NFLX - YUCK (TARGET $100)

OUCH!
Over the last couple of years I've done posts where I have highlighted my short trades on NFLX.  Don't get me wrong, I don't have some hatred for the company or the service, in fact, I think it is cool and as a late technology adopter I would love to obtain the service one day.  I have an issue with companies that become over-valued and NFLX certainly has been one of those stocks.  (You can insert many a high-flyer with a PE ratios that are obscene).

In December of last year I was targeting $175 as an exit for a successful short.
http://goatmug.blogspot.com/2010/12/december-macro-update-rally-on-feds.html

Here's a nice little update on NFLX as we see how powerfully and violently the once favored stock has fallen.  I expect some bounce around $100 which is still $18 or so south of where it is trading this morning.

Somehow, I think we'll see a lot more of this type of action with the broader market.  Make sure you are defensive.

GOATMUG

Goatmug is an investor that cares about you and your family. Goatmug's Blog - Financial Perspectives From The Mountain Top is a collection of thoughts on our economy and how it impacts the lives of investors and average people. While several specific investments are named in many of his posts, these articles are simply invitations for you to do your own research and reference to these securities does not constitute financial advice. Your situation is complex and unique and you should seek professional assistance with your trading and investing. Please visit Goatmug and share your comments at http://www.goatmug.blogspot.com/

TRADING DELIGHT - MOS

I have been trading MOS quite a bit lately and have been making money on the long and short side of things.  I simply wanted to put up a post with a chart that I have been using that has been a great tool in determining when to buy and sell and when to switch sides.

Currently I am short as of yesterday afternoon when I saw MOS hit $69.  I felt like that would be strong resistance on the upside, so it was natural to enter a short there.  I see that MOS is in a downward channel.  The $67.15 level has been one where it has had support, (although it did break through earlier last week), and that $66.75 area is also support. 

15 MIN CHART (MOS)

TRADING THOUGHTS
I will probably play this quite tight today, by selling 1/2 a position when we near $67.15.  Right now, my stops are around $68.35 to keep me winning.  If MOS would drop through the $67.15 area, it could very well trade down to the bottom of the channel which is somewhere around $65.00 on the weekly chart.

WEEKLY 3 YR MOS

Be very careful and nimble.  You must use stops, although MOS is under pressure, all commodity plays are potential huge upward reversals if the US dollar continues to drop.

GOATMUG

MOS HITTING LONG TERM TREND - SHORT

Mosaic is making a run for the bottom a very long term channel bottom.  This presents several options for those that are more focused as traders. 

15 MIN - 20 Day Chart on MOS - NASTY

LONG TRADE?
Where one sees blood, other see a purchasing opportunity, and it is always a good idea to look for the trade that would be on the opposite side of yours if you took a trade. Obviously one that has a bias toward going long can attempt to go long near the $71.55 area, setting a stop just below around $69.00. This provides an opportunity to catch a bounce with little risk. Personally, with all commodities looking pretty weak and entering into May (historically one of the crummiest months for stocks), I am not in this camp at all.





SHORT TRADE?
The good trade has been to be short MOS, and I have enjoyed that position for several days.  As we near this significant area of support, I am on high alert because I do not want to give up my gains.  As I examine this trade I have now entered in stops at $73.50 to prevent me from giving up a large portion of these great profits.  On the flipside, if the $71.55 area breaks down I am looking for a potential move to $65.00

Long term 3 Yr Weekly Channel is close to being broken. -

Daily View - 200 Day



As always, be careful.

GOATMUG

CRM - A SHORT FUSE?

EXPENSIVE SERVICES?
I was looking at some charts this afternoon and found this interesting one.  CRM is the symbol for Saleforce.com.  Yes, it is a software company and therefore it is wonderful!  I looked at adding their products to one of my businesses and found it to be nice looking, but nothing other than a glorified contact manager.  I highly recommend http://www.zohocrm.com/ as a substitute.  If you have less than 3 people in your office, guess what..... it is FREE.  Now of course I need it for basic services and I don't manage a pharmaceutical sales force or anything like that, but then again, do you need what you get for the price?

Compare that to the $2,500 a year I was quoted for the CRM services.

P/E IN THE STRATOSPHERE
Anyway, beyond just CRM has a PE of about 275 or so and seems to me it is a natural trade for a short based on the chart.  They are announcing earnings soon, so know that you are rolling the dice trading in front of that but here are the targets.
Based on the chart, a stop at $140.00 is advisable as anything above that shoots you into a new trend channel.

A target of $123 or $122.50 would be nice to place to cover.

Be careful!

GOATMUG

UPDATE ON AAPL & RIMM. SHORT TERM REVERSAL LONGER TERM FAIL

Several days ago I made a case that AAPL might be in for a decline.  While that post certainly had a day-trading (go short) aspect to it, I really was making the case that longer term, there would be headwinds that would cause AAPL to slow its march higher and ultimately reverse.  APPLE RESTING OR "SHIFT" IN PLAY?

Please examine the chart below.  I've drawn an additional line or two to show where we might see some major support at $305.  Again, I am looking at the play from a longer term strategy view (I think these are the ones I'm best at).

Some Slopers are currently taking a shot on the long side of AAPL, and when you take a look at the daily chart here, you can see why they would go after it.  If I were playing that trade, I think I'd lighten up at $340 if I got there.  I think there could be a short term bounce, but ultimately a failure back at the $330 level and a fall to test my $305 level. 

So there you have it, a bounce here, and then over the next several weeks a drop through the $330.00 to visit $305.  As for my RIMM play.  I'm keeping that one short. 

GOATMUG

CHINA - LOVEABLE PANDA OR BLOOD SUCKING GRIZZLY BEAR (PART II)

Just a quick follow up on the China trade (FXI) I outlined last week. In the post titled, China - Great Big Loveable Panda or Blood Thirsty Bear I noted that the etf was close to breaking critical support at $42.00. As often is the case, I have been short that trade since the post and have slowly been bled to death by the daily POMO that makes markets go one direction despite the fundamentals that suggest the price action should be the opposite.


As of this writing at 9AM Eastern, FXI is trading at $41.79 pre-market. If we open here, this should be cause for a doubling of my short position, with a target on the downside of at least $39.00 and a lower target of $36.00
China raised one year interest rates yesterday by a quarter of a point to 6.06% as they attempt to cool off their overheating economy. Please see the following Bloomberg article on the topic - http://www.bloomberg.com/news/2011-02-09/hong-kong-gauge-drops-to-lowest-this-year-as-china-raises-rates.html
(FXI)

What does this mean for other emerging countries? The serious answer is I don't know. If we look at charts like EEM, I don't see anything there that is a big tell as to direction, although it is really just floating out in space and could easily drop back to support around $43.75. I think a better target might be found in a chart like the one below EWS (Singapore), it looks like a pretty good short with an easy stop above $14.00.
(EWS)

I will have the monthly macro update done this evening. Please continue to check in at http://www.goatmug.blogspot.com/ . Until then, be careful!

GOATMUG

NFLX - EXITING THE SHORT AND MORE PILING ON?

The NFLX short I highlighted the other day just keeps getting better.  While I have a tendency to make quick profits and run, I saw this interview this morning where Daniel Ernst of Hudson Square Research simply has a view of NFLX that many don't.  His price target for the firm is $75.



During the interview he highlights three of his reasons for hating the stock - and none of them include the higher cost of responsibility for paying for the heavy weight data they are forcing through the internet pipes.  He gets more leeway than normal for a bear on CNBC, I wish he spoke faster so he could have been able to share his 4th reason for hating the movie vendor.

I'm am now officially out of this position for a very big and wonderful gain in just a few days.  As usual, if you are foolish enough to buy a stock (or short it) based on something some blogger writes, you are nuts!  This information is educational and for your entertainment, not so you can blow up your accounts!  As a trader I have made lots of money and lost a heck of a lot too over the years.  If you don't understand risk and know how to control losses you don't need to purchase anything in this rigged stock market (or bond market for that matter).  There is a pretty good chance at $179 and perhaps $165 that NFLX bounces hard.  If that happens, I'll be tempted to reshort, but until then it feels good to have profits in the account.

BE CAREFUL

GOATMUG

HATING NFLX HERE - TIME TO SHORT

NFLX GOING SOUTH
With the disclosure a few moments ago that the FCC has no problem with pricing mechanisms that charge based on broadband usage this puts significant pressure on companies that provide content to end-user web surfers.  In other words, when you are at home and use Netflix to order a movie you buy that content and then funnel it done the electronic superhighway to your computer or internet tv.

The present situation is that Netflix sends that big load of data to you and it uses the infrastructure of your internet provider like AT&T, Comcast, or other ISP.  As that big bundle of data comes through, Netflix simply sends it off and the carrier absorbs the cost of delivering that to the user.  Of course as more folks begin using BluRay players and Netflix this places larger and larger infrastructure demands on your internet service provider who isn't necessarily getting more revenue for your greater use of its bandwidth.  The added volumes also impact their ability to provide great service.

The FCC ruling today means that Comcast and others probably have the ability to charge those internet content providers for the amount of data they are sending onto the ISP's highways.  Netflix is a great idea if it only costs $10 a month, how great of an idea is it if Netflix is going to cost $30 a month as they will need to pass these toll charges on to consumers.

Here is a snapshot of NFLX right now.  Shorting at $202.50 and I have a stop at $206.00.  The chart has been impressive going pretty much straight up.  All bubbles burst and this is probably the catalyst.  A drop to $163.00 is quite possible with some churning at $179.

GOATMUG

MOS - SHORT OPPORTUNITY AGAIN?

Here is another look at MOS.  I have no position here, but a break through $46.50 will have me adding many puts.
The long term lower trend line and the support all line up here to make a line in the sand.  If there is no break, this could easily rally much higher especially if the overall markets turn around.

Personally I'd set a stop at $48.00 to stop the bleeding if this reverses, but $42.27 is my target exit on a profitable trade.

Here is a close up of the same image....

Goatmug

WILD ENVIRONMENT - TRADING UPDATE (MOS)

The last two days have been quite crazy and therefore I've tried as best as I could to be watching the market and focused on the breakdown and the potential rebound for buying opportunities.

If you visited SlopeofHope a couple of weeks ago, I identified a trade in MOS that I've been trading with great frustration. 
http://slopeofhope.com/2010/04/mos-breakdown.html

At the time of writing the post, the stock was trading at $52.70.  I identified a stop at $53.25 and a target of $48.  I use options to short stocks typically so I bought puts.  As you might guess I was immediately stopped out of the trade within 15 minutes of putting it on!!! YUCK!

In fact, I believed enough in the trade set up that I actually put the trade on 2 more times and was stopped out each time within hours.

I'm posting this here because I want to encourage you as traders to stay with your convictions and always continue to minimize losses and continue examining your trades so you can maximize the opportunities when they actually come to fruition.  On Friday I saw the set up again as MOS hit the mid $52.50 area, so I re-entered puts on the position.  As the day wore on, Monday provided weakness and then Tuesday and Wednesday finished the trade.  As we went underneath my target of $48 I sold my put position.

Happily, I am pretty flexible and as MOS traded down to the mid $47.40 range I see pretty good support for MOS.  I have purchased June $50 calls on MOS and am now doing quite well since it is now trading at $49.65 as I type.  I will exit this long trade on a break above $51.75 and prepare to short again if it looks weak.

Keep in mind that Thursday is the big European vote, I probably will be in all cash with my trading account.

Again, I'm not posting this to say how great I am, I'm posting this to encourage you to examine these charts and identify pretty easily the areas of support where price simply hits a ceiling or somehow stops a rapid decent and then use that as a way to buy or sell momentum that breaks through those areas.  Finally, the lesson of stops is so important.  I limited my losses despite the fact that I had losing trades 3 times!!!  My one winning trade (now two) has compensated me for all of those small losses and earned significantly more.  I closed that short position out too, so it is on the books rather than some unrealized profit.  This is why we need to learn to limit losses and let winners run to your targets.

Check out the revised chart on MOS and see why I'm looking to sell near $52.

EDIT ----11:46AM - sold my MOS June $50 Calls at a +12% profit.  I may be leaving some on the table here, but 12% in an hour is nothing to throw away.   Profits are better than losses. 

Goatmug