Red: Real Price SPX Blue: Real Price CRB Index

Small Cap : Ideas and methodology

Consolidating patterns: TIBX, USTI, CMTL, VSEA, SONS, BRCD, and MDCO.
Questions to ask.
Are we hoping for breakouts? Are these value traps.
Attractive risk/reward: extremes that can be exploited :

Momentum Extremes: CYMI, ATHR, WGO, RATE, BCEN, CENT, ECLP, KYPH, AMMD.
Questions to ask.
After acknowledging oversold weekly momentum; are these names all worth taking the risk/reward

Leadership Momentum: MW and PSSI

Questions to ask.
What are the risks of sticking with momentum names? Any reason

Early rotation to tech:

Further upside move in the markets clearly shown by advancers expanding from 57,318 to 176,522 in CBOE put/call data. Looking for pullbacks this week in tech/retail related themes.

Coming into September, I was looking for further upside move in the VIX - but volatility has been tame in this upside move.

Clearly, the fed speak day will offer further uncertainty and volatility. A decline in VIX from 14-11 is visible in near-term charts.

CHART: Last week clearly tech rally continues exhibited by acceleration in semis. OSX - sluggish performance continues and this inverse correlation is shown in the above charts.
Rotation into tech out of commodity related names.

Decline in crude: a theme which has worked and due for a near-term recovery.

mkt thoughts - ahead of CPI and FED

Broadly speaking: Weekly momentum remains positive from deeply oversold levels. Near-term pullbacks pending but how much downside does the anticipated downside move offer?

Rotation out of defensive themes Since the May's correction, defensive themes have outperformed XLG - (top 50) outperformed most groups in the market by recovering 9% since July 18th low. ` further on Large Cap out performance like the Dow Jones + 7% YTD.
In the past few weeks further confirmation of beta related rally. Further showcased by weakening relative strength iin utilities and Consumer Staples.

Searching overdone themes:

Recovery in Tech and Consumer - Along with other severely underperforming sub-groups. (like homebuilders, retailers etc).

Approaching upcoming 'daily sell' might be an an opportunity to reiterate working themes
Given the abundance of attractive charts, perhaps focusing on established leaders with strong relative strength can identify quality names. For example in technology...DRIV, ATML, ASML, MU, AKAM, WEBX, ORCL, CTSH, and VARI.

Plenty of Econ data approaching along with Fed decisions. And the start of earning season can all create shifts in Macro/broad market behavior. Making sectors themes even more significant.

TIVO: another media / NFL theme

TIVO: continuing on a media theme. Attractive pattern similar to DTV. $6-8 range for many days but a long worth sticking to with an exit at $6. Wheather playing the options market for a tight range in the near-term the bias of an upside move is attractive. Worthwile going long in this range while accumulating on any pullbacks and let the market figure out the rest.



Fool.com---

Go long, TiVo
The new pro football season kicked off on Thursday night. Earlier in the day, I had written about TiVo's (NASDAQ:TIVO)new service for fantasy football junkies. The DVR pioneer had teamed up with Sportsline.com -- a CBS(NYSE:CBS) online property -- to offer stats and other goodies to participants of its fantasy football leagues.

DTV: Direct TV- building stregth.

DTV:

As the NFL season is officially underway; many recognize Direct TV for the Sunday NFL package. Well, chart has built up with a strong relative performance and worth a look in media space.

Breakdown: Break above a multi-year trading range between $14-18. Difficult to find growth especially in small cap. Volume building positively here and despite strong recent price appreciation, - add to pullbacks.

Cable remains a competition but a theme Wall Street neglected and will play catch up to the buyers from earlier this spring.

Net/Net: attractive risk reward on pullbacks closer to 18. - An investment long with an exit around 16.50 with Major support at 14.

JBLU and Crude: Inverse Trade

JBLU: Black; Crude: Blue.

Crude declined in October-Dec in 2004 and 2005 in the last quarter of the year.

At the same time, JBLU rallies higher. Although, early in the fall trade worth a look and accumulate on weakness with exit at 9. Continue to build on strength towards $12-14 level.

Of course JBLU has company specific risk while crude has began its summer correction.

NVDA: near-term short

NVDA: Short closer to the 22 -23 level given a strong run in the near-term. A tech name that offers high beta

• Momentum weakness : following a strong recovery since the summer lows, watch for recovery stalling
• Above both 200 and 50 day mva.
• Rally on weak volume
  

Volatility- worth a look here in September

VIX and VXN : Following turbulent sell off’s in May both volatility indexes continue to decline. This behavior illustrates low implied volatility, creating bargain opportunities in the option markets. (Note: calendar spread might be a timely strategy- will follow up this week- buy longer duration and high volatility with shorter timeframe).

“The last time the absolute pricing of implied volatility was as low as this was in 1993, but interest rates were much lower then, 3% instead of 5%. Since options have been listed, I don't think there's ever been this kind of opportunity on a relative basis between option pricing and interest rates. The bear market was a long time ago -- four years ago -- and the market hasn't had a 10% decline in over three years, and people have gotten a little lazy and forgotten what it's like to have a downturn” – Barrons article.

Jack Dreyfus- Two Rules

JD: I had two rules. One was not to pound the table because if you pound the table and say, “We have to do this or do that,” you put yourself in the position of not being able to retreat because you’re too proud to let go. You have to be able to cut your losses!

The second rule was to treat your investment money as if it is your mother’s money — not someone else’s mother’s money! I thought that if investors thought of it as their mother’s money they would make decisions based on their own best instinct, rather than listen to stock advisors or others.

How to read options values and prices?

How to read options values and prices? September 1, 2006

Unlike stocks, options have an expiration date. Unless a company goes bankrupt or buys back all its stock, the stock investor always has the choice to wait for a price correction. Sometimes that wait represents the triumph of hope over experience, but more on that elsewhere.

That expiration date makes calculating an option’s value more complicated, but also more accessible to some of the powerful statistical tools developed over the last few decades.

Two of the more common methods for evaluating options involve measuring their intrinsic value and their time value.

The ‘intrinsic value’ is the amount by which the option’s strike price is ‘in-the-money’. Strike price is the contractually set price at which the underlying asset would be bought or sold, if the option were exercised. ‘In-the-money’ means the strike price is lower (for a call option) and higher (for a put option) than the current market price.

For call options: IV = Asset Market Price – Call Strike Price

Since options have an expiration date, but are purchased on some prior date their value changes as the expiration date nears. That change in time results in a decay of the value of the option as a trading instrument.

An option with two days remaining is generally worth less than one that gives the investor three months to act. At expiration the option is either in-the-money, in which case profits are possible, or it’s out-of-the-money and the investor incurs a potential loss.

Time value is the amount by which the price of an option exceeds its intrinsic value.

For call options: TV = Call Premium – Intrinsic Value

[For put options:

IV = Put Strike Price – Asset Market Price

TV = Put Premium – Intrinsic Value

Note: The ‘premium’ is simply the cost of the call or put.]

For options that are ‘at-the-money’ (strike price = current price), or ‘out-of-the-money’ (strike price higher/lower (call/put) than current market price) the option has no intrinsic worth at that time. It only acquires value in so far as the market price can change, i.e. it has only time value.

For example, suppose MSFT (Microsoft) has a current market price per share of $27 for a June 30 call. The ‘30′ refers to the strike price, not the expiration date. If the premium is $2, the option is out-of-the-money - since: $27 - ($30 + $2) = -$5.

I.e. if you bought the call and exercised it immediately you’d lose five dollars (plus commission costs).

Since, the option has no intrinsic value (negative intrinsic value isn’t allowed), why would anyone execute such a trade?

Because an out-of-the-money is less expensive than one in the money and the further out-of-the money the cheaper it is. There are many trading strategies that utilize this fact as a hedge or for potential profit. Given a three month period, the market price may well rise to more than cover the premium and produce a profit. That’s what makes option