Wednesday, May 31, 2006

Bought Freeport McMoran Copper (FCX)

I bought back june 55 calls on FCX at 3.20, which is 10 cents lower than what I paid last time. I like commodities too much to not have any exposure in it. I'm still monitoring it day to day, because I am still not certain that we have seen the bottom.

Monday, May 29, 2006

Copper demand remains strong

Despite all the arguments from the copper bear camp, such as "$4.00 per pound? That's too high!" and "Copper has gone up too much too fast!", and despite the fact that commodities have gone down quite a lot in the past month, copper prices are still near its all time high. As it turns out, copper demand is extremely strong, and supplies are tight, as revealed by the article here. In this article, it says:

Stockpiles in LME warehouses fell 1.1 percent to 105,625 metric tons on May 26, the lowest since Feb. 21. That's equivalent to about two days of global consumption. Copper may rise as much as 50 percent in the next year as demand from hedge funds and cablemakers outstrips supply, according to Sucden U.K. Plc, which trades on the LME.

As I've stated many times before, as long as demand exceeds supply, the price will go up. Yes, I acknowledge that there's tons of speculation already baked into the copper price, but these speculators could run up the copper price a lot more if the copper users are willing to buy at any price.

Disclosure: My current positions are: Freeport Mcmoran Copper (FCX) and Valero Energy Corp (VLO) . As of the current moment, I am only playing a retracement of the correction, but that may change depending on how they do the next few days.

Update: I sold both for pretty nice profits. I don't like the fact that non-commodity stocks are acting weak Monday morning. If they go down, commodity stocks will likely follow. Also, I was disappointed in VLO...the oil sand stocks went up so much, and VLO underperformed badly.

Tuesday, May 23, 2006

Bought Goldcorp Inc (GG)

Bought Goldcorp Inc shares @ 31.64 as a swing trade. In retrospect, should have held onto BHP, but was nervous this morning...needed to see whether the market would hold onto it's strength. Since it did, I don't mind getting in again.

Update: Stopped out at a loss. I should be more patient in this market because everything is so deceptive

Monday, May 22, 2006

Bought BHP Billiton (BHP)

I took a gamble this morning and bought BHP Billiton (BHP) June 40 calls @2.00, or when it was trading around 40. Commodities are still in a long term bull market, and what we're seeing right now is 1987. In 1987, after a sharp drop, tech stocks rallied back until it reached an insane peak in 2000. I expect the same sort of pattern for commodity stocks.

May 23, 8:15am. Update: Sold BHP for close to 100% gain. Although today is an up day, I don't feel comfortable holding in this environment.

Bying options in this environment is hard. Not only do you have to identify good stocks, but you also have to identify stocks whose Implied Volatility (IV) is not that high. Because if the IV is high, you're getting ripped off on the premium.

Monday, May 15, 2006

Cameco Corporation (CCJ)

I bought June 37.5 CCJ calls today. Cameco Corporation (CCJ) participated in the commodities free fall the last 2 days. Unlike other commodities, uranium did not fall, and will not fall for the forseeable future. Therefore, I believe Cameco Corporation (CCJ) was unduly punished, and should lead the commodities and the rest of the market into a relief rally during the next few days.

Update Sold the CCJ call for a minor gain. Everything is extremely weak.

Thursday, May 11, 2006

Markets sell off

Was this a Kirk report induced sell-off? Haha...just kidding, but he did make a good point when he said that it's generally a good idea to sell at the top of the range. If the general markets go down, there is very little chance that commodities will go up by themselves...but you never know.

Crashes occur when people overextend themselves in debt. That is what happened in 1929 and in 1987. During those years, people were so overleveraged in stocks that when the markets started to go down, margin calls hit, resulting in mass panic. Currently, I believe personal debt is at an all time record (the average debt per person is approximately 10000 USD). I don't know if these are the people that invest in the stock market, but if they are, these people will contribute to the crash.

Another point I would like to make is that although the DOW has "double-topped", meaning it is at the same level as it was 6 years ago, the DOW is actually down 30% in the last 6 years due to the decline of the US dollar. This is what people don't consider; the US government is printing so much money that they are devaluing paper currency. This is the primary reason why gold and commodities are doing so well, and after a correction(?), they will continue to do well.

Wednesday, May 10, 2006

Thoughts for the day

Today, I got out of Empire Resources Inc (ERS) for a very nice gain @ 44.60 (I bought it at 38.4), and I'm still hanging on to my Phelps Dodge Corp (PD) calls. I was surprised when ERS tanked during the last 30 minutes of trading. What I think happened was that everyone (including me) was playing the dead cat rally, and when it broke critical support, everyone bailed at once. Does this mean it's still buyable? I wouldn't touch it anymore, because the stock does seem very expensive on a valuation basis.

For commodities, we are clearly in the sweet spot right now. Enjoy it while it lasts, and always remember in the back of your mind that these things can come down. And when they do, the go down with a vengence. When this will happen is beyond me, but as long as it's going up, I'm riding it up. (Just remember that the risks are really high).

Tuesday, May 09, 2006

Update on positions

Nothing to report except I sold my Petrochina (PTR) and bought calls on Phelps Dodge Corp (PD) during the morning. Can't believe PTR went down while every other commodity stock was going up.

I also purchased a stock position in Empire Resources Inc (ERS) . I think this is the first time in over a year I have ever bought stocks instead of options for short term trading. But I couldn't resist because the reward is so high.

Nice to see that commodities broke out AGAIN. Let's see how high they can go this time before another consolidation.

Monday, May 08, 2006

Oil stabalizing

Oil appears to be stabalizing after a week of selloff. I picked up some call options on Petrochina (PTR) because even commodities-bear Warren Buffet likes Petrochina .

Check out the chart on Empire Resources Inc (ERS). It fell 50% in 3 days. I don't know the news behind this fall, but I think it is buyable at this point for a very nice snapback rally.

Saturday, May 06, 2006

Charts of interest

Based on Friday's market action, I think the Nasdaq will test its recent highs. I don't know when gold and copper will short term top, but as long as they're going up, ride them up.

Here are some charts I'm bullish on in the short term:

Apple Computer Inc (AAPL)

Peabody Energy Corp (BTU)

Phelps Dodge Corp (PD)

Cameco Corporation (CCJ)

Goldcorp Inc (GG)

These are only my opinions, so trade at your own risk.

Note: I changed the layout of my blog and lost all my links. So if I left your link out, please let me know.

Thursday, May 04, 2006

My ramblings

Chicago Mercantile Exchange (CME) is in a solid uptrend. I have no idea whether it is overvalued, but as long as the uptrend holds, it doesn't hurt to be in CME. I purchased May 460 Calls @ 14.8 today when CME was trading at around 466.

Update: I sold my CME call at 22.6, or when it was trading around 478. I sold it Friday morning when it kept on dropping after gapping up.

I contemplated shorting Newmont Mining Corp (NEM) today, because NEM is one of the weakest gold stocks. Gold looks really toppy from an elliott wave standpoint; and I would anticipate a correction to at least 650 or even to 600.

Oil is weak because it is overvalued compared to the price of gold. Historically, the gold/oil ratio is roughly 15.8, meaning it takes 15.8 barrels of oil to buy one ounce of gold. Right now, the ratio is 9.7. Based on this ratio, gold will probably outperform oil in the coming years.

The general markets continue to chug along. Although I am bearish on the general markets, mainly due to the TRIPLE deficits (budget, trade, and personal debts), I am going to trade the long side until the market tells me otherwise. However, I would not be surprised if something like October 1987 happens pretty soon (October 1987 happened 5 years after the tech bull market started in 1982, and 2006 is roughly 5 years after the commodities bull market started in 2001-2002). Besides, nothing goes up straight (commodities), and it is in need of a correction.