Had the pleasure of joining the Fast Money Halftime crew today. Here’s the segment on $YHOO. For those who follow this blog and StockTwits regularly, you already know my thesis and position.
As I have mentioned before and did in the clip, I can’t stress enough how important it is to not chase rumors on this. You have to have a plan. If you want to be long, get it when its fading or sell put premium. I see a bunch chasing every time someone reports on what Jack Ma or others say which is all slight of tongue.
I have no position yet but am looking to begin establishing one in $INTC over the next few weeks for a long term trade.
The disparity between market expectations and reality, Tuesday’s earning surprise, the bullish market response yesterday in a down market and recent long term positive technical developments are catalysts for my interest. The 3.6% dividend yield is a kicker.
I posted this chart over the weekend from @TSD_Trader. He writes “24 bucks breaks the neckline of a SEVEN YEAR (inverse) head and shoulders pattern.” That level has been tentatively taken yesterday.
TSD’s great look…
24 bucks breaks the neckline of a SEVEN YEAR (inverse) head and shoulders pattern on $INTC. Monthly chart.
"Intel is breaking out from a decade-long downtrend."
Fundamentally, there appears to me to be a significant difference between consensus street expectations which assume “the pc is dead” and the reality of Intel’s financial performance. Such rifts between ingrained perception and reality only work themselves into the market slowly over time.
As regular readers know, I usually sell near dated puts to establish positions but in this case I will likely buy the stock and sell calls in order to begin capturing the dividend yield.
I will have more to say on $INTC in the coming weeks here on the blog and will post trades in real time on StockTwits.
Someone is going to come along soon and create software as a service (or SaaS) for group couponing or daily deals.
If I am able to figure this out, there must be some smart geeks somewhere already working it through on their own or as part of a larger company. It is surely the natural progression and the next generation of online discount crowdsourced promotion…
It will work like this….
Let’s call the new company SaaSpon
Let’s say Italian restaurant X in Suffern, NY is thin on reservations for the next month and wants to promote a YY% discount if more than Z customers respond.
They go to SaaSpon’s client dashboard and enter the details of the deal they want to create including the discount, how many customers need to respond, restrictions etc and it loads instantly both as a widget on their own website (also embeddable anywhere) as well as in SaaSpon’s directory.
SaaSpon also creates a searchable public front end on the internet where those seeking deals can search for them in their area. So, lets say I go to the site and search for Italian restaurants within 15 miles of my address and this deal among others pops up at me.
It can also do tailored emails for those looking for deals in their neighborhoods with certain specifications.
SaaSpon has no sales team and charges a small flat fee only for every deal they bring in.
Geez, if Google or Bing built this, they could embed geo + subject targeted deals in search results and that would be game over.
The restaurant is also empowered because they can promote the deal themselves, pay much less, do not have to wait to get reimbursed and retain greater autonomy regarding the promotion of the deal.
If they are not already, Groupon better be working on this like yesterday.
Earlier this evening, $INTC beat analyst estimates and traded higher by 4.5% while $AAPL missed estimates and traded lower by 6.5%. My expectation is that tomorrow’s close will be critical in determining the direction of these stocks over the next few months.
Here’s why.
Analysts estimates serve as a proxy for market expectations.
Stock prices tend not to respond in full instantaneously to new information such as earnings surprises but to drift instead, after an initial gap, in the same direction of the surprise for a few months.
The above chart, taken from a classic study by Bernard and Thomas, displays a phenomenon called post earnings announcement drift in which stocks tend to continue to move in the direction of the surprise for a few months after the earnings event.
I am taking into account tomorrow’s close because, through experience, I have found that the direction of the initial move after the surprise adds further validity to the direction of the subsequent drift.
In the case of $INTC, the beat was substantial and the initial reaction was positive while in the case of $AAPL, the miss was also substantial and the initial reaction was negative.
As such, and in light of the quantitatively derived tendency described above, I would expect $AAPL to continue to drift lower for 2 plus months and $INTC to drift higher over the same period if they the after hours price reactions are any indication of tomorrow’s close.
Just got an email from John Melloy over at CNBC with news of a lowered forecast on Sprint from Goldman Sachs. Here’s a portion of the note from Goldman:
Walking through our iPhone forecasts.
The launch of the iPhone is an important
milestone for Sprint in its ability to compete on level footing with regards to handsets.
However, the device carries significant upfront margin dilution, and we think Sprint will
struggle more than others to be able to absorb the impact. We currently estimate 1.6mn
iPhone sales during 4Q11, driving record-low margins of 11.3% (noting some
incremental qoq pressure from Network Vision as well). We estimate 7.7mn iPhone sales
in 2012, and 9.9mn in 2013 (see exhibit 6). Our forecasts imply Sprint takes roughly 20%
of total iPhone sales between 4Q11-2013, compared to an 18% share of total postpaid
subscribers among iPhone carriers (AT&T/Verizon/Sprint). Given the elevated subsidy the
device carries, as well as iDEN migrations Sprint will need to work through with an
accelerated Network Vision rollout (iDEN shutdown by 2013), we expect net equipment
subsidy to be elevated. This is a key driver of our lowered EBITDA forecasts for 2012/2013.
The weekend is a great time to back up the lens and take a long term view of the charts we examine so microscopically while the casino is open for business.
The following is a collection of weekly and monthly studies from Chartly which do just that.
First up, an SP500 monthly via @LuckyElmo21. The Fake out higher, fake out lower looks like we’ll get consolidation in a narrowing range to me…
@TrendTrace highlights the big ramp this past week in SP500 stocks trading above their 10, 20 and 50 day moving averages but not the 200. Nice one TT:
Next, @traderyork details this sweet looking Sugar ($SGG) weekly:
@fallondpicks (who is a great follow btw especially if you are interested in market internals) chalks up the weekly NASDAQ Summation showing that breadth improved dramatically this week. The Summation Index is actually a breadth oscillator and you can find more on it here if interested.
And now for some individual tech names…
@TSD_Trader spots a potential inverse head and shoulders on the $INTC monthly. Great find TSD:
Pro @Kenshreve notes a nice long term setup in $EBAY beofre they report on Wednesday
And finally @Stumptowners with the sublime monthly of a littl company you might have heard of. Thanks Stump:
Search is exquisite genius and yet still woefully imperfect as we become experienced consumers of it and understand better what it could be. The race for personal relevance will not slow down but I do believe it will improve, with hiccups, or be disrupted over time.
That said, the video below, a Ted talk by Eli Pariser and author of The Filter Bubble, will enlighten your view of how sites like Google, Facebook and Yahoo! News tailor information based on the analysis of your habits.
This tumblog which was created only 4 days ago is quite evocative and gaining a large following quickly. It displays pics sent in from the 1%ers who show support for the Occupy Wall Street movement.
The About Us section of the blog states:
We have more than we need, while the 99 percent struggles to survive. This has to change. We believe in an equitable distribution of wealth.
Support from the 1% cohort is critical to the movement for a variety of reasons. First, they are in a position to provide money. Second, it may potentially alter the perception of critics and politicians as they observe their own legitimizing grievances. Third, it has huge symbolic meaning similar to US military deserters during Vietnam.
Notables who are closely tied to the US financial system are also chiming in. Yesterday, Ezra Klein published an interview in The Washington Post with PIMCO co-CEO Mohammed el-Erian in which el-Erian expressed sympathy for the movement and their cause. el-Erian states:
A lot of what they talk about is a reflection of the five big structural impediments to growth and employment in the U.S. today. We have a housing market that’s not functioning. And housing is really important. It’s the largest component of people’s wealth. We have a labor market that is showing structural unemployment, which is really scary. And remember, the unemployment number is not just 10 percent. If you add in underemployment, it’s more than 16 percent. And add in people who have left the labor force, and it’s 20 percent. So that’s your real unemployment. The third element is credit. We have this ridiculous situation where those who don’t need credit, like big multinationals, can get credit in the capital markets, and small and medium firms, which need credit, can’t get any. Those are the big three.
Add on top of that, we have crumbling infrastructure and we can’t seem to resolve the debate between short-term stimulus and long-term budget reform and you have a whole set of impediments undermining the return of growth. That doesn’t deny the importance of the demand side. Demand is important, but not sufficient.
I’ve heard comparisons between trading and video games since online trading began back in the mid 90s. The reference is often made disparagingly as if trading was a kid’s game that is, like tv, a waste of time.
There is a similarity between trading and video games, though, but disparagement ignores innate and learned intelligence based aspects of both and the importance of the visual spatial skills being exercised.
The comparison is truer than ever today as trading platforms grow more powerful, trade frequency increases and technical trading increases in popularity.
Visual Spatial Intelligence
Visual spatial intelligence denotes how well people recognize, organize and synthesize visual representations. Over years, scientists have developed and validated assessment measures for it which include the recognition of visual patterns as well as the manipulation of objects in order to replicate 3 dimensional patterns
Block Design Test Measures Visual Spatial and Motor Skills
Artists, engineers and architects score high on visual spatial scales. Cognitive psychologists, though, have not studied the relationship between technical analysis and visual spatial intelligence although the relationship seems obvious anecdotally. (There is research suggesting computer games positively affect visual spatial skills.)
Cognitively, the similarity between trading and video games relates to the centrality in both of visual spatial operations.
Technicians need to differentiate patterns amid an overabundance of complex visual data and relate it to in the moment decision making, similar tasks involved in video games.
There are differences too. In the case of video games fine motor coordination plays a more central role while in the case of trading, measurement of future price probabilities, risk management and adaptation to the stress of risk are more central.
The relationship between visual spatial intelligence and other types of inteligence are also clear as those scoring high on visual spatial tests tend to also score high on general visual memory, mathematics and numeric memory tests – all relevant skills to trading.
Two types of Visual Spatial Intelligence
Visual spatial intelligence can be broken down further into two categories – these are general (or innate) and learned.
Innate visual spatial intelligence is what you are born with. Some have more raw talent than others and might naturally have greater potential for video games and technical analysis.
Learned visual spatial intelligence involves improvement in the capactiy to recognize and organize patterns that comes with practice.
The implication here is that traders can improve their innate capacity over time as they study and practice which might increase skill specificity including visual recognition of predictive chart patterns.
Incidently, this is one way in which Chartly has become a super valuable tool as traders are able to inspect and learn from the technical work of other traders some of whom are experts in the area of recognizing chart patterns which might have price predictive value.
I’d go so far as to say that if I were measuring or interviewing new traders, I would inquire about their video game experience and possibly test them on it.
I speculate that adolescents who have innate capacity in video games and who have spent a lot of time playing them would be more advanced at the outset in learning technical analysis.
Finally, there is huge untapped potential for research in the areas of visual spatial intelligence, technical analysis and technical trading.
