Saturday, March 18, 2006

Weekly Review (3/13/06 – 3/17/06)

Strong Buy or Strong Sell

I would like to set a point system for better describe my suggestion. Going forward, I will use the following number to represent:

0 ----- Strong sell
2 ----- Sell
5 ----- Hold
8 ----- Buy
10 -----Strong Buy

The numbers in between will show the different meanings at different strength. For example: Hold (6) means: you should hold the stock or buy a relevant small amount because the potential price margin might not big, or the risk is bigger at this price range.

Now, let’s review the stocks that I discussed in the past.

During the week, I received a couple of phone calls from friends. They asked me whether they should take position because the INTC was going down. My answer was “Congratulation!” The more down means more margin you will earn in the future.

Here is the P/E ratio for the top 6 company in the Semiconductor industry. All other statistics data of INTC also show that Intel is at above average level or at top level industry wise. The fundamental analysis shows INTC is a good pick.

During the past two days, the price of INTC reached its yearly new low ($19.40). It shows the selling pressure is strong still. Technically it turned the price moving direction back down. If the panic is not over, it seems a new low is on the way.

A good fundamental vs. bad technical, plus next week’s uncertainty make me feel too difficult to give a clear prediction. But I believe the market will realize INTC’s value soon.

My suggestion: Buy (7.5)
During the next week, whenever INTC’s price dropped one level, you should increase your holding.

2. NBR
NBR is another example for good fundamental vs. bad technical. Because of its industry, Oil & Gas Drilling & Exploration, its price is strongly impacted by the oil price.

My suggestion: Buy (7)
You should watch a couple days, make sure its direction and then take a position.

If you have time, you should keep an eye on it. I believe there are some interesting things going on because I found more evidence to support my doubt. Please refer to "Stock Analysis: SNDA -- Is it “Artificial”? "

Apparently it is too risky for investment at this time. I am going to remove it from my list.

CSCO had a stable gain this week. Like I said in "Trading Skill with Example: CSCO ", it is above $21 now. I believe it will keep going up.

My suggestion: Hold (6)

As I predicted in "Invest on the Future -- Hi Google!", the $340 is a big resistant line. At this moment, we have not seen a clear direction change yet.

For long term, I am going to keep the down rating: Sell (2)
For short term, I think there might be a bounce. Its high should be above $360, even reach $370.

Please read my article “Trading Skill: Take Advantage from the Volatility -- Google Again! ”. It is a safe play guide to get benefit from stock such as Google.

6. NYX
Congratulation to who read my articel "Weekly Review (3/6/06-3/10/06) --“Hi, the Market Read Your Blog!”" and took action on NYX! 10% to 20% in a week is a nice margin.

It is too early to say $90 is its ceiling yet. We should watch closely on it next week. My estimation shows $107 is its ceiling, the time frame should be earlier of April. Anyway, I think buy at low and sell at high is a good strategy for it.

My suggestion: hold (6.5)

During this week, it had a high level adjustment. There should be a room for its continuously growth.

My suggestion: buy (7)

8. ELN
ELN overcame the pressure and stood above $15. It was so difficult and took too long! I am surprised that so many investors eager to sell this stock. Maybe people still wait for FDA’s final announcement.

When it was at $4, at $6, at $8, at $12, and at $14, I said “Buy” before. Today, it is at $15, I suggest “Buy” again. To reduce the risk, I suggest buy its stock or long time call.

My suggestion: buy (7)
FDA should release it’s finally decision by 3/26. The next week is an important week too. You should pay attention on the stock movement to catch any early sign of the anouncement.

Good luck to you!

Friday, March 17, 2006

Market Point

Ready to Surf?

The market is at its top now and another Fed rate meeting is on the way. Needless to say, many concerns, predictions and speculations will drive the market crazy today and in the coming week.

The market will switch between up and down because someone might want to take their profit; and someone else might want to buy more. It will be very sensitive to the news.

The uncertainty of the market is a challenge to market players. It will be a fun time.

If you are optimistic, as I am, you should collect the shares whenever at its bargain price during the next week; and cash out if you are more aggressive.

Don't forget to take the long position finally. I think the market will be very cheerful during April, especially the first half of the month. So, get it ready!

Wednesday, March 15, 2006

Stock Pick of Today: INTC

"I Will Be Back!"

INTC (Intel Corp.) has suffered enough from the bad news. It seems at a position to bounce back. Its closing price is 19.92 for today.

For both short term and middle term players, it is a good choice.

My suggestion: Buy
The near price target: $22.50

Tuesday, March 14, 2006

Stock Pick of Today: NBR

NBR (Nabors Industries Ltd.)

NBR is a worldwide drilling contractor. It is oversold and on its track to recovery. Today, its closing price is $67.60.

This is a good choice for both stock investor and option trader; for both long term and short term.

My suggestion: Buy
The near price target: $82

Trading Skill: Take Advantage from the Volatility

Google Again!

If we look the chart of Google for the past few days, we could see almost every price direction change is very clear. Each wave draws its almost straight line until its turn around. Each turn has about $5 to $15 margin.

This is an excellent opportunity for an option trader.

Suppose you saw the price is starting to bounce back, you can quickly buy a call. After the price went up, if you recognized the price is going down, you can quickly sell your call and buy a put. When the price is at the bottom, you can sell the put and buy the call again…

The practice sounds risky because people might be afraid of making wrong judgment. But I think if you handle your risk properly: getting out quickly when wrong, your risk is limited.

The big benefit of this strategy is whenever there is a big direction move, regardless a big jump up or a big drop down, you are always on the right track. This guaranteed you make the big money.

For stock like GOOG, it is worth to try this strategy. And don’t forget, by doing so, you will accumulate your experience, check your decisions, improve your skill, and HAVING FUN.

Stock Analysis: SNDA (Shanda Interactive Entertainment Ltd.)

Is it “Artificial”?

Watching stock movement has been my entertainment for a while. I enjoy guessing the reason behind any “abnormal” situation. "Exist is reasonable". The “abnormal” probably carries more information then “The Random Walk”.

The behavior of SNDA in the past two days has confused me very much. Without any news, the stock went up $1 at very stable pace. Neither fundamental nor technical analysis would not support such a strong “Bounce”. If yesterday’s result is acceptable, today’s is just too far.

This wave of down stream of SNDA should push the price under $12, which is my theory price of SNDA based on its fundamental.

The two day rally seems broke the trend and turned it to opposite direction. It is not a “normal” situation and seems controlled by a hiding hand. If someone has 10 millions, then he can easily stir the price of SNDA. Could it be someone is trying to pull the price back to certain level, and then release his holdings; or someone thinks $13 is the bottom? Either case, the market seems responded positive and has not added any pressure on it.

For a long term investor, there is no room for even consider SNDA at this time; but for a short term player or option trader, it is an excitement you should not miss.

I would not list all my reasons here (In case I am wrong, those reasons would look stupid, right?) and I don’t want to miss the opportunity to show you some fun. Besides I would do my best, but never ask myself to be right all the time. It is rather my personal preference. I could watch it one more day to make sure whether my guess is right, but wonder there would be little room for my reader to get benefit from it.

Let's quickly jumped into the conclusion which is we should bet the price up also.

My suggestion is watch it tomorrow morning and make sure the up trend is not slow down or turn back, and take your action. My short time resistance estimation is $14.90 or $15.80 (not sure which one is). At any situation, if you see a volume increase and price move down, it is the time to get out.

Regardless of the result, I am sure that we shall all learn something in this case.

Monday, March 13, 2006

Trading Skill with Example: CSCO

Can you make big money on CSCO (Cisco Systems Inc.)?

Most of stock players would hardly consider CSCO in their portfolio, unless it is for “defensive” purpose. The reason is simple: the potential growth of this stock seems very limited. People usually don’t have much patient and want to see a bigger number on the return at higher risk.

The option traders probably think differently. When they bet a stock up, let’s say a dollar, they don’t care much about how much will the stock go at 1 or 2 years later; but they do care how soon the price will reach their target and how far it will go during a short period of time.

For example, if the price of stock A is at $8 today, and I bought a call at strike price of $10 and the expiration date is 3 month later, I would only hope the price of A goes up during the 3 month. Whether the price of A went up to $20 or down to $1 after the 3 month, is not my concern at this time at all.

Suppose I was right, the price of A went up to $11. If I bought its stock, my gain would be 37.5%; if I bought its call option, my gain would at least 80%. If we think further, for the same amount of money, you can buy much more contracts than stocks; then the margin ratio for option is much much higher than the stock.

As an option player, sometimes I feel myself love those stocks such as CSCO because they are kind of stable. Its price is always shaking between curtain price ranges. Which means I have less risk and more control. If I have a longer expiration time, my investment is more predictable and the gain is still as good as at others.

The first time I noticed there is a chance at CSCO was in my Christmas vocation. The market was pretty good in December, but the CSCO was very low still. From historic chart, we can see easily that $17 is the bottom support for a long period. An over all good market plus a blue chip stock at its bottom, was an obvious chance to bet! My first analysis showed that $19 would be the near target.

I watched the stock climbed to $19 during just a week, but did nothing because I did not have cash. The strength of the up and the volumes made me believe there is more room to growth.

When its price adjusted down to $18.2, I bough some call contracts of strike price at $20 and expiration date in Jan 2007. My initial price target was $20.10.

Its price went up and then down, even dropped below $18. Because my contracts’ expiration date is far away, I just watched them and waited for its coming up. The more fundamentals I reviewed about CSCO, the more I believe there is an even bigger turn back.

It wasn’t taken too long, the big news came out. The Cisco’s earning will be bigger than previous estimate. This news hiked the stock up a dollar. The most exiting thing to me was not $1 up, it was the 200 millions volumes. The second day of it was another 120 millions day when it once reached the $20 line. The big volumes made me believe that some institutions (who else can hold such amount of shares?) was selling off, but some other institutions was buying because they set a bigger price target!

Then I knew my initial price target should be move up too.

The $20 line was apparently the resistant line at that period. It seems some institutions were cashing their gains and some others were accumulating the shares. On Feb 27, I told a friend that once it crossed $20, it will walk into another level. When it’s happening, it would be the chance to buy.

I bought more contacts at same expiration date, but strike price at $22.5 when it stranded firmly above $20.

When the price was around $21, I sold 40% of my first purchase. The first reason of it was that I needed some cash to move to another area; the second reason, perhaps the most important reason, of it was my discipline: Always cash half of your holdings when price is up.

My first round covered 85% of my initial investment. The rest of 60% of my holdings is for perusing higher profit only.

This story is not over yet. How long would it stay above $21 line? May be the coming Monday or Tuesday, may be another week, but it is only the matter of time. I have seen enough positive signals.

It seems every whole number would slow down it a littler bit. But don’t worry! My analysis tells me that the nearest high should be around $24.35.

CSCO probably is not a good candidate for stock trading, there is little chance to double or triple your investment; but for option trading, it is.

I want to emphasize what I want to say though this story:
1. A safer play for option trading is important. A blue chip stock could be a better candidate for option trading.
2. Buy a longer time is better, especially for immature
3. Set a smaller goal or price target at the beginning.
4. Patient would be paid off.
5. Watching the progress. Adjust target only when you have solid reasons.
6. When the price moving direction is favorite, adding little more investment to enlarge the benefit.
7. Under any circumstance, cash your revenue when it reached certain point.