I probably don’t have to say how discomfiting it is to be holding fast during this upsurge. The NASDAQ has added nearly 6% in just the past five trading days, and we’re getting dangerously close to violating our nice, neat series of lower highs. If we slice above the prior high, it’s not the end of the world, but it definitely muddies the water. As if it weren’t muddy enough.
When the powers that be are doing everything that can to keep the dance music going, the moves are going to get more and more violent. What we’ve seen just in the past couple of days is a sneak preview of the absurdity ahead: waterfall drops (AKA reality) and explosive up-moves (AKA desperate bidding from the big boys). My motto? Three words. Sell into strength.
It’s obviously more of a kick when things are falling, but looking at today’s action, we have seen this movie before. In fact, we’ve seen it multiple times lately. The unicorns are cavorting once more in the meadow, and everyone is bidding assets up. But one glance at the past couple of months on the ES simply screams “short me!” even though it’s virtually impossible to do so on a day like this and feel good about it. It only feels good after the fact. That’s why hardly anyone does it. “Sell into strength” are three of the easiest words to say but most difficult to actually execute.
In a post earlier this week, we looked at hedging one widely-traded stock that was within a few cents of its 52-week high, ADM (“Downside Protection For ADM”). Another stock in a similar position Wednesday was Intel (INTC). Shares of Intel rose fractionally Wednesday, closing at 26.98, within a few cents of their 52-week high of $27.12. (more…)
In a post on Monday (“VXX Sucks”), our host Tim noted the double digit move in the VIX (though not in VXX, which has made longs’ money evaporate since inception) on the day. With volatility getting a mild bump, I thought I’d take a look at the hedging costs of a few widely-traded stocks trading near their 52-week highs. Agricultural powerhouse Archer Daniels Midland (ADM) was one that was relatively inexpensive to hedge. Here are two ways of doing that over the next several months. (more…)
One of the bigger losers on Friday, when the Nasdaq lost 110 points, was Facebook (FB), which dropped 4.61% to $56.75, a buck and change away from the near-term bottom target for the stock hedge fund manager and market technician Tim Knight highlighted in a recent post (“Social Targets”). (more…)
Shares of Netflix (NFLX) dropped nearly 7% on Monday, as Carl Icahn told CNBC that he may have sold half of his Netflix stake. In a post last month (“Investing alongside Carl Icahn while limiting your downside risk”), we presented a hedged portfolio constructed out of the holdings of Carl Icahn’s Icahn Enterprises (IEP) by the automated portfolio construction tool at Portfolio Armor. That portfolio included a hedged Netflix position, circled below. (more…)