Health officials are always concerned about fiber in your diet but what about fiber in your portfolio?
I really struggled to come up with a play today because of the instability in the market. The short squeeze from the prior two days tried to extend at the open but failed almost immediately. However, the failure was not dramatic and the markets lost only a minimal amount.
Clearly the markets are waiting on the ECB and the Fed as well as the critical economic reports starting on Wednesday.
Any pick today and probably on Tuesday night would just be a coin toss because market direction is going to be totally dependent on headlines on Wednesday. We could be up +200 or down -200 by Wednesday's close just because of the headlines.
That is not an environment where we want to be adding a lot of plays. We would prefer to have a directional market to aid us in producing profits. Without a directional market you might as well be betting on black or red on a Vegas roulette table.
I did find one stock where I believe there is minimal risk.
NEW BULLISH Plays
Emulex - ELX - close: 6.45 change: +.20
Stop Loss: 5.85
Current Gain/Loss: unopened
Time Frame: 6 to 8 weeks
New Positions: Yes, see below
Why We Like It:
Back on July 5th Emulex and Broadcom settled a long running suit. Shares of ELX declined sharply on the settlement but found support at the $6.20 level. On Friday the entire chip sector was crushed at the open knocking ELX back to $5.85. However, the shares rebounded immediately to end the day flat and then continued their rebound on Monday when the majority of the Nasdaq was negative.
Emulex announced on Monday they had a new fibre channel product for Dell equipment with transfer speeds of 16Gb. That is extremely fast compared to the 3-6 Gb speeds of normal equipment. The transfer speed is important because of the massive amounts of data that current generation servers have to manage on an hourly basis.
According to IDC the total data in the storage universe will triple from 2.7 zettabytes in 2012 to more than 8 zettabytes by 2015. Moving that data around will consume more and more time so faster channel speed is critical. The new Emulax HBA devices are capable of handling over one million I/O operations per second, per port. That is up to five times faster than current technology.
I believe this announcement will insulate Emulex from further broad market declines but of course it does not make them immune.
We may hold this position over earnings on August 9th.
Trigger @ 6.65
Suggested Position: buy ELX stock @ $6.65
Entry on July xx at $ xx.xx
Earnings Date 08/09/12
Average Daily Volume = 4.5 Million
Listed on July 30, 2012
NEW BEARISH Plays
No new bearish plays