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March 06, 2016
Charles Moskowitz Discussion
OUT TOO EARLY !!
Week 9 was a small loss with very little trading. The loss was $244 bringing our YTD performance back to $2,417. We have no open positions in the options account.
The market continues to surprise on the upside, but I think that a great part of this last several days of rally has been a combination of short covering and low volume buying, as we come up to just under the 200 day moving average on the S&P500. Last week we discussed that the financials needed to be involved if we were to test the 2000 level in that index, and they were. I was a little early in selling the BAC 3/12 calls @ $ .93, as they outperformed and traded to almost $2.00. However, as Bernard Baruch said, “I made most of my money getting out to early.”
We are now approaching overbought in all indexes and I feel like the next $40 move in the S&P500 is lower, not higher. While I think we can rally to the serious resistance at S&P 2025 we are more likely to test the recent breakout (now support) at 1950.
We also took a small loss on the FB puts, and I intend to continue to trade this one from the short side. FB remains slightly overbought and in what I would call a BEAR flag. It has consistently made higher highs and higher lows on declining volume. It has been riding along an uptrend line but has been unable to break above the area from where it broke down at the 110-112 area. It has also been a non-participant in the current rally and while it may be a late-comer to the party, the path of least resistance for this name looks lower. This week we’ll try the March 106 puts and keep a close stop.
As Mike discusses on pages 11&12, a lot of people have a misconception about the use of natural gas. Its primary use (which is dramatically growing) is for the generation of electrical power. Most people think of fuel to be burned (heating oil) as a seasonal usage related to exactly that, heating. Natural gas’s seasonal use is spring, summer and into the fall for the power to run air conditioners. With all of the talk (and drop in usage) about coal being a “dirty” fuel, and the beginning last month of the shipping of our natural gas to the rest of the world, this is a very timely idea.
I’m not sure what the weekend news about China confirming a targeted growth rate of 6 ½-7% will mean to the market, but I’m sure the talking heads will have many theories this week. All I know is that we are overbought; approaching a falling 200 day MA and stocks look extended….CAM
All trades were based on your participation in the texting service to receive updates. Previous closed out trades not listed here may be seen in previous market letters.
New trades $ 10,000 account...In Texting we have a limited amount of words. In the interest of brevity: OPTIONS ONLY: 1 January , 2 February. The Quantity and Strike Price for each trade is specific. Trading is hypothetical. We may trade weekly options and they are noted: SPY 1/25 147 for SPY Jan 25th 147 Calls or Puts.For questions please call 702 650 3000. Closed out positions are found in previous letters dating back four years: Feb 29th22nd; 15th; 8th; 1st;Jan 25th; 18th; 11th; 4th; Dec 28th;21st;14th; 7th; Nov30th; 23rd; 16th; 9th; 2nd; Oct 26th;19th;12th; 5th;Sept th;21st;14th etc
New Stock and Options Recommendations
Options Account Trades
( 1 ) Buy 4 SPY March11th 199 Puts @ $ 1.15
( 2 ) Buy 4 FB March 106 Puts @ $ 1.20
$ 100,000 Account Trades
( 1 ) Buy 8 SPY March11th 199 Puts @ $ 1.15
( 2 ) Buy 8 FB March 106 Puts @ $ 1.20
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