Wednesday, October 6, 2010

It's all about Friday's Job Numbers & the Dollar....Still!!!!

What happened today:
Today's market really provided no clue whatsoever as to which way we're going....up or down.
What everyone is waiting on is the employment report on Friday. This could be a big mover in the market as the market has priced in or is in the process of pricing in more QE2 (Quantified Easing 2), which simply means we're going to print more money and try to create inflation.

I personally am bullish on gold and silver for the long time and have been if you've known me for that past 9 years. With that being said you need to be careful if you own gold/silver via ETF's in the market currently and if you do not own any protection.....you are playing with fire. Get some protection either by selling calls or buying puts. If the dollar trades higher which I have blogged about recently and have a trade that is doing exactly what I thought would happen over the past week, you better watch out, gold, silver, and oil will sink which will also sink the stock market. I'm not saying this is going to happen but the odds are clearly tipping to this happening soon so get some protection against the market and your precious metals and keep watching the ETF UUP for which way we go.

What we saw today?
What we did see is just how fast things can and will fall if things don't go exactly as planned. See the sky high flying Cloud computing stocks today for what I mean (VMW, CRM, FFIV) These all got thrown out with the bath water as the baby Equinix blue up it's earnings today. This company lost 35 points today as it opened at 105 and closed at 70.19....now that's what I call the cloud popping.


If you've been eyeballing a few of these companies I'd wait for a day or so and let the people that  didn't sell today watch the news tonight, sell tomorrow and then put a buy in. 


The Trade:
My suggestion is to pick up FFIV anywhere near $90-$95 a share if you are a stock buyer. Of course I prefer options so I'd purchase the Jan 2013 $85 call and sell the $105 call for what is called a bullish call spread. This should cost you around $900 dollars per contract. 


This gets you in with the option to buy this stock in Jan 2013 with a basis of $117 which is fair value for the stock as of today. 
One of several things can and will happen over the next 3 years of owning this:
 1) You sell for a tidy profit anytime between now and Jan 2013.
 2) You hold and this company grows and you sell years from now or 
 3) The company gets taken out when the inevitable consolidation happens between the clouds.


Happy Trading *DYOD* (Do Your Own Diligence)
Marty Blackmon

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