Daily Wrap
DJIA +175.24 (+1.26%) to 14,075.37; S&P 500 +19.05 (+1.27%) to 1,515.99; NASDAQ +32.61 (+1.04%) to 3,162.26
The market followed up yesterday’s moved with a rip your face of rally that took the Dow toward new all time highs. As for what drove the rally, we started to bottom and go after pending home sales data but it is hard to think that really caused the run and we were likely more running do to the technical bounces as many charts moved off their 50 day SMA’s yesterday.
Stock of the Day today was Apple Computers (AAPL) but not because of a wild move and more due to the fact that they had their annual shareholder’s meeting. There was a great deal of speculation going into the meeting that AAPL would announce something especially with David Einhorn being so vocal about the shares of late. Tim Cook did not accomodate but he did state that the company is having very, very active talks about what to do with their cash hoard.
I have not discussed AAPL in a while but there is definitely no shortage of research and opinion out there. Some believe we might have bottomed here and others think we will see $400 or even the upper $300’s before finally bottoming. I think the way to play AAPL depends on your time horizon. I feel pretty confident that I will not bottom tick (catch the absolute bottom) on AAPL and that I will likely get in slightly early or late but that is how I go into every trade and I just focus more on risk reward set-up and having a plan. When AAPL first started to drop I noted that a long term investor could look to scale into an initial piece of AAPL. At the time we were trading around $515 and also noted that I would look to sell calls against that position. If someone did take a 1/5 – 1/3rd position then I think down here would be another spot where you could use dips to add another tranche.
Yesterday CommonWealth REIT (CWH) gained over 50% after Corvex Management disclosed a 9.8% stake in CWH and also noted that they would be willing to buy the remainder for $25. CWH lost over 7 and near 8% today as they announced they plan to pursue a common share offering. This prompted Investors Corvex and Related to up their offer to $27 per share if the planned offering is canceled.
Today we saw names moving on earnings and two specifically were Guidewire (GWRE) and Zogenix (ZGNX) up over 16 and 40% respectively. On the downside was Papa John’s (PZZA) which lost over 9% after they announced they will be restating earnings for ’09, ’10 and ’11.
The markets ripped back into the picture over the past two days as expected although I really wanted to see the S&P 500 get to my target region. The problem was many names bounced off their 50 day’s yesterday and it was very likely that they could follow through. I didn’t know that the follow though would equate to a near 20 point rally in the S&P but the direction made sense. What now? I think tomorrow could very well be lower and ideally I would like to see the market be up in the morning and then send the remainder of the day retracing which would leave the door open for Friday to finish the week higher. Otherwise the game plan is the same and I still would be scaling back size to decrease risk but would not be getting too negative yet and still think that we continue to likely drift in this trend to try and demoralize the Bears.