Compelling set-up this morning

Pirate Update – Friday, 31 July 2009

Good morning,

I’m pretty maxed as far as trading positions go right now.

But that doesn’t stop the wide world of companies from bringing
forth their news and tidings of earnings, projections and
estimates.

And the wide world of how investors respond to them.

Lots are compelling stuff, including the computer/virus security
firm, McAfee, MFE and it’s action this morning.

There’s another too that caught my eye this morning – and that is
Rosetta Stone (RST).

In addition to the compelling price action and volume because of
fresh new forecasts about the future (and the earnings announcement
out of the way either this morning or late last night) – RST is
newly publicly traded.

If there’s an earnings announcement that carries the most weight,
it would be the earnings announcements (and reaction by the market)
in the first 3 quarters of a company going public.

Disappoint the crowd in this period, and the stock can pay for it
in spades…sometimes not recovering for a year or more.

Why? It’s because the institutions (who own most of the stock as a
function of having recently “roadshow’d” the company) can feel
shortchanged and lied to during this “going public” process. Not
to mention they’ve likely showed off the company to their other
investment banking peers.

In a nutshell, it can be ugly to miss earnings during the infant
phase of going public.

But just the opposite can be true. Hit earnings and/or glowing
guidance on all cylinders in this “infant” period – and it’s “all
good”.

It’s almost doubly good because think about it…for years this
company has been private…able to be nimble and answer to no board
of directors, etc.

Now as a publicly traded company, with oodles of money in their
hands from the IPO and now having to answer to shareholders (some
of them activist investors, etc) – a great earnings announcement
shows a pretty nice transition has taken place. And that the
company is being resposible with it’s new IPO money and is putting
it to great work.

Not so small a feat.

Holy crap that was windy.

The most important thing here is the way the market is responding
to RST this morning. It is up on big volume, with a gap up in the
price action.

I like it.

The drawback here is the options. There ARE options, and they ARE
traded on more than one option exchange (not a “roach motel”),
however the bid/ask spreads aren’t exactly ones you’d call Mom
about.

(come to think about it, good or bad, I don’t think I’ve ever
called my own Mom after having looked at a bid/ask spread!!)

But these are all the things you weigh – this stuff you find in the
research process of this business. Sometimes you get all the way to
the end, then something like an less actively traded deal tells you
no.

I think RST is workable though.

Next, it comes down to how you want to trade RST (notice I didn’t
say the word “play” RST…that word bugs me worse than anything
else in my profession!)

4-6 month in-the-money calls can be purchased while a short-term
(August) “at-” to “out-of-the-money” calls can be sold to take
advantage of this.

(the 4-6 month out calls substitute for stock + puts)

Anyway – that’s an idea to take advantage of this set-up over on
the income side.

Hell…there is so much out there that I can get to, but at times
I feel like going into some more detail on individual stocks and
how I find them. That’s where some solid learnings can take place.

Someone has to give it to you real!

Anyway – I hope this finds you well.

Hope you have a grand weekend.

Over and out,

–Pirate

Holy moly…here’s my late update

Pirate Update – Thursday, 30 July 2009

Good morning,

I’ve been saying it for a while now, but for the time being there’s
no argument…we have a powerful bullish market on our hands.

The sell-offs are happening on anemic volume, but most days are
registering the gains on over-sized volume.

Today – it’s exploding out there.

If you and I got to sit down and we drew up a “T” on a sheet of
paper and weighed all the facts for a bullish run on one side and
all the bearish facts on the other…the bearish side would no
doubt win out with flying colors.

All the stuff this government wants to impose – with all the
800-pound government tentacles weighing down potential profits.
Not to mention a slew of other stuff about lay-offs, housing woes,
etc.

Yet – the big money right now is buying stocks.

Period. Point Blank.

So what do you do…trot out there in front of this steamroller
crying it’s all wrong and it shouldn’t be happening?

Well…you can do anything you want – but the smart thing to do is
just to stay in your own lane, mind your own P’s and Q’s and trade
right along with it.

Since what I write on here is hardly ever in “order”…let me carry
on the tradition by telling you about VECO.

Here’s a company that’s not going to be mentioned today on CNBC.

But what VECO did just the other day is scream up (gap up) like
crazy on immense one-day volume – all to make a new 52-week high.

This is very compelling action here. And let me tell you about a
trade that can be done with it. Right now, today.

One could purchase the Jan 2010 $17.50 calls – and at the same time
SELL the same amount of August $20 calls.

Why would you do this?

Well first of all – you have to get in your noggin that a call
option is the very same EXACT trade as buying stock + a put.

The call option simply allows you to get in the game with less $.

So the edge here is you have a stock on the come-uppance. You buy
6-month out time (which has a veeeerrrry slow time decay curve) -
and you sell short-term time against it right now.

VECO will probably waffle around a little bit here. Yes, it’s in a
new reality – however there will likely be some “backing and
filling” for the next few weeks.

By selling the August $20 calls for nearly a $1 – you basically set
into motion a rapid time-decay dealio in your favor.

The idea here is you can participate in the probable uptrend that
is taking place. But you never have to buy the underlying stock.
And as the stock struggles to climb (after many bouts of
profit-taking, which is what happens anytime a stock makes some
noise like this) – you attempt to bring in $ to offset the price of
the long call options.

At this point there is no need for puts because again, the
underlying calls (Jan calls) is the same exact trade as stock +
puts. The Jan. calls have a limited downside (all the way to zero,
from where you bought ‘em) – so in effect – there’s the limited
risk equation right there.

Anyway – I thought I’d throw this out there to you.

Being we’re in the thick of earnings season, there’s a ton of new
pre-announcements today – a lot of them look compelling (you also
have to factor in the strong market performance today as well).

With that said – I have to run.

Apologize for the late sending of this update.

It’s just one of those days.

–P

Brand new Pre’s and “new high” talk

Pirate Update – Wednesday, 29 July 2009

Good morning,

If my life were on the line -

If the situation was gun-to-the-head and I had to choose 5 stocks
that would go up in price higher than another dude’s 5 stocks…or
else it was curtains.

And if I only had one resource to choose from…

Hands down (and twice on Sunday) I’d ask for the new high list.

Here’s what I’d do. For any given day’s new high list (found this
morning inside IBD on page B9 by the way), I’d pick the 5 stocks
that showed the most one-day volume and had the most dramatic one
day moves to make their “high”…but most important…I’d pick the
new highs that were the “newest”.

(having all 3 is ideal beyond compare)

What do I mean by this?

I’ve said often that “not all new 52-week highs are created
equal”…

What I mean by that is a stock that’s been printing new highs for
the last 6 months compared to a stock that just started printing
them the last 3 days is different.

The 6 month-old one is likely nearing the END of its trend (which
has made me pontificate in the past saying “the trend is your
friend until YOU get in!”)

While the 3-day old one is likely at the beginning.

Again – the more dramatic of fashion said stock reaches its 52-week
high, the better (the more the volume and “stretchy” the one day
bar is when it makes the high, the more compelling).

Here…see for yourself. Go look at RKT.

RKT is compelling.

So back to the ‘gun to the head’ thing – if I had to choose just
one resource for my 5 stocks…the new high list would be it.

Why?

Because there’s no faking in it…there is no B.S.

These are not opinions, these are not advice from the analyst
cartel, these are not hopeful “turn around” situations.

They are real situations — REAL because they are really happening
(and curiously often NOT getting mentioned by all the noise of TV
split-screen commentators…on what “looks good” or feels right).

Instead of a hopeful turnaround, the turnaround is for real!

Did you know that over large swaths of time – 30% of stocks go to
zero – another big % eek along – and around 15% or so of all stocks
do the heavy lifting. These are the ones responsible for an entire
sector or market’s gains!

So what do these 15% or so of stocks do most of their “heavy
lifting” lives? They go up. And they make their
shareholders/investors rich.

Yes they take breaks – yes they get scared and trade down in a
nasty market. But there they are getting noticed when the nasty
spell ends. They’re they are popping up as leaders – as the rest
of the muddled herd stays muddley.

The 52-week high list is where these worker-ant stocks are found.
It’s where all the real action is.

But most investors don’t know this. Why? Because they are weighed
down in webs of conventional wisdom. They are bogged down looking
for bargains -

And they are tired as hell fishing around down there looking to
“buy low and sell high”.

Their mind is about sapped wondering why some company with a new,
killer technology is still trading for $4 per share? And why it
doesn’t make any sense?

Then they go really bonkers wondering why HUNDREDS of companies
share this same plight?

The behind-the-scenes secret is NO ONE can pull this kind of stock
picking with any kind of consistency. (let alone keeping their
wits about them).

So why not look where the lookin’s good?

I’ll tell you why.

Most people don’t look in the right place because it doesn’t “feel”
right. And the reason it don’t “feel” right is because it looks
“high”.

But the numbers bear out time and time again that
leading/winning/compelling stocks are the strong ones.

So why not catch one in stride? Or five.

Oh, is that you over there in the corner saying the only way you
can make money is to scrape something off the bottom and catch a
stock’s full run?

Is that you leaving alone compelling moving stocks because you
can’t get in at it’s bottom or close to?

And do you think this way so you can pump the chest out a little
and relish in being “right”?

That’s a damn hard journey trying to be THAT RIGHT. And it’s a
hell of a thing to do this just once…let alone pick bottom after
bottom again and again and again!

One of my greatest mentors asked me the question over and over when
I caught myself thinking this way…”DO YOU WANT TO BE RIGHT, OR DO
YOU WANT TO BE RICH?”

You need to think about this. If it were me…I’d get to a quiet
place somewhere/sometime today and think hard on how you think as a
trader.

This whole thing started with a fake situation (but a very
educational one!): what I’d do if my very life was on the line and
I had to choose 5 stocks that would outperform the next guy’s 5 -
or else it was curtains for me.

With all that said – there is a cornucopia of new pre-announcements
(which are not all created equal too…but would be my very
next-in-line second choice)

All of them that I have listed this morning on piratepicks.com PASS
MY STRICT TEST!

They are all trading higher today (on a down day in the market I
might add)…and are doing so on compelling volume. Almost all of
them are taking out significant lines in the sand (most are taking
out relative highs…which can be just as powerful as 52-week highs
especially when you have a market that got whacked as hard as this
one did some months ago…

Here’s the “pre” short list:
SYMT
WXS
ATAC (no options)
PLT
FTI
MCK
WCG
USNA
CSGS

I hope a part or the whole of this update rocked your world this
morning. At least I hope it made you think differently than you
normally do.

Over and out for now…

–P

New wild trade this morning!

Pirate Update – Tuesday, 28 July 2009

Good morning!

Here come the hearings! ICE officials are before Congress and the
hearings are beginning. Looking forward – ICE has a hearing
scheduled on Aug 5th…the same day as their earnings announcement!

I can’t think of a more volatile stock for the next few weeks!

I am holding tight in the income “coccoon” I’ve created for myself
with ICE.

As for the market action…there’s some selling today but there’s
plenty of compelling new highs (I haven’t yet had time to go
through all of them) – and new pre-announcements.

CPLA, CVH, AMED and CSR (smaller priced) all have tremendous price
action and volume going on right now.

There is another stock that caught my eye some in this morning’s
IBD, but then it really shocked me with the action it took this
morning.

The ticker is: UTA. There are no options – and the margin
requirement is a full 100% (in fact, I had to enter a Pin # on the
order screen to buy the damn shares!!).

Anyway – I love this pattern and I am not putting any kind of stop
loss on it yet because it’s way too damn volatile. I am doing this
with a pilot buy of shares that is manageable for my accounts.

Basically – in the new highs and pre-announcements…what’s
compelling to find are new stock names that are actively traded
(same with options) – that are just now reaching out and breaking
long bases.

The more recent – the better.

Also, I am way more lenient on getting involved with these on the
first pullback they have from leaving a long-term base. After
that…I get less tolerant of getting involved on “pullbacks”

(I hate the damn word “pullback”…it already implies that there’s
some kind of government guarantee the stock will go back up just
because it takes place! Remember…it’s on the most innocent of
“pullbacks” that a stock can lose more and more and more ground –
killing most investors that thought they were getting a “deal” on a
“pullback”!)

Again – I am more tolerant of that first pullback. After that -
the stock HAS TO make new highs.

Okay – that’s all for this morning.

–Pirate

Pirate Monday Update

Pirate Update – Monday, 27 July 2009

Good morning,

Mastercard announces on July 30th – and it’s really creeping higher
day after day as we near earnings.

The August near the money premiums are nice and deep. Great for
call selling and starting a trade on it.

Provided, of course, that you also go in with put protection. With
the stock here around $189/$90 – this is what I’m doing.

I am buying the stock, selling Aug 190 & 195 calls – and buying
October 170 puts.

If the stock takes off after the announcement, we can consider
rolling out when August expiration gets closer.

If the stock doesn’t move all that much – there will be a lot of
premiums collapsing out of these August calls.

If there is an earnings disaster – then the $170 puts are there to
limit the carnage. Basically all we have to do in the worst-case
disaster scenario case is sell another round of $9 calls.

But I don’t think there is disaster here.

In fact the past few days I have made comments about the market in
general.

It’s true that in the weekend IBD it shows 86% of stocks trading
above their 200 day moving average. And it’s also true that over
80% of stocks trading here is getting to an extreme.

But good hell…on the “other” extreme…when stocks got drug
through hell…for month after month less than 10% of stocks traded
above their 200 day (less than 20% of stocks trading above their
200 dma is the other extreme).

The point is – stocks can run to extremes and stay there for a LONG
time!

In fact – this market could run up and away higher for many many
months.

Only 37% of newsletter publisher/gurus are bullish on the market.
This is a GOOD case for the bulls…when pessimism is in the gutter
still.

So while we may think this or that – all the market is doing right
now is advancing convinicingly higher on big institutional like
volume. And it’s selling off on light volume.

Big money is in this uptrend right now – and more and more leaders
are cropping up and staying in compelling uptrends.

who are we to argue and tell the market where its extremes are?!!

Anyway – there’s some two-cents from me on the matter.

Did any of your trades today act weird because or did anyone hear
of any power outages at the exchange? It may be all over CNBC but
I never have that drivel on.

Just curious…I had some orders held up today and it was weird!
But all seems to be back to normal now.

–P

New income trades…

Pirate Update – Friday, 24 July 2009

Good morning,

Or I should say good day!

I’ve had a rather unusual day. With 2 hours left before the close
- I’ve pretty much been camped right here in front of my computer.

This is rarely the case! But I guess change is good every once in
a while.

Truth is, there’s something else going on. Our good ‘ol state of
Utah’s B-day is today, July 24th. And it’s a statewide holiday
here.

Maybe it’s that day off vibe coursing through my body or something.

Anyway – I’ve been a home-body today.

I’ve sat here and watched GMCR move $3-$4 bucks today from the
intraday low to now. This bad boy announces earnings on July 29th
(next Wed) after the close.

The way the options are priced – you can feel the action…all you
have to do is look at the last earnings surprise that shocked the
world.

When my account balance grows (equity curve, up) that’s when I’ll
take some more chances…things I normally wouldn’t do.

In that vein, I am buying some side calls on GMCR. A small amount
of calls (compared to the stock and income trade I have going with
GMCR). I am going for the Aug 70 calls.

If GMCR explodes for $20 to the topside, I may just cash these
in…but watching the market cycle and the price action and volume
of GMCR – I may just hold on to ‘em to the Wed or Thurs before
August expiration and then EXERCISE them. Which means if the stock
is going for $90, I’ll take ownership of actual GMCR stock at $70.

That’s a great and “cushion filled” headstart to be able to sell
calls on into September. Granted it won’t be a huge position of
stock – but it will be very profitable.

Remember…you MUST know when earnings are going to be announced on
the companies you own. The bigger the position, the more it needs
to be ingrained.

When you’re shopping for a new income trade – also remember to
check the next earnings date. I just checked out MA (Mastercard) -
the premiums looked really nice, however I found out they announce
earnings next week just like GMCR. What that means is the option
premiums are probably normally NOT priced like that.

Another killer looking stock out there is ISRG. I am doing a new
income trade with ISRG. Buying stock, selling Aug 220 calls &
selling Aug 210 calls. And buying Jan 185 puts. 1 to 1.

Well I’d wish you a great holiday – but it’s just the
reverse…wish me a good one this time!

Over and out,

–P

Dow Jones Index Stands Stubborn

Pirate Update – Thursday, 23 July 2009

Good morning,

The market is all hyped up and bustley.

It’s up 8.5% in the past 8 trading sessions, not including today.
This morning’s count was 82% of stocks are trading above their 200
day moving averages. Again, this 82% figure DOES NOT include today.

This is blistering hot. Especially because no real earnings
announcements out there are talking about sales growth or higher
projected growth in the future (What’s happening is companies are
simply smashing up the “analyst” EPS numbers).

We HAVE TO BE careful here.

No truer statement has ever been said than this:

The market is going to see what it wants to see…it can remain
fixated on a certain point of view for longer than rational people
think is possible. It can also remain stubbornly fixated on its
point of view for FAR LONGER THAN A RATIONAL PERSON CAN REMAIN
SOLVENT!

With markets, you never know how high things can go, and you never
know how low. It even happened to tulips 400 years ago or whenever
the hell that mania was.

But we DO know this…the market exists in cycles. And we CAN
watch for signs of the cycle being overextended. (don’t try to
REASON WHY the market is doing what it’s doing…that’ll send you
straight to the funny farm in short order).

In circumstances like these – I will still get into stocks, however
I want to see them closer to break-outs than stocks that have ran
up for 5-6 months.

The newer the better.

That’s why I’m excited about stocks like MICC…look how recent
(I’m talking a matter of days here) the breakout happened?

By the way, MICC ran away from me this morning as well – I have a
limit order to buy Jan 2010 65 calls for $12.80. This one’s
getting all gussied up and is out the door to the dance – I’m just
trying to grab it’s arm, smell the corsage and wish it a good night
before it vanishes out of sight.

While I have puts on every single stock in the portfolios – I am
buying a rather small pilot buy of some DIA puts (the Dow Jones ETF
index) – I am starting with Dec 88 puts.

I don’t even have clue #1 on when to sell these. If the market
tips over and cools off next week- then these DIA puts will be in
good shape right off the bat, but I’ll still hold ‘em.

Or…another blistering week to the upside will negate their
effectiveness. Which will only prompt me to buy more of them at
a lower price.

When I buy puts like this I chalk it up to a cost
of doing business -nothing more. An effort to protect my capital
base and to help smoothe out what I call my “equity curve”…

There are lots of compelling looking pre-announcements today
-however I am tempering each one with the fact the Dow is up nearly
200 points. Almost everything is up today!

That’s all for now…

–P

Prosperity happening outside U.S. borders…

Pirate Update – Wednesday, 22 July 2009

Good morning,

3 or so months ago, it was GMCR that seemed like it was always in
front of my face. At least where my eyes go every single day.

Up on unusual volume, making the 52-week high list – again, again
and again. Great earnings strength, up on unusual volume some
more.

And then the geyser blew. That was on April 30th of this year.
You just can’t be surprised it blew after it showed up right there
right in front of me – in what seemed like on a daily basis.

There’s a stock right now that seems to be showing up – while not
exactly and entirely like GMCR. It is MELI, which is called
MercadoLibre. This is the Latin America version of eBay. (more
Mexican and Central American actually).

(if you need a translation: MercadoLibre = FreeMarket…something
America is yearning to claw back into!)

The option trading isn’t ideal on MELI – but I do like the action
it is putting in.

Looking at MELI (a trade I was in earlier in 2008) – made me look
at MICC. This is Millicom…the kingpin of the latin American cell
phone space.

When I looked at MICC just now I said HOLY SMOKES.

I absolutely LOVE this one here.

MICC is just now (as of yesterday) breaking out with conviction
(that is price action and volume) to a convincing “relative high”
area. With some more added on this morning for good measure.

Options are okay active here. Not ideal, but adequate. A little
more dicey when you talk of selling a short term call and also
buying a longer term out of the money put (I’m speaking of an
income trade of course. Buying stock + selling short term calls and
buying longer term puts). It’s these puts where the stomach gets
a little topsy turvy of what you have to put up with regarding the
bid/ask spread.

By the way – I’m rather filled up at the time being in our trading
accounts. I make mention to you of what I’m seeing and finding
compelling out there in case you’re looking to trade.

Speaking of that – SBUX just came out with great earnings and an
increase in their full year ahead guidance.

The stock is making a compelling move today on already triple the
normal volume. I love SBUX here for an income trade!!!

The stock is right at $17 – the Aug $17 calls are $.74 cents or
close to. The Oct $15 puts or Jan $14 puts are the puts I’d go
with (or split up and go half and half).

Here’s both an icon name combined with an addictive product – that
now has it’s founder back in charge at the CEO post. Little wonder
there’s been a turnaround – and now there’s guidance from the
company’s own mouth that is radiant and positive going forward.
Analyst, brokerage and media bias be damned here.

Did you know that just last week, more brokerage accounts were
opened by Chinese people (in China) than for all of the last 18
months combined?

Do you see a trend here?

The trend being the rest of the world deperately in “prosper mode”?!
Latin American ebay & cellphones, and Chinese people tripping over
themselves to open brokerage accounts!

I guess the saving grace is we can access most of the world’s top
companies via our exchanges – but good hell U.S. Government – get
the f*$@* out of our way!!!

Apple did sell just over 5 million new iphones in just last the
last 3 months. But whatdya bet a nice % of these were worldwide.
The stock is up on this news and THAT IS nice to see.

That’s all for this morning.

–P

No Wireless, no civilization for 3 days…