CHICAGO, Aug. 17, 2011 /PRNewswire/ -- Zacks.com announces
the list of stocks featured in the Analyst Blog. Every day the
Zacks Equity Research analysts discuss the latest news and events
impacting stocks and the financial markets. Stocks recently
featured in the blog include: National Oilwell Varco (NYSE:
NOV), Suncor (NYSE: SU), CVR Energy (NYSE: CVI),
Southern Copper (NYSE: SCCO) and Freeport-McMoRan Copper
and Gold (NYSE: FCX).
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Here are highlights from Tuesday's Analyst Blog:
A Trader's Market for the Next 2 Months
The bottom line is that we will survive the slowdown and any
hiccups from China, the newest
engine of global growth. The market will be higher next year and
GDP growth will likely be above 3%. But it doesn't mean that fear
and profit-taking in equities won't prevail in the short run. I've
seen this movie many times. And it ends with money rushing back
into the market. That may take a flush toward S&P 1,200 first,
but it will happen.
Above is what I wrote on June 30
as the S&P rebounded back above 1,320 from the June swoon to
1,260, and was still headed higher to 1,340 on July 1. That article, "Summer Pullback Over? Not
So Fast," highlighted the growth concerns of a slowing economy --
before the debt ceiling drama or worries about Europe heated up as catalysts.
Using the somber June FOMC reflections of the Chairman of the
most important bank in the world, Ben
Bernanke, my comments foreshadowed the nasty GDP revisions
we got on July 29 that I still think
were the biggest catalyst for the market meltdown.
How to Invest and Trade Until We Have More Certainty
The volatile market swings of last week were a day trader's
dream come true, where one could ride the momentum pushes for
double-digit gains in hundreds of stocks.
As I wrote on August 5 in "How
Long Will Correction Last?" I expect the market to range trade
between S&P 1,150 and 1,250 through October as incoming
evidence for and against a potential recession is processed by
participants.
In the meantime, I don't "day trade" much (see below). Instead,
I sell puts on my favorite stocks when they go on sale. For example
I sold the November 60 puts on National Oilwell Varco (NYSE:
NOV) for $6 when the stock traded
near $61. As NOV rallied hard back up
to $70, and option volatility has
declined, the value of those puts has fallen to nearly $3.
I may take profit soon, but either way I have no worries about a
possible decline and no problem being assigned and buying a great
stock at an effective price of $54
before November expiration.
I also sold Suncor (NYSE: SU) Jan
30 puts for $3.40 when the
stock traded near $30 last week. I
loved this name at $40 in June (I
sold January 2013 puts for
$10, making me effectively long at
$35) and even though they missed on
earnings last quarter and crude oil is lower, I wouldn't mind
buying more below $27 (my effective
price if assigned).
I may also trade out of these puts, as I could pocket over
$1 right now since they went out
below $2.40 Monday.
Finally, among the bigger names I played with (I also sold puts
on mid and small cap companies CVR Energy (NYSE: CVI) and
Basic Energy Services (BAS)), I sold the September 28 puts in Southern Copper
(NYSE: SCCO) for $2.00. This is my
favorite copper stock next to Freeport-McMoRan Copper and
Gold (NYSE: FCX) because they have an abundance of reserves
largely hedged above $4 and they pay
a hefty dividend currently yielding over 8%.
The Sep 28 puts are trading around
90 cents today, so there's another
quick profit I could pocket. But if the stock drops below the
strike price of 28 and stays there to Sep expiration, I will be
assigned and have an effective buy price of $26 ($28 - $2
option premium credit I received upfront = $26). Since I am betting against a severe
recession that would take the good Doctor Copper below $3.50, I like owning SCCO there.
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