By Alex Salomon
As with the previous columns, let’s review previous trade ideas/positions and preview the week to come. You can follow most of my real-time updates and action on Twitter @Alex__Salomon where I comment on many of the stocks covered in this weekly column.
Before we attack the week ahead, though, let’s review the previous weeks’ ideas.
As I commented on Twitter, it was a difficult week to manage; I came in very long and left closer to flat. A lot of the positions that I was trailing for a couple or more weeks were “hit” and cut.
1. iShares Semiconductor Sector (SOXX) – “Looking for that double-bottom at $48 and a repeat of Nov./Dec. 2011. SOXX hit its first target of $52 (scaled 1/3) and still has outstanding targets of $56 and $60.” So far, so good, it’s strong and staying strong. I sweated it a bit but it’s solidly in play!
2. Apple (AAPL) – “The plan unfolded! […] take profits at $621.50 and $640 with a $40 trailing stop. We’re on! Profits were taken (at 2 prior targets), the position is down to the last third with a $40 trailing stop for now.” Keep in mind that the headlines for Apple are going to be strong all week and we could see $685 soon… the more we go up, so does my trailing stop. Eventually, in a deeper correction, this last third will be stopped. But so far, at $634, it’s solidly on.
3. Russell 2000 iShares (IWM) – “The potential trade was on hold for 2 weeks: “patiently wait for a break above $80, make a failure ($79) your floor and be prepared to take incremental profits, $1.00 level at a time (profits at $81, then $82 and then a $2.00 trailing stop until it is taken out).” The position is “on” as of Friday, just as described. First profits were taken at $81, the stop has been raised to $80 and $82 is the next target to scale the second tier.” We hit $82 and booked the second tier. The $80 trailing stop on the last third is still “on”.
4. Teradata Corp (TDC) – “After taking profits in the prior weeks, I still have 50% of the position with a $3.00 trailing stop at $74.25 and will keep it on as long as possible (until the trail is stopped).” Last week was a close one but the position is still on.
5. Salesforce.com (CRM) – “CRM in at $144.05, $140 is my stop, my first target $150, then $160 into the August 23 earnings.” We hit the first target at $150 but the earnings reception was very subdued and created a huge gap down, in which I felt “lucky” to sell at $142 for a small gain on the overall position (150, 142, 142 vs. 144). Little did I expect that the initial move would be the wrong one, and the stock jumped back above to $147 and change… I had moved on, taken my “beating” and I really felt fooled on the whole position … but discipline trumps conviction! Moving on!!
6. Direxion Daily Natural Gas 3x ETF (GASL) – “GASL in at $25.38, which is also my stop, my first target is $30, then $32.50.” The position got stopped short on the $2.00 trail at $26.25 for a small gain. I will not re-load this position for this column, however, I will be actively trading in and out of this position in my trading account. It just does not really fit the profile of a teaching and sharing article.
7. Compania Energetica de Minas Gerais (CIG) – “CIG in at $19.70, with a stop at $19.” I got stopped for a loss — this position kicked me to the curb!! -3.6% and out!
8. Leapfrog (LF) – “LF in at $11.00, use $10.50 as risk (stop) and $11.50 and $12.00 as my bullish targets (then trail the rest $1.50 for as long as possible).” It’s “on” and waiting!
For the week ahead, just like for last week, I remain cautious and careful, nimble remains the word. I want to be bullish but I am weary of the vacuum effect of the pre-Labor Day break. I am concerned that the next few weeks could provide big up days and grinding down days within an overall downtrend, at least until around September 25. I am still invested at 51% of my funds.
If the market remains solid, I am going to deploy new positions on Monday or Tuesday — but I want to get a feel for the return of the crowds to their desks and whether they’ll be stuck in a squeeze up vacuum or in a European down doom sell off?
F5 Networks (FFIV) is always on my list of “go-to” stocks and I am really intrigued by the coiling action and a small bullish pennant. $90 seemed to have been a very strong base and $100 a piece of resistance, which, if broken with conviction, would likely become the new support. SMA 30 day is about to cross above SMA 50 day. It is coming off oversold stochastics.
I will look at either one of 2 scenarios, depending on general market conditions:
1. Buying a full tranche at the meaningful support of SMAs (30 & 50) around $98 for a very tight play (any back to back day close below the averages would close the position, or below $97, whichever would come first); sell tier one at $100, then $102.50 and shooting for $110 (which, if breached convincingly, would actually lead me to cost average up);
2. Buying a half tranche upon breaking $100 and wait for a meaningful breach above $102.50 to add to the position. In that case, $100 would become my stop, $110 my first tier target.
VirtualWare (VMW) is another stock always on my list. Right now, it’s squarely resting on the small uptrend created from the July $80 lows, the August 3 $86 dip, and this week’s $92 price point resting right on SMA 50 day (which has crossed above SMA 30 day). To the opposite of the small uptrend, there is an upside channel defined from $85 to $98.
So, which one is it? Is VMW going to go back to the channel and bounce from $92 to $100 or crack down?
Provided that VMW stays steady around $92, I will initiate a full position with a $2.00 trailing stop, targets of $95, $100 and the last tier probably on a long leash back to entry price.
Guidewire Software (GWRE) rounds up my list of targets for the week — it’s my “earnings play of the week” (reporting earnings on Sept. 4). I do feel like I am a bit late to the party and I wish I had identified GWRE earlier, but I like the break above the downtrend line and the steadiness above all major SMAs. This stock is a longer term play and thereby, I am likely to give it more leeway: current pricing around $27.50 would provide an entry, the downtrend line at $25.50 a $2 risk and $30 and $35 as initial targets.
Disclosure: At the time of writing I own Apple common stock and calls; I own IWM; I own SOXL, a 3x ETF based on SOXX — 3x ETFs are riskier vehicles and investors considering them should carefully read the risk disclosures written by each leveraged ETF underwriter; I own TDC calls and common stocks; I own CRM calls, GASL, LF; I am considering building positions in FFIV, VMW and GWRE in the next 5 trading days.
Any opinions expressed herein are solely those of the author and do not in any way represent the views or opinions of his employer or any other person or entity.