Stock And Option – End Of Day Comments For Sep 28 2012 – RIMM, AAPL, MSFT

Stocks tried for a nice recovery towards the end but negative sentiment was too strong and stocks finished lower. The S&P 500 closed down to 1440.67 for a loss of not quite half a percent. Overall the whipsawing in the markets has some investors nervous but the VIX Index with a reading at the close of 15.73 continues to show not much concern in the market. There is certainly no panic, which is why the markets made such a strong come-back in the afternoon. This apparent lack of concern has investors looking to pick up stocks on dips for what they believe are going to be higher prices into October or November. For those worried investors who have written me and wondered about my outlook with stocks at recent highs, I can only say my crystal ball does not allow me to look that far ahead. I have read all the recent Dow Theory dire warnings and of course yet another Death Cross. I don’t put much faith in death crosses and after more than 30 years in stocks I have seen the Dow Theory be wrong more times than right. There was a Golden Cross in early 2008 which apparently is quite rare and very positive for stocks and look what followed. I think the better bet is to stay with winning strategies, and watch the 50 day moving average for any signs of stress.

September Stock Market Gains

September certainly fooled a lot of analysts and investors as it put in a solid performance. September tends to be the worst month for stock market gains so it was encouraging to see September this year providing gains.

Stock and Option – Research In Motion Stock (Symbol Canada RIM – US- RIMM)

Analysts were busy talking about RIM which turned in a lower quarterly loss than expected. Note how there was a loss, but at 27 cents per share it was better than the .47 cents loss that was predicted. RIM Stock moved up sharply on the news that the number of subscribers had increased and that some capital had been made to be used for the launch of Blackberry 10. But there is other news in the report that perhaps not everyone saw. RIM is continuing to lose subscribers in North America but increasing subscribers in India and Indonesia. The problem though is that profit margin is better in North America. Profit margins are tighter in Asia.

Analysts jumped on board with predictions of a further increase in value for RIM Stock. National bank upgraded the stock to a buy and a target of $12 and BMO Capital markets upgraded the stock to a buy with no further guidance. As far as Put Selling I think RIM Stock is too risky although at $7.00 some could argue there is not much risk left to the downside. But no matter what analysts say I believe there are better stocks to use for Put Selling, covered calls, spreads and the like. Why set yourself up for problems and endless rescue trades when there are good premiums to be had with a multitude of other stocks. I think put sellers need to ask themselves would they want to own shares of Research In Motion if assigned? I know I would not.

Stock and Option – Microsoft Stock

Microsoft stock closed near the lows of the day. The break of $30.00 which Microsoft tested at various times over the past few trading sessions could lead the stock to fall quickly to $27.50 to $28.00 where there is more support. For put sellers not interested in owning shares, they may want to wait to see if the stock hits that area and no further, before selling puts.

Stock and Option – Apple Stock

Apple Stock fell back 14% today which hurt the NASDAQ Index quite a bit today. The inability of Apple Stock to hold above $700.00 may lead to some good Put Selling opportunities but I think if I was doing Put Selling I would be looking more towards put credit spreads. (Sell a higher put, buy a lower put) The movement in Apple Stock is certainly going to make for very good premiums but I do believe the spread offers a bit more safety against possible losses in the event that Apple Stock decides to pullback a bit further. The one year Apple Stock chart below shows that there are very few true support levels in Apple Stock. The $625 to $630 level is probably a decent support zone to consider. The November $630 put was trading around $18.00 today which provides a break-even of $612.00 which based on the chart is not a bad entry-level and would allow for more Put Selling at lower strikes should Apple Stock fall through $612.00.

Apple Stock One Year Chart

The One Year Chart On Apple Stock Shows Not Many Support Levels

I will update my market direction outlook for next week over the weekend. Right now with October on the horizon I believe volatility will increase and there could be more whipsaws ahead which will make Put Selling premiums quite good. It should be an interesting month.

Just in passing I thought I would mention that I watched an interview with the Prime Minister of Qatar this evening. He manages one the largest sovereign investment funds in the world. The interview was interesting but I took note of his comments about the Fed and the ECB. He noted how there does not seem to be an actual plan for managing the present economic issues facing the global community. He indicated that the US Currency is not what it once was and the continually increase in the flood of currency (printing more dollars) can do nothing but devalue assets. He spoke about how real assets will always have value and he mentioned those assets as being great companies and property within both the United States and Europe. I found the interview very well handled. It is probably available online through MSNBC’s website. It is well worth watching.

  • Can you please put up a link of Prime Minister of Qatar video, I had a look, but couldn’t find it.
    Btw, thanks for all the great info.

  • It was on Television so I don’t know the link. Try MSNBC website and see if it is posted there. Sorry that’s the best I can offer.

  • moises

    Typo correction:
    “if I was doing Put Selling I would be looking more towards bear put spreads. (Sell a higher put, buy a lower put)”

    Should be:
    “(Sell a lower put buy a higher put.)”

  • Thanks for spotting that. I meant to say put credit spread. Sell a higher put and put a protective pit (lower strike). I have fixed it.