FRE & FNM

Yesterday, I heard from CNBC that FRE had a very bad earnings results . I had been monitoring the housing market. Checked both FRE and FNM. It was down for more than 20% at pre-market. Watched the stocks when the market opens. Both gapped up. Since I expect the stocks to go down further, I waited for the stocks to complete its retracement, typically 50% or 61.8% of Fibonacci level (measured from yesterday's opening price and the previous day closing price.)

.................FRE...................................................... FNM

Made the following entries:

• FRE Dec 25 Put @$1.60 (when FRE was $28.89)
• FRE Bear Call Spread Dec 25/30 Call @$2.80 (when FRE was $28.59)
• FNM Bear Call Spread Dec 30/35 Call @$2.50 (when FNM was $32.00)
• FNM Dec 30 Put @$3.70 (when FNM was $29.82)

Both the Bear Call Spreads are sold in-the-money. Both straight Puts play are bought out-of-money.

Closed part of my FRE Dec 25 Put at $2.65 after lunch time (not at the best price for the day though). I thought the market would continue its slide after 2:00pm (EST). It happened that the market reversed and enjoyed a short rally. Anyway, it was good money earning 65.6% from that play.

I have kept the rest of my play for today. So far, the market is still in my favour.

Note: When a stock tanked like FRE and FNM yesterday, the time value for the options increased substantially. It would be good to sell the options (in my play, I played the credit spreads). The time value would drop substantially by the end of the day.

- PersianCat04 (Millionaire-in-progress)

Level 3 Assets at MS, GS, LEH, BSC, C, MER

With the current credit crisis in the U.S., it is important to monitor the following development.

Extracted from Online Trading Academy email newsletter (free subscription).
"The Financial Accounting Standards Board (FASB) is the referee for accounting practices. They recently issued a new rule which will be implemented November 15. Essentially, Statement 157 requires a financial firm to divide its assets into three categories called simply enough, Level 1, Level 2 and Level 3.

Under FASB terminology, Level 1 means assets that can be marked-to-market, where an asset's worth is based on a real price, like a stock quote. Level 2 is mark-to-model, an estimate based on observable inputs which is used when no quoted prices are available. You can go get several bids and average them, or base your assumption on what similar assets sold for.

Level 3 values are based on "unobservable" inputs reflecting companies' "own assumptions" about the way assets would be priced. That would be market talk for best guess, or in some cases SWAG (as in Simple Wild-***ed Guess.)

.... It seems that some companies have far more Level 3 assets than they have capital. Take a look at these six banks which have already posted their Level 3 assets ahead of the deadline:

• Morgan StanleyEquity base: $35 billionLevel three assets: $88 billionLevel 3 to equity ratio: 251%
• Goldman SachsEquity base: $39 billionLevel 3 assets: $72 billionLevel 3 to equity ratio: 185%
• LehmanBrothersEquity base: $22 billionLevel three assets: $35 billionLevel 3 to equity ratio: 159%
• Bear StearnsEquity base: $13 billionLevel three assets: $20 billionLevel 3 to equity ratio: 154%
• CitigroupEquity base: $128 billionLevel three assets: $134.8 billion Level 3 to equity ratio: 105%
• Merrill LynchEquity base: $42 billionLevel 3 assets: $35 billionLevel 3 to equity ratio: 38%"

I will certainly monitor the above stocks especially MS, GS, LEH and BSC and consider shorting them when the time is ripe. At the moment, these stocks are recovering from their recent losses. It seems that there are more room for these stocks to go down.

- PersianCat04 (Millionaire-in-progress)

Market Update

The general market bounced back yesterday after 4 down days. Basically, the market bounced from its Support levels:

• Dow Jones (50% of Fibonacci level)
• S&P 500, SPY (61.8% of Fibonacci level)
• Nasdaq Composite (SMA200)
• AAPL (50% of Fibonacci level)
• RIMM (38.2% of Fibonacci level)

Could it be a bull-trap? It remains to be seen. (Btw, I have no open positions at the moment)

I am now looking at the right set-up to short the financials (banks, mortgage lenders, etc) and housing stocks again. They are now experiencing a rally (it should be a short one though). Frankly, I prefer the market to experience some rally to recover some of their lost ground before testing the August Lows.

- PersianCat04 (Millionaire-in-progress)

Tech Play - Positions Closed

Hi !

Just an update. I have closed all my positions in AAPL, RIMM and SPY when they are consolidating during lunch time yesterday. At that moment, AAPL and had been resting on its 38.2% Fibonacci level (taken from Aug low to year high), SPY resting on its 61.8% Fibonacci level and RIMM is resting on its 50 SMA. It seems then that the market is poised for a short rally. Since I have made my money, I thought, let's not take chances and take my profits that I deserve. The market went down further towards the later part of the day. Well, I am not perfect - but for these trades I am still very happy.

Sold Bear Call Spread AAPL Nov 185/190 @1.80
Bgt back @0.10
Profits = 53.1%

Sold Bear Call Spread RIMM Nov 125/130 @2.28
Bgt back @0.20
Profits = 74.5%

Sold Bear Call Spread SPY Nov 148/153 @1.81
Bgt back @0.83
Profits = 30.7%

The above play were over 3 market days.

Also played intraday trade for GOOG (straight Put). The first trade was disastrous. The second trade was much better and managed to recover the previous loss plus some profits. Then again, I closed too early and the market tanked further. I should not complain and still be thankful for what I have got.

- PersianCat04 (Millionaire-in-progress)

Tech Play - AAPL, RIMM & SPY

In today's bearish market, I would not be a hero and play Long no matter how good the stock is - unless the stock benefit from an economic downturn. For shorts, which sector should we focus on then?

I would focus on sectors that had a good run recently and might be affected by the current bearish sentiments. One sector I'm focusing on now is Technology stocks. e.g. AAPL, RIMM, GOOG and many others had a very good run. While they are good stocks with strong fundamentals, they are not impervious to bad consumer sentiments. Since CSCO guidance yesterday, the tech stocks had been beaten badly yesterday. At market opening today, the bloodshed continues.

Since the market is volatile and the option premiums are somewhat expensive, I thought I should just play credit spreads and be less affected by the volitility (but less profit/risk). I opened 3 new positions yesterday, playing Bear Call credit spreads for Nov month (7 market days left) for the following stocks:

AAPL = Sell 185 Call , Buy 190 Call, for $1.80 when AAPL is around $182.72
RIMM = Sell 125 Call , Buy 130 Call, for $2.28 when RIMM is around $126.61
SPY = Sell 148 Call , Buy 153 Call, for $1.81 when SPY is around $147.60

For RIMM, I sold the 125 Call in-the-money. It is against what we have been taught (normally sell out-of-the-money). It is a higher risk play. But I reckon that since RIMM can move big, if I am wrong I would lose money anyway. I might as well collect more credits from my spreads and lower my risk that way.

So far, these new positions are positive. I may not wait for expiration Friday (Nov 16) to collect my profits.

Other sectors still bearish are Housing & Financials.
Note that SPY is not a Tech stock.

- PersianCat04 (Millionaire-in-progress)

Quick Comments on the US Market

My quick assessment of the US Stock Market:

I am generally very bearish over the US stock market based on the following reasons:

• Subprime woes. It is already affecting housing stocks, mortgage lenders and banks in US. I believe the bottom is not near yet. More bad news can be expected. Once consumers spending is affected, it will greatly affect credit card companies, retail and tech stocks. The general market will go down in tandem somewhat. The earliest sign that tech stocks could be affected comes from today's CSCO guidance. Tech stocks that had pushed the market lately, tumbled today (as at 2:00pm ET)
• Weak US Dollar. The ridiculous trade and budget deficit in the US coupled with lower Fed Interest Rate will push the US dollar lower. This somewhat pushed Gold & Oil to go higher. More countries such as China are also reducing their US$$$ holdings. As long as the FX market sees no bottom for the weak US dollar, the US stock market will be under pressure to go lower as inflows of funds to the US stock market might be lower.
• China's Stock Market Bubble. Greenspan had been saying that China's stock market is generating a huge bubble. Now that he is out of government, I tend to trust his words more than before. China had enjoyed a bouyant economy. However, with the recall of many products from China, it had created a BIG FEAR among consumers in the West. Demand for its product might be affected. I suspect that a significant number of Chinese factories should face overproduction now. It is a matter of time before the media get to know about it. If the US market go down coupled with the weak US dollar, US consumer spending would be affected. The demand for Chinese goods would go down too. Thus creating more overproduction in Chinese factories (unless they can create demand from elsewhere fast enough). Soon the Chinese stock market will be affected to.

In a down market, all stocks, good or bad will go down too. Stock markets all over the world might go down the drain too. My concern is that this whole episode might create a global recession. The question is, "What will trigger (it is just a market excuse) the global market meltdown?" Is it something from the US, China or elsewhere?

The above arguments may sound very simplistic, but I suppose you get my point.

- Persiancat04 (Millionaire-in-progress)

I'm Back

Hi All,

I'm back updating my blog. It's been more than a year since I last wrote. I have been actively trading though. It is just that I couldn't find the time to write. Sometime last year, my mum-in-law was diagnosed with cancer. So have been busy shuttling her for treatment and check-ups and handling new chores/routines.

Anyway, she is now diagnosed to be free of her cancer cells. I have more time now and you could expect more of me in this blog.

The market is now entering an interesting phase. So watch out for my 2 cts worth.

- Persiancat04 (Millionaire-in-progress)

GM Play

I have been playing GM for a number of times for the past few months - going in and out of positions. Technically, GM had broke new 52-week high and had been on an uptrend since April 2006. Its uptrend had been quite predictable within a channel (a rally followed by a a good pullback within a range). Lately, I have also been following the news about its possible alliance with Nissan/Renault and the sentiments that its Chairman Rick Wagoner has against the alliance.

03-Oct-06 08:34 ET Briefing.com
General Motors board faces key decision on alliance - Detnews.com (33.50 ) -Update : Detnews.com reports all eyes are on the General Motors board today as directors evaluate the widely different analyses of a blockbuster alliance of GM, Renault and Nissan Motor (NSANY). ........ GM declined comment Monday on the agenda for today's meeting of the 12-member GM board headed by Chairman Rick Wagoner. But people close to the co said Wagoner is certain to report on last week's summit meeting with Renault-Nissan chief Carlos Ghosn in Paris -- and possibly present GM's recommendation against the deal. People familiar with the matter say Ghosn is interested in Renault and Nissan each buying a 10% stake in GM, with GM purchasing a similar stake in the French and Japanese cos. However, GM insiders say that the automaker can't afford to spend its precious capital on stock in Renault and Nissan.

Received further news about GM on the same day.

03-Oct-06 08:44 ET Briefing.com
Newspaper Notable Mentions : FT: Nissan Motor (NSANY) wants to conclude talks on a possible tie-up with General Motors (GM) and Renault by mid-October, despite recent suggestions that the three auto giants should extend a 90-day study of their proposed alliance beyond that...

Since then, I have been on the look out for more news. Futhermore, CNBC reported that the Board is convening a meeting to discuss the proposed alliance. To me, that is strange since they have until mid Oct to decide.

On 4th Oct, Bear Stearns upgraded GM to Peer Perform from Underperform. Then the big news came:

04-Oct-06 11:46 ET
Follow-up: WSJ says GM, Nissan-Renault alliance talks terminated, according to source (32.47 -0.94) -Update : Dow Jones reports the chief execs of General Motors and Nissan-Renault terminated talks about a possible globe-spanning alliance, according to a person familiar with the situation. In a phone call Wednesday morning, GM CEO Rick Wagoner and Carlos Ghosn, chief executive of Nissan Motor (NSANY) and Renault, decided that the two sides were too far apart on the value of the potential tie-up and decided to stop the high-stakes talks which had been underway for two months. The move comes ahead of the mid-October deadline the two sides had set for a decision. Behind the failed talks was GM's demand that Nissan-Renault pay GM a "control premium" if it bought 20% of GM's stock as part of the alliance, according to another person familiar with the matter. Wagoner told his board Tuesday that investment bankers advised GM to secure a 20% control premium because such an alliance -- while not technically control -- would prevent the Detroit automaker from making any other joint ventures.

I interpreted this as bad news for the stock. As such, I expect the price to drop. The stock was dropping when I bought its Nov 32.5 Put. (And I bought F Nov 8.0 Call as I expect the stock to gain from this news. It was mentioned before that it is willing to talk with Nissan-Renault should the talk with GM failed.) It however gained in price over the next two days. Intuitively, I know the stock will drop dramatically. I just do not know when.

{Prior to the Put Position, I played in-the-money Oct Bear Call Spread (30.0/35.00) playing on the pull-back and planning to close my position when the stock reverse again upwards. My mistake was that I did not stick to the plan. From a positive position, my Bear Call Spread turned negative. As it was more negative, I hang-on to it because the Oct options had about 3 weeks more before it expires. Anything is possible in 3 weeks. On hindsight, I should have stick to the plan and close my position when it was positive then. - eventhough Friday's move saved my position}

Then on Friday, 6 oct 06, I saw my GM chart started to move significantly in the direction that I expected (down). The bigger news came as I read from Briefing.com:

06-Oct-06 12:09 ET
Follow up: General Motors dislcoses Tracinda has decided not to pursue the acquisition of additional shares of GM common stock (31.84 -1.29) -Update : From Tracinda's SC 13D/A: "On October 4, 2006, General Motors abruptly announced the termination of discussions regarding its proposed alliance with Renault and Nissan prior to the expiration of the time period originally established for the initial evaluation of the alliance and without the General Motors Board of Directors obtaining an independent evaluation of the alliance. On October 6, 2006, Tracinda received a letter from Jerome B. York stating that Mr. York had resigned his position as a director of General Motors. The Filing Persons have decided not to pursue the acquisition of additional shares of General Motors common stock. The Filing Persons will continue to review their investment in General Motors and may determine, based on market and general economic conditions, the business affairs and financial condition of General Motors, the market price of its shares and other factors deemed relevant by the Filing Persons, to acquire or dispose of additional shares."

A lot more news about GM were released that day. While it is uncertain what Kirk Kerkorian (one of GM's major investor) might do next, the market is not willing to hang on to GM at that price. Two analysts interviewed by CNBC also agreed (normally one is bullish while another is bearish) that GM stock will go down further with one of them saying that the price could be around $26 - $28. I added more to my Put position. The stock ended $2.08 lower at $31.05.

We shall see what happens next on Monday. I would probably lock-in some of my profits.

- PersianCat04 (Millionaire-in-progress)

Home Builders Stocks

Today, the existing home sales data was released. For the first time in years, the median price for the existing home sales decreased (about 1.7%). CNBC also mentioned that the inventory is at the highest since 1993.

The drop in the median sales price is what I have been waiting for. Continuing drop in median sales price would put pressure on the home builders stocks to break its recent support.

- PersianCat04 (Millionaire-in-progress)

Market Update

The DOW is now about 170 points away from its May high and 250 points away from its all-time high. On a very good day, to achieve 250 points is not a problem for DOW. The S&P 500 index had already broke its May high.

However, the market had shown a lot of lethargy, trying to break new high. It is in overbought situation. It had 2 down days for the past 2 trading days. While the market will probably make another attempt to break an all time high for the DOW, it is time to consider that the market might be in for a pull-back. There are many stocks as candidates to short, especially the Tech stocks (many with confirmation candles). The stop-loss should be the recent high.

A few things to consider however:

• Jim Cramer had been calling to dump energy stocks and push for Tech stocks (at least till the end of the month) as he believe that the institutional investors will window dress this quarter with Tech stocks.
• He also mentioned that crude oil will drop to $56 before it go up again.
• Many analysts are still expecting a Christmas rally. Such expectations tend to be a self-fulfilling prophecy.
• September tends to end lower.

While I tend to give what Jim Cramer says with a pinch of salt, what he says tends to move the market in the short-term. As a swing trader, I play on a short-term basis. As such, I have to take notice of what he says eventhough I may disagree with him.

- PersianCat04 (Millionaire-in-progress)

DOW and S&P500

DOW ($INDU) S&P500

Based on the daily charts, the DOW is just about 130 points away from its 52-week high. Whereas the S&P500 is just 10 points away from its 52-week high. One could expect the market to attempt to break the 52-week resistance line. Barring unforeseen circumstances (e.g. war with Iran), I feel that the market would break new high and remain high for most part of the next quarter.

- PersianCat04 (Millionaire-in-progress)

Home Builders

$HGX - the housing index made a strong rally today. Lately, the home builders stocks have been resisting the downtrend eventhough the homebuilders industry had been bashed with continuing bad news (e.g. increasing inventory & increasing lower sales). At current market value, most homebuilder stocks are valued at a very low PE ratio (single digits).

However, what is interesting is that the median price of each houses sold had not dropped. Until and unless the price of houses sold drop, the continuing slide of the home builder stocks could not be justified further. As such, I believe the home builder stocks would get a reprieve it badly needed (as shown in today's rally).

I'm however, feel that the prices of houses sold would start to drop next year if not sooner. Depending on the severity of the drop in prices, it could impact consumer spending (which would impact the market in general)

I've been playing Bear Call Spread on BZH and RYL recently (typically in-the-money). I closed my sold leg yesterday with profits. But what make it more interesting is that my bought legs, which were negative before is now positive. I might close these positions tommorrow.

I would wait for a reversal signal before playing Bear Call credit spreads on the home builders again.

- PersianCat04 (Millionaire-in-progress)

RIG - Huge Oil find in Gulf of Mexico

Heard from CNBC about the huge oil find in the Gulf of Mexico. Also read from American Capitalist:

Black Gold Gushes in the Gulf
Just announced this morning, Chevron Corp. (CVX:NYSE) has successfully completed what it called “a record setting production test” on a well located about 270 miles southwest of New Orleans in the Gulf of Mexico. Chevron said the well sustained a flow rate of 6,000 barrels of crude a day. Unfortunately, the equipment used is not able to maintain more than 6,000 barrels, but we’ll take what we can get.
Chevron owns 50% of the well, with companies like Devon Energy (DVN:NYSE) and Statoil (STO:NYSE) holding the remaining 50% equity interest. All three companies are estimating the new oil field to hold between 3 billion and as much as 15 billion barrels worth of oil and gas reserves. If 15 billion barrels are found, oil reserves would be boosted by 50% in the United States.

The find should benefit Oil Services stocks. One player I like a lot is RIG. It had quietly gained more than $4 on Friday and further gained $2.70 so far today. We have 2 more months before the hurricane season is over. Any freak hurricane in the Gulf of Mexico (where many of U.S. oil rigs are located, apart from Alaska) would again benefit RIG.


Target = 80.10, 84.05 & 90.16 (52-week high)
Stop loss = 65.52

- PersianCat04 (Millionaire-in-progress)

AAPL - Special Media Event

Read from Briefing.com about the impending AAPL Special Media event next week on 12 Sep 06 to introduce new products and services. I would expect the market to react positively to the new slate of AAPL's products and services (It had gained $1.65 so far today).

Chart-wise, AAPL broke its resistance today. Target 73.38, 76.60 and86.40 (52.-week high). Stop-loss at 65.12. Note that AAPL is now above its SMA 200 again.


05-Sep-06 12:13 ET
Apple Computer confirms media event - AppleInsider (69.77 +1.39) -Update : AppleInsider reports in a digital invitation sent out to US-based media this morning, Apple confirmed that it will hold a special media event on September 12 to introduce new products and services. "It's Showtime," reads the invite, which displays a white Apple logo floating amongst four crisscrossing Hollywood movie spotlight rays. The event is scheduled for 10:00 am local time at the Yerba Buena Center for the Arts Theater in San Francisco, Calif. (See 8:30 comment)

05-Sep-06 08:55 ET
Apple Computer: Cell phone is a reality; new product cycles including Macs, iPods, and cell phone drive ests higher; increasing tgt to $91 - AmTech (68.38 ) -Update : AmTech says Skeptics abounded when AAPL first launched their iPod MP3 players and revolutionized an emerging market and created a new business segment and a major rev driver for the co. Firm believes the new AAPL handset will be a major player and competitor set to disrupt another industry. Firm has learned that the kinks have been worked out of the new handset, and it is set for production. Firm is confident that AAPL will time their launch opportunistically, and that the new handsets are positioned to gain significant traction. This new market could easily represent an incremental $2 bln annual rev run-rate rev opportunity in Y07. Firm says 10 mln units does not seem a lofty target to them. This is not even contemplating sales of potential services and accessories which would be incremental. With Steve Jobs' history of revolutionizing the PC industry, the music industry, and the movie industry, firm encourages investors to get aggressive in purchasing shares of AAPL prior to the potential revolution of the handset industry. Firm ests for FY07 are now $22.2bln and $2.60 EPS up from $22 bln and $2.45. Firm adds AAPL to their Focus List, and their new tgt $91.

05-Sep-06 08:30 ET
Apple Computer to roll-out iTunes movies and 'one more thing' - AppleInsider (68.38 ) : AppleInsider reports Steve Jobs plans to summons the worldwide media to a special event this month in which he'll usher in a new chapter in the co's digital media strategy. Although the semi-official word out of Apple Americas is that invitations to the event have "not been sent" out, a seemingly inadvertent leak out of Apple Europe last week pinned the affair for Tuesday, September 12. Jobs will have much to talk about during the event, sources familiar with the chief exec's plans have said, including new iMacs and a much-anticipated update to the iPod nano. But the real push, they say, will be tied to the big screen. After what has seemed like nearly two years of rampart speculation and unbridled enthusiasm on the part of its fans, Apple is ready to introduce its al la carte feature film download service as part of iTunes. For some time now, published reports have insinuated that Apple and Jobs would be unwilling to launch a movie download service without a wide, touch-screen video iPod player to coincide. Jobs many months ago commissioned an elite group of Apple engineers to get the ball rolling on an intuitive hardware solution that would more closely tie the co's digital media strategy to the living-room. And so AppleInsider has been told, Apple has been quietly developing a video streaming device that will interface with an updated version of its iTunes jukebox software.

- PersianCat04 (Millionaire-in-progress)

ENER

ENER (Energy Conversion Devices) is a leading supplier of hybrid car batteries and player of alternative energy (e.g. solar). Yesterday (30 Aug), ENER break its 4-months downtrend by making a new higher high with a spike in volume.

The next target level ranges from $39.28 (38.2% Fibonacci level) to its 52-week high of $56.00. Stop-loss at $31.91. Currently, ENER is hovering at $35.51. This stock might be slow in movement. Have to be prepared to stay in the game for a few weeks.

- PersianCat04 (Millionaire-in-progress)

FOMC minutes (29 Aug 06)

Yesterday (29 Aug 06), the FOMC released its FOMC minutes. While analyst reports I read thought that the report is rather bearish, the market rally after the release of the report. Below is an extract of one such reports:

From Briefing.com The market took a surprisingly optimistic view of the August 8 FOMC minutes released yesterday. The minutes indicated that many members felt higher rates were needed. The minutes stated that it was a "close call" at that time not to raise rates, and that "additional firming may well be needed." The minutes also said that "All members agreed that the statement to be released after the meeting should convey that inflation risks remained dominant and that consequently keeping policy unchanged at this meeting did not necessarily mark the end of the tightening cycle." That's a fairly hawkish tone that conflicts with the financial market view that no more rate hikes are likely.

Nevertheless, traders poured over the minutes to find what could be considered bullish statements about economic and inflation trends. There was a clear effort to find the good news and ignore the bad. In our opinion, the minutes in themselves were clearly bearish for the stock market.

The fact that stocks went up after the release says more about the underlying tone than about what the minutes themselves revealed. We still believe the market is overly optimistic on the inflation and interest rate outlooks. There is a risk of disappointment on both. Nevertheless, the longer-term fundamentals remain good. -- Dick Green, Briefing.com.

I found Dick Green often give good analysis of the market. I tends to agree with him on this regard (FOMC minutes). I will treat any short term rally with care.

- PersianCat04 (Millionaire-in-progress)

DELL Earnings Play

Read in Briefing.com yesterday:

17-Aug-06 15:33 ET
In Play
Dell: earnings preview (22.62 -0.11) -Update : DELL is scheduled to report Q2 results today after the close, with analysts expecting EPS of $0.22 on revs of $14 bln. Note that on July 21, the co issued downside guidance, saying they see EPS of $0.21-0.23; sees revs of $14 bln. The co said these ests primarily reflect aggressive pricing in a slowing commercial market worldwide. AmTech does not anticipate much deviation from its pre-announced miss in late July. For the October qtr, they anticipate DELL to decline official guidance but express comfort with sequential growth. They are modeling $14.6 bln and $0.26 as they see a seasonal pick-up in the Americas offset by weaker seasonality in Europe and continued pricing pressure. With the stock trading at 16x depressed CY07 EPS, they see more upside than downside at these levels. A.G Edwards notes since Dell has already preannounced its July quarter, July sales and earnings are already known but P.C pricing details will be of interest. The firm says Dell's October quarter operating margin expectations will be important. They have assumed that Dell's operating margins will remain stuck in the 4-5% range for some quarters. The firm believes that Dell plans to regain some share in the consumer space, which is likely to result in ongoing margin pressure, though they think this is the right strategic move.

Since the July 21 downside guidance, DELL had gained significantly. As I do not expect any good news from DELL earnings, the only way for it to go is down. I played Bear Call Spread, selling Aug 22.5 Call and buying Aug 25 Call for $0.55. Also bought Sep 22.5 Put for $1.05 (almost at-the-money).

Today, DELL did opened much lower, dragging along the market somewhat. Closed my Sep 22.5 Put for $1.65 for a profit of 57% over one day. At the moment, I am leaving my Bear Call Spread intact. Hopefully, it expires worthless today.

- PersianCat04 (Millionaire-in-progress)

NVDA Earnings updates

NVDA did open lower the next day. However, it moved back upwards to fill the gap and gained much more the next day.

My mistake is not to lock-in my profit immediately in the current volatile market. In total, made a very small profit, helped by Bought leg of my Bear Call spread.

- PersianCat04 (Millionaire-in-progress)

NVDA Earnings Play

NVDA will report its earnings after the market close today. Read from Briefing.com regarding NVDA earnings preview.


14:59
NVDA NVIDIA: earnings preview (23.97 -0.36)
Today after the close NVDA is scheduled to report Q2 results, with analysts expecting EPS of $0.23 on revs of $677.08 mln. Caris says FQ2 results for NVDA should be roughly in-line with increased share in discrete notebook and incremental I.G.P sales. Despite the currently poor sentiment surrounding the PC space, the firm believes NVDA fiscal Q2 results were near expectations with low probability of an impending disaster. This would point to NVDA outperforming typical P.C seasonality with flattish revs QoQ as notebook and I.G.P strength offsets desktop related softness. The firm is expecting NVDA to report roughly $682 mln in sales, slightly above the street expectation. Given the increase in mix to G70 based components, the firm also looks for gross margin to be roughly flat at 42.5% despite the ramp of lower margin IGP business. The firm is slightly more optimistic than the street with a $0.28 EPS estimate for FQ2 as profitability remains relatively stable. Lastly, they believe the inventory situation will improve QoQ as NVDA burned additional G70 product and strictly management TSMC wafer-outs. The firm is looking for mid-single digit sales guidance as seasonal tailwinds commence... ThinkEquity believes Q2 results should be in-line and guidance for Q3 will be better than most are expecting. Most importantly, the firm believes DELL (DELL) will use NVDA's chipsets for its AMD PCs, driving revs up by $140 mln in CY07. Click here for techincal levels of interest.

The stock had a good steep run upwards since 18 July. In normal market, the market would punish stocks that had a good run upwards badly if the earnings outcome and guidance werejust in-line. As such, I expect the stock to correct downwards. (Anyway, Briefing.com earnings preview has served me extremely well before.)

Played a conservative Bear Call Spread (for $0.60) selling Aug 25 Call and buying Aug 27.5 Call. Also played a more agressive play buying Sep 23.75 Put (for $1.50).

After the close, Briefing.com reported:

16:21
NVDA NVIDIA announces voluntary review of the it's stock option practices (24.16 -0.17) -Update-
Co announces that the Audit Committee of the Board of Directors is conducting a voluntary review of the co's stock option practices covering the time from the co's initial public offering in 1999 through the current fiscal year. The Audit Committee is conducting this review with the assistance of outside legal counsel. The co has voluntarily contacted the SEC staff to inform them about the ongoing review.

This news is as good as reporting bad results. At the time of writing, NVDA price had dropped below $22.00. Hopefully, the price remains low when market opens tommorrow. Based on the charts, NVDA can drop further to $17.17 (my target).

- PersianCat04 (Millionaire-in-progress)

Market - Updates

As at yesterday, the indices (e.g. Dow, S&P 500, Russell 2000, Nasdaq 100, Housing) showed a confirmed short-term reversal to the downside. The first target should be the lowest point over the last 2 months. The immediate resistance (stop loss) would be the highest point over the last 2 months. I believe the market will try to break the support (where my target is) and go lower. Let see how it turn out.

There are many possible short plays. These include:

• AAPL - AAPL tends to close its gap whenever it has a huge gap up (last one in early July). Target $55.08 & %50.16
• Homebuilders & homelenders (DHI, TOL, KBH, BZH, RYL, LEN, LEND, etc)
• Index stocks (DIA, SPY, QQQQ)

I had already place my positions and am reaping the fruits of my labour so far. I will probably put more ahort positions soon.

- PersianCat04 (Millionaire-in-progress)