Scanning charts on a couple hundred stocks this weekend reminded me of the famous Tom Cruise line in Top Gun. "This is what I call a target rich environment!"
Instead of struggling to find some stocks worth playing this weekend I was finding it hard to decide how to prune the list to a manageable number. There were so many good plays I spent an hour just culling the list over and over before I could narrow it to only 20.
Obviously having this many prospective plays produces some serious questions about market viability. If there are that many good plays has the market reached a top? When everything looks too good to be true it normally is.
It appears China did not raise rates over the weekend so that cloud is still hanging over the market. Obviously if they do not raise rates it would be bullish. The markets are poised to move higher over the next three weeks but they may stumble ahead of the FOMC meeting on Tuesday.
I am hesitant to add too many plays but I am also hesitant not to add them because market conditions are ripe for some decent gains into year-end.
The paralysis of analysis is always a challenge. Today I am going to discard those concerns and produce a full play list. Please use caution on your entries. If the market is acting strange or weak please use some common sense and wait for it to move higher before taking the plunge.
We are fortunate to have several opportunities this weekend with a potential floor under their prices. FCX announced a 2:1 split and a special dividend. NFLX and FFIV are being added to the S&P-500 next Friday. Baring some bad market news those should have a lower risk of decline.
This is a list of symbols and strikes that I thought were decent plays but did not make it into the newsletter today. Use your own judgment.
Current Position Changes
NFLX - NetFlix $194.56
NetFlix will be added to the S&P-500 after the close next Friday. Fund managers tracking the S&P will be forced to add NetFlix to their portfolios and drop the stocks being removed. Speculators will be buying stock in anticipation of a big volume spike on Friday that sucks up all available shares.
Enter this trade only if the S&P and NFLX are positive
Sell Short NFLX January $180 Put (NFLX11M18000) currently $6.65, stop 188.75
Chart of NFLX
FFIV - F5 Networks $142.63
FFIV will be added to the S&P-500 after the close on Friday. With a relatively small number of shares outstanding the stock should move higher as funds add to their holdings.
Enter this trade only if the S&P and FFIV are positive
Sell Short FFIV January $135 Put (FFIV10M13500) currently $5.20, stop $137.95
Chart of FFIV
FCX - Freeport McMoran
Freeport announced a 2:1 stock split with an EX-date of Jan-15th and a special dividend of $1 with an Ex-div date of Dec 20th. Both of these events should help to keep FCX moving higher.
Obviously FCX is influenced a lot by the price of gold, copper, the value of the dollar and any rate hikes in China. There is risk in a FCX position despite the added dividend events.
Enter this trade only if the S&P and FCX are positive
Sell Short Jan FCX $105 Put (FCX11M10500) currently $3.25, stop 109.50
Chart of FCX
VECO - Veeco Instruments $48.40
Veeco pumped up its premium volatility on Wednesday with a sharp dip that was quickly bought. Veeco has made a niche for itself in the high brightness LED market and equipment to make solar cells. Business is good and VECO closed at a new multi-month high on Friday.
Enter this trade only if the S&P and VECO are positive
Sell Short Jan VECO $45 Put (VECO11M4500) currently $2.10, stop 46.75
FSLR - First Solar $138.24
First Solar is charging ahead once again. The company announced it won a 15 MW contract to supply panels to a project in India and will begin deliveries in March. The solar sector took a serious hit back in November when Credit Suisse downgraded the sector due to future over supply. Several big contract signings over the last couple weeks have reinvigorated the solar stocks and FSLR is leading again.
Enter this trade only if the S&P and FSLR are positive
Sell short FSLR Jan $130.00 Put (FSLR11M13000) currently $4.45, stop $134.75
Chart of FSLR
VMW - WMWare $88.87
VMW has had an amazing recovery since early December. The stock has found new life on the better than expected guidance from Salesforce.com. I do not expect this to slow down. That was a game changer for the cloud sector. VMW closed at a new high on Friday.
Enter this trade only if the S&P and VMW are positive
Sell Short VMW Jan $80.00 Put (VMW10M8000) currently $1.70, stop $84.75
Chart of VMW
New Long Term Recommendations
None - Waiting for a market dip
New Aggressive Recommendations
FLS - Flowserve - $116.07
Flowserve is a provider of valves and flow control equipment to the water and energy industry. They just announced a five year contract, with a 5-year option, with Shell to provide all the flow control equipment for their upstream and downstream needs. This is one heck of a lot of valves!
We will not hold this position until April. We will only hold it until we have accumulated a significant amount of profit and then stop out.
Enter this trade only if the S&P and FLS are positive
Premium $17.40 = $13.93 intrinsic, $3.62 time.
Sell Short FLS April $130.00 Put (FLS11P13000) currently $17.40, stop $112.50
Chart of FLS