Monthly Cash Machine Newsletter, Tuesday, 04/19/2005 01:33:30 AM ET
Portfolio Activity - Adjusted Exit Prices
HAVING TROUBLE PRINTING?
A Brief Respite...
It was nice to see a few buyers "testing the waters" near the end of Monday's session even as ongoing inflation woes and concerns about some forthcoming economic reports kept most of the retail players on the sidelines. When the closing bell finally rang, the major equity averages were relatively unchanged with blue-chip shares trending lower while technology and broader-market issues finished with a mild upside bias.
The MCM Portfolio endured similar (mixed) results but there was some favorable activity in a few of the newer positions. Bearish spreads on Cephalon (NASDAQ:CEPH), Expeditors International (NASDAQ:EXPD), and Navistar (NYSE:NAV) profited as the underlying issues slumped to new long-term lows. In contrast, bullish candidates Black & Decker (NYSE:BDK) and Sealed Air (NYSE:SEE) enjoyed some buying support as the stocks moved back into recent trading ranges. Unfortunately, one of our adept readers noted that the initial exit points in the latter plays (BDK & SEE) have already been breeched on an intraday basis. That presents a problem because our technical analysis software, which uses closing or "end-of-day" prices for the majority of indicators (and projections), suggests these positions should still be open. It's a dilemma we didn't anticipate when the loss-limit/exit point data was introduced and until a better solution is presented, we are simply going to adjust the (stop) prices - which must be in place throughout the session - by a small margin to help offset any unexpected (intraday) volatility in the underlying issue.
Since there are probably a few readers that exited these (SEE/BDK) spreads prematurely, the summary will reflect losses in each position. Based on the time and sales data, it appears the closing debits were roughly $1.00-$1.05 for both plays, which results in a drawdown of approximately $525 overall. This will be a difficult setback to overcome in the current expiration period, but we may have some success with the plays offered on Sunday and there are at least two more weeks to search for (replacement) candidates. In addition, we will be sure to approach the loss-limit/exit points in a more precise manner (even though it remains a subjective process), so that any closing trades are intentional. Along these lines, we have reviewed the (stop) prices for all of the positions in the portfolio and recommend that readers who use this system adjust their existing orders as follows:
Mentor Corp. (NYSE:MNT) - No Change
Genentech (NYSE:DNA) - $61.50
Mercury Int. (NASDAQ:MERQ) - $49.00
Expeditors Int. (NASDAQ:EXPD) - $54.50
Cephalon (NASDAQ:CEPH) - $49.25
Yellow Roadway (NYSE:YELL) - $58.50
Navistar (NYSE:NAV) - $38.00
Xilinx (NASDAQ:XLNX) - No Change
Mohawk Ind. (NYSE:MHK) - $87.50
Pixar (NASDAQ:PIXR) - $91.50
Positions in Chiron (NASDAQ:CHIR), Biotech Holdrs (AMEX:BBH), and Estee Lauder (NYSE:EL) do not have specific (stop) prices at this time, but we suggest that traders in these (adjusted) positions use some type of loss-limiting strategy to prevent catastrophic draw-downs. A simple "debit-limit" would suffice for the credit spreads whereas a (contingent) "buy-to-close" order on the sold (MAY-$45) calls would protect against upside activity in the EL calendar spread.