Newsletter Update for April 28, 2014

Hello Again! Periodically I will update in the future, anyone can go back and see what I said in the past regarding the market, as well as some specific stocks. So here we go:

What I wrote on 4/20/14:

The cover story on Barrons this week was on Home Depot. They are expecting the share price to rise by 25%. It is at $85 now and I have a call option with a strike price of $100. It also had this to say," A Wall Street analyst says Home Depot's current management, led by CEO Frank Blake, is the best he has seen in 29 years of covering the retail industry". If it is a bullish day tomorrow, there is a high probability that HD will go up tomorrow.  I have been going in and out of HD for the past 2 years. Under "Market Watch", it also had an article titled 'Warning for small caps' as they have had a rough couple of weeks recently. For the first time in 17 months, the Russell 2000 touched its 200 day moving average-signaling a long term trend change. For the past few weeks I have been watching Alcoa (AA) even though they are losing money, it is expected to make good money in the future. It is already up 50% but it could go much higher. Last week, it was one of the heaviest traded stocks as it went up 1% in price with the volume rising by 8%; which is a good technical indicator. Ford used to be on this list every week for the past year or so but it was missing from this week’s list. I wonder why! GE is still there and it is very bullish. Barons is very bullish on emerging markets, too. I just placed a sell order on a call that has gone up by 60% and I also have another call that I bought recently. I love Barrons! About 25 to 30 years ago, a company called Halmi (a Hollywood production company) had its financials in Barrons. I studied it and was interested in buying the stock. At that time, it was trading at $1. When it got to $2, I got my dad to make a big purchase. I got my dad to sell his share when the price hit $20, a couple of months later. I googled and found that this 90 yr. old producer is still active!

 What I wrote on 4/27/14:

It is interesting that last Sunday I wrote to you about how Ford was missing from the week’s most active list in Barrons.  Ford missed the earnings estimate by $0.06 due to onetime ‘special items and charges’. The stock price finished 3.3% lower. As expected, Ford lost money in Latin America and they will close some productive truck plants in the summer to make their trucks from Aluminum. We had a solid quarter, and we are on track with our most aggressive product launch schedule in our history,” said Alan Mulally, president and CEO. Europe and Asia looked good. I had 3 call options on Ford and I sold one on Friday (4/25/14). Ford is back on Barron’s most active list again -price went down by 0.22% and volume too went down by 1.4%. If the volume increased the price going down, it would have been bad. Ford did not appear among the ‘largest changes’ on NYSE Short Interest Highlights. I am still bullish. If the price falls further I will buy more calls. It would be great if the price falls below $14. Under $10, it would be a steal. GE keeps slugging up. Slowly but surely it is getting closer to its 12-month high of $28.  At $28, my calls would be worth quite a bit and if it reached $40 as some analysts expect it to do, it would be fantastic! A few weeks back I said that JCI CEO expected China to surprise Wall Street on the upside; and now more and more CEOs are saying the same. Barron’s cover page was dedicated to a ‘tired bull’ so a 10%+ correction could come at us at any time. Periodically I buy puts on the total market as hedges. I have been watching Caterpillar for a long time and over the past 6 months; it rose from $85 to $105 (approx). The PE is at 18. Call options are very pricey and for that reason I did not buy any. Amazon with a 515 (!!) lost 9.88% on Friday when they reported another loss. Surprising short interest fell by 7% during last week. Most probably people are tired of getting caught in short squeezes. If anyone is interested, there is a way to play Amazon. Put option with a strike price of $160 for January 2016 is trading at $5 (or $500 per contract). This is insane! This should be going for $1 or so. Strike price $160 for January 2015 is trading at $1.40. How to make money on this? Write (sell) a ‘naked’ (not covered) January 2016, strike price $160 at $5 and reasonably expect to buy back in 8 months at $1.40. In other words, sell now at $5 and 8 months later buy at $1.40. After writing the option if the price drops below $160 (currently at $303), the owner might exercise the option and you will end up owning 100 shares at $160 for each contract you ‘wrote’. If Amazon drops to $160, it would be foolish not to buy. On the other hand, if you want to have a hedge against a huge disaster, while writing naked Jan 2016 options, you can buy some Jan 2015 puts-hoping to close the deal before 1/25/15. A no brainer!

Thank You for Reading. Stay tuned!