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Wednesday, December 23, 2015

Chart - $aapl

In my previous AAPL Review post I left out a weekly chart highlighting AAPL's trading dynamic around its long term trend line. I purposefully left it out because it coincidentally corresponds to the 'absurdly-low PE'. 

For a long long time, AAPL would follow the blue trend line, until in 2012. The 2012 breach (~mid 30% from trend) was met with an equivalent breakdown (~low 30% from trend) in 2013. 

After 2013, an argument can be made that a new trading dynamic formed, and this trend line is no longer valid. Even though parts of 2014 and 2015 the stock acted around it. 

If the trend line is still valid, the same thesis can apply. A 25% breach of the trend may correspond to a 25% breakdown of the trend. If that is the case, then a price of high 80s / low 90s can be expected. That would mean a single digit PE.

Does it make sense fundamentally? No.

Apple has proven it's worth as the best tech company (software and hardware) in the world.

Does the best tech stock merit a single digit multiple? No. 

The biggest question, I'm assuming the market cares about, as services (and wearables) begin to shine, is the shine enough (considering low-to-moderate iPhone growth, while the HUGE cash-flow remains)? Yes. Or so I think. But that opinion is worth about as much as this post.

Monday, December 21, 2015

Charts - $twtr

Twitter momentum sucks. Im still a huge fan, and think its fundamentally incorrectly priced by the market. (I'm a believer in the $30-50B price range.)

I can re-print the fundies and reasons, but fuck, it's exhausting being in such a negative trend. The break of the 24-25 level was precipitated by other execs announcing departures. 

Here is where it stands technically. To break the negative trend it needs to breach the 20sma on the weekly.

Wednesday, December 16, 2015

$aapl review

Last time aapl started seeing this much negative chatter for its stock was in 2013.

Will history repeat or rhyme? Who the fuck knows. 

From wall street to influencer chatter, the sentiment is the same for iphone growth: flat/negative everywhere except China (where there will be unquantifiable growth). Obviously not reassuring. But hey, Goldman's conviction buy recommendation was predicated on flat iphone sales and a growth in services! 

The charts look okay, but when the markets are up so much, and a market leader lags, its not encouraging.

The 78 sma on the weekly should not have been broken, and the lack of a bounce sucks.

If the stock follows the monthly pattern, aapl maybe headed toward 90. Fucking 90, for the most premier tech name (or rather the most premier company) in the world. Why such colorful language? Because a price of 90 means single digit multiple, not factoring the massive cash position. 

Looking at the historical trailing PE, the asinine single digit multiple can happen. Consider the lower red line the low level trailing PE, and the lower blue line the asinine level trailing PE.

I am for trading momentum, unfortunately I am a sucker for the fundies. A few differences between 2013 and now:

1. Cook era Apple was not tested. Since Cook took over he has more than handily proved his capability to motivate and release successful software/hardware. (The company moves fast and executes.)

2. Wall Street big-gun support. Once the big guns got involved the stock started to turn. They still seem to be involved. 

3. The services business is growing fast. (Its a $5B/qr business!)

4. A road map was laid out through interviews or released chatter for the car. But looking at recent developments with their products (Apple Watch, new AppleTV, potential car) and Swift going open-source, Apple wants the IoT space. And with Swift open-sourced, and the quickness of developer uptake, they can own it.

5. A steady increase in margins since 2013.

I'm long aapl. I'm annoyed as fuck that it didnt bounce off the 78sma as the SP500 had a super bounce, but I am long. 

Fun fact: In Q1, aapl usually sees an increase in cash position by ~$15B. (They basically earn a Twitter every Q1, free and clear.)


Saturday, December 12, 2015

Charts - $fb $bac $amzn $aapl

FB - 38sma

BAC - pattern pretty defined.

AMZN - 72sma

AAPL - its there.

Market Thought... Market Mechanics or Systemic Risk

The "junk bond threat" has been getting louder and louder. Although it was thruster forward with Mr Icahn pretty loudly a few months back. But recent Bloomberg chatter is that of pushing for a delay in rate hikes because of this threat. Miraculously enough, some very smart people are considering a .25 point rate hike a potential catastrophe to the likes of 2007. The severity-pedestal the junk market is given is a head scratcher. 

How will an issue with one isolated market, about $1-2trillion in size, cause such devastation?

In 2007, the subprime market was the starting domino that revealed gross inefficiencies with the regulations of the financial and insurance industries. Defaults revealed comical insurance on debt, that counter parties could not pay for, leading to horrific leverage, which revealed stupidly low bank capital reserves. The system was going through a domino effect, with no stop-gap built in. (Hence the Fed's QEs.)

This time around, money flowed to junk bonds. The market has been front loading the Fed hike for months but very smart people think the same domino effect will happen. Or they are sensationalizing the scenario for their positions. Does the risk truly exist?

Proprietary funds have been divested from banks. The banks have been going through consistent stress test since 2008. Their leverage is healthy. The capital reserves are arguably over flowing. Without the banks folding, there is no systemic financial risk. 

Worse case scenario is now off the table with a little common sense.

The junk bond market is ~$1-2T size market. Obviously it will cause hiccups. Every market is based on supply / demand. Quick selling in any market based security will cause a decline. If redemptions start coming in, as was evident Friday, assets get sold to meet these redemptions. Hence quick market declines. (Add some public knowledge of a known threat to spice up the day, and a market move gets exaggerated.)

Let's assume the junk bond market is $1.5T. Via a normal distribution curve, 20% of it is shit. (Shit meaning companies like Valent Pharma that will not be able to refinance their debt or get new debt, and will have to survive on cash-flow.) Most obligations will get paid but some will probably not. The credit markets maybe looking at $300B in default risk. (This maybe realistic given the energy related names that borrowed heavily with assumptions of higher oil prices. They have yet to see defaults but prob will if the market is shut out to them.)

Two funds made headlines blocking redemptions: Third Avenue and Stone Lion Capital. Understandable given the sizable declines in Junk bonds. 

The Junk bond ETF was handily beating the SP500 since the 2009 low, until the begining of 2015.

At the beginning of 2015 jnk was stalling, and by June, the selling into Fed tone-change was obvious. Smart money was leaving. Now its the naked players with the big boy induced exaggerated moves, praying off of fear.

Also evident, are the corresponding moves from one market to the other. But there is no correlation.

I'm not a bond guy, nor connected to high-yield offerings, but from the outside looking in, seems like the unprepared players will get hit while the prepared will take advantage of a crunch. Basically how markets are suppose to work. 

Saturday, December 5, 2015

Charts - $twtr

Trend and support are obvious. What will be a catalyst to bounce off 25, and breach the negative trend?

Will it need to flush below 25 before pushing higher?

Will it keep collapsing?

Or it can bounce with the higher lower argument is in play, while breaching a negative trend. Super bullish. 

Unfortunately, not sure which is the higher probability event. 

Saturday, November 28, 2015

Chart - $trxc

While waiting for the FDA decision, they arebuilding outtheir marketing and sales teams. (They seem to have nice experience.)

Technical hurdles are obvious. But once the machine starts moving, after FDA decision, current trading dynamic become a mute point. 

Friday, November 27, 2015

Some $yhoo facts

1. Improvement in mobile is evident. It is a mobile company.

(I wish)

The Yahoo App is usually a solid 3, but its pushing a 1 star thanks to removing the back-swipe. To say it does not know mobile is now disingenuous. 

2. Many of Mayer's acquisitions have been to bulster mobile. Obviously that strategy worked. Although from a finacial perspective, the acquisitions have done little. A quick look at Wikipedia suggests Yahoo did about 48 acquisitions during Mayer's rein. The major purchases (tumblr, brightroll, flurry etc) cost about $2.4B. Not a bad spend rate. 

3. Their social savvy sucks. Or at least that is the perception. Yahoo spent $1.1B on tumblr and after multiple quarters with native ads, there is little to brag about. (Facebook is more than just sponsored posts in the news stream. Its the leveraging of the graph w/Atlas and tracking sell-through that makes their offering effective and high margin.) Yahoo's gross margin decline prove the lack of effectiveness and overall strategy.

Yahoo also does not know how to leverage their original content through other social. (At least not effectively, and their content is not typically what goes viral.)

4. Yahoo still drive huge traffic and has enormous reach. (NFL broadcast of a blah game, at weird hour of the day, produced great traffic.)

(They successfully leveraged their audience to participate via a ground up transactional business, Daily Fantasy, and through nothing more than their installed audience, were able to claim the #3 slot behind Draftking and Fan Deul. While still taking ad revenue from the two leaders.)

5. The stock is completely dependent on baba. There is still a direct correlation, but since the last quarter report, BABA now has the premium.

6. Little trust in Mayer. Manager turn over and reports of hiring consultants are breaking the camel's back.

7. Finacials are not encouraging. Revenue growth is coming at a big cost, and gross margins are down. 

Gemini seemed impressive, mobile usage is nice but none of the goodness is translating to the numbers. 

8. Original content lacks new-age character. Lacks a voice and tone that would resonate with the younger generation.

9. Lacks community throughout its mobile properties. 

Yahoo has been playing catch-up to mobile, and now they need to get ahead of the curve. The things they lack are obvious. How they plan on filling the voids is what will guide their future. Will they target the audience that will make them relevant? Will they embrace a solution that embraces more than just advertising? 

Companies exist that can fill these voids with the right demographic Yahoo desperately needs.

-BuzzFeed (leverages all social platforms well, brand management, quality original content)
-SeekingAlpha (financial community)

-Motif Investing (a transactional business, leveraging the huge finacial audience)

This baba spinoff is now a side show. Tax hit or not, the core has to become relevant. Yahoo needs to spend that cash wisely. Does Mayer still have the sway to convince the acquisition of relevant companies?

Saturday, November 14, 2015

Charts - $aapl $amzn $baba $bac $fb $twtr

aapl - entered from previous technical setups, but the weekly 78sma looks interesting too.

amzn - waiting for the 62 sma to trade it again.

baba - looks for a bounce near thr 10 sma. (But when comparing it to global peers, its market cap is too low. It should be more in line with amzn and google. And singles day performance does not suggest WeChat chipping away just yet. The general rise in consumption is benefitting both.)

bac - as rates go, so goes bac. Already re entered from the push back from low 18. Will add near mid/high 16.

fb - momentum trend still intact. Would rather take a position near the 38sma on weekly.

twtr - if current level can hold, it will be a higher low. A restest of the weekly 20 sma will breach if higher lows are made. If not, we linger.

Thursday, November 5, 2015

Charts - $fb supports

Points of which are interesting nuy.

Barring a systemic issue that arises, the 20sma on the weekly seems interesring. 

Wednesday, November 4, 2015

China and Rates - $baba $bac

On the heels of a 6.5% target China GDP, the perception of stability, or the whatever-it-takes attitude, should bring stability and benefit to baba. Looking how well its western counter parts have performed, baba's market cap seems too low. Although it recently rallied hard, and the breakout was highlighted here, its at a little resistance point. But with stability, it will keep rising. 

With a stabile China, and an easing ECB, the Fed is out of excuses to keep rates at these levels. With rising rates, bac will rise. (Stock has been correlating well with the 10yr yields since the litigation concerns have eased.)

Tuesday, November 3, 2015

Charts - $spy

Markets are approaching highs, and it should be seeing a technical push back. (Although energy stocks have given a nice boost. See xom post below.) 

Monday, November 2, 2015

Charts - $aapl 125-130 near

The obvious play is near. Once the 38sma on the weekly is broken, it should follow the 5 sma to 125-130. (Although I'm biased for it to make all time highs.)

If it bounces off the weekly sma, aapl may see 115-117. (If it does, im adding. But given market sentiment, the above seems like the higher probability event.)

Friday, October 30, 2015

Charts - $xom

The daily negative trend is breaching.

Longer term resistance persist.

From a div yield perspective, still think xom should be higher. From an oil macro perspective, once China finalizes its next 5 yr plan, this may help oil prices firm up.

Wednesday, October 28, 2015

$twtr not that bad

Miss on future revenue, but that is a mute point. Last quarter they a lower guidance but they beat. User growth is still light. But these are well known.

Solid revenue growth. 

New product are popping up quickly, and hopefully we see the product execution translate to user growth. In the mean time, losses narrowed.

The ah sentiment seems much for already known issues, and with a far more up beat (compared to the last call) management. Looking for a higher low, around 26-27, from the intermediate trend.

Was a buyer in ah. Twitter is still a $50B company.

Tuesday, October 27, 2015

$aapl gross margins increasing

Beat estimates. The most interesting development, gross margins appear to have increased. And they are projected to increase.

Oh, has position is just insane. 

$ibm breaking down

For a seasoned management team, their handling of the street has been shit. The SEC news is kinda blah, but given the negative sentiment, this is just a good excuse to allow the 140 support to break.  If the stock does not recover, there is a legitimate risk of it going toward 120. (Thats in large part due to the consistent lowering of guidance. And with the constant lowering of guidance, the recent buy back may not make sense.)

The stock may bounce along the down trend. Unfortunately it may see lower lows until there is evidence of stability.

Saturday, October 24, 2015

Charts - $aapl

Interesting position. Daily is overbought. A condition that usually merits a interim sell.

But earnings report is this week, and anything can happen. Longterm trends suggests a move higher, solidifying a breach from negative trading and a new trading dynamic. Or a move towards the highs.

Since this is aapl, and everything is viewed through a negative lens, a penny miss or a 1/2basis point miss on margin expectations could drag the stock down 10%. 

AAPL's trailing be is below average, and below SP500. A simple reversion to mean, brings the stock to 140-150.