Welcome back, Meta-Traders.
Things went from bad to worse this past week in world markets. Recall we went into last week expecting some relief from an upcoming meeting between European leaders Angela Merkel and Nicolas Sarkozy. What did we get from that meeting? A new "financial transaction tax" on the banks!
Anyway, things stayed relatively calm in equity markets for most of the week until Thursday's 500-point plunge in the Dow Jones Industrials. The sell-off hit growth stocks hard: AAPL minus 16 points, NFLX minus 16 points, AMZN minus 14 points and the list goes on.
First a word about government IT contractor CACI. Recall I got washed out 2 weeks back at about $55 per share. I saw some basing action at around $50. With earnings coming out after the close on Wednesday, I expected some room for an upside surprise. So I bought a few shares in each account looking for an earnings related pop.
Well we got excellent earnings as expected and the stock gapped up to $52 after hours. I even tweeted Joe Terranova from CNBC's Fast Money and got a reply that he sold already 'Bad Trade' was his reply. So what happened? The stock opened down along with the rest of the market! It rallied above $50 at the close of the week. But it goes to show you that even good companies with a great story and great earnings can get crushed in a bad market.
On the bright side, I finally got involved in the gold trade. I bought some Oct 160 calls in GLD for about $16.50 and sold then just 2 days later at about $21 for a quick $450 profit per contract. Unfortunately, that was a splash of green in a sea of red that we saw on Thursday.
Also on the plus side, my AMZN August $210 calls expired worthless and I took in a fat premium on that contract. Unfortunately, I paid dearly on the underlying stock and i'm now deep in the hole on that trade in addition to the September $180 calls which have now lost about 75% of their value. But I'm still long AMZN stock as well as the contracts, and perhaps we'll get a move back to even before September expiration.
Thursday hit me hard and I started raising cash. I washed out of NFLX, CMG, and a few others, selling the weaker performers. Horrible news from Hewlett Packard on Thursday after the close hit tech stocks hard on Friday.
Even venerable tech stock IBM broken down on Friday, breaching the $160 level to the downside. This was tough to watch since I paid about $165 for this stock, and rode it all the way up to $185 level. Even earlier in the week it rallied back to about $171. I should have grabbed the profit while I had it, since I ended up selling at about 159.75 and it closed the week at $157.50.
As Dennis Gartman says "When they Raid the House of Ill Repute, even the Piano Player goes to Jail". Translation: Bear markets take down both good and bad stocks as we have seen with AAPL, NFLX, AMZN, CACI, IBM and the list goes on.
I expect that we are in for more pain next week, and that we will take out the lows in the major indices. I've kept a balanced approach trying to offset losses with winners and trying to hold onto the long terms gains that I have already booked this year. We'll see what happens, and perhaps we'll get some relief from Uncle Ben Bernanke with his policy speech in Jackson Hole, Wyoming.
Automated Forex Trading was a disaster this week and was down in every account except for Megadroid Live which had a pair of profitable trades on Wednesday. Most disappointing was my leading account Atipaq Full Portfolio which lost about 10% for the week, but is still up nearly 40% for the year in that account. My Forex Portfolio profits continue to evaporate, but I'm still up substantially for the year, and that's more than I can say for my equity account!
At times like this there's not much you can do except live to trade another day. So re-focus on your core strengths and preserve your capital. And have a fine weekend.
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