Most of the time I don’t like post recent trades because I haven’t yet figured out how to feel comfortable with it and I don’t want it to mess up my trading and get me to do weird things that deviate from my philosophy because I will end up posting it in on the website. I feel much more comfortable posting my analysis and views and scenarios in the weekly habits that I post. That I feel really comfortable with.
But this time I will post just a few trades and recent thoughts. Let’s begin.
#1 – Short EUR/USD
My plan from last week was to wait for the EUR/USD to rally before trying to short it. I didn’t want to short EUR/USD at 1.3450 or 1.35, etc because I saw how the market was shrugging off bearish EUR news and the market was not yet going bullish on the USD even as the data came in slightly better for US econ.
My macro model told me to only consider shorting EUR/USD if it rallied first. It said not to buy top tick, so I could fade topside stops if I wanted to. (or I could also choose to go long EUR/USD on the intraday dips as well). So I set a limit order from last week to sell EUR/USD above 1.3600 stops. It was finally triggered today, and I was filled. It was just an intraday trade as I took profit after a few hours.
The market didn’t seem to want to go too much USD bullish on the good US data, as the market is still uncertain whether Fed will taper in December or not. Part of the market still believes that with whatever the current US data, the Fed may still want to delay taper so that is causing EUR/USD and GBP/USD to grind higher. So I didn’t want to hold it for a swing trade and I just got out for around 30 pips profit.
Similar play in GBP/USD today when it tripped stops above 1.6300. They were fade able for a small intraday tactical trade.
#2 – Long AAPL
The basic premise behind this is that there is a bullish macro environment for equities, but that the S&P has run up so much, that there may not be any clean volatility to the upside anymore for it. So that is why over the past few weeks if you have noticed in the weekly habits that I post, I have written that there are better trades and better reward risk ratios in going long individual equities rather than the S&P. You always want to be thinking into what new trades you can be rotating your capital into.
I have been long AAPL on and off for the past 3 months. The basic scenario behind the trade is first and foremost a bullish global macro environment for equities in the form of continued Fed QE, lower oil prices, etc. Secondly, AAPL’s P/E ratio is still relatively low compared to some of the other high flying stocks in the market. So the P/E ratio has room to go higher if the market pushes the stock higher. Other companies may be rallying faster than APPL due to their perceived growth potential, so AAPL has lagged behind a bit, but I figure there can be some bargain hunters willing to buy up AAPL on a relative value basis since if other stocks have too high P/E ratios, they may turn to buy AAPL which has a lower one.
But the bigger and more important scenario and catalyst comes in the form of what AAPL will do with their large pile of cash that they have. Carl Icahn has taken a large position in AAPL and he is very vocal that AAPL return cash to shareholders in the form of a larger stock buyback. AAPL has around $150 billion in cash currently, and with the holiday season, that can grow even larger. I believe AAPL will make a decision sometime early next year on whether they will do anything more to increase shareholder value, such as dividend hike, or larger buybacks. So I wanted to position myself before that. They may not decide to do anything, but it still looked like a good trade at the time to be long AAPL.
Also, judging by the wait time on some of the Apple products I have bought, either there is sizable demand causing the wait times for the products, or they are having production problems. If it is the strong demand, then that bodes well for the Apple earnings for the current quarter, etc.
So in some ways, I would hope that going long AAPL, you get some exposure to bullish equity macro environment, a relatively free bet on any earnings growth and profit growth, and a free bet on if they will give back more cash to shareholders. Its not free or risk free, but it seemed like a good trade.
I don’t know how long I will hold it. I hope this post does not jinx it.
#3 – Short Gold
My basic theory behind this trade is that I want to play the Fed tapering QE scenario, but I want to play it in the right way. I can’t short the EUR/USD or GBP/USD for a swing trade, since they are shrugging off good US data. I can’t short bonds for a swing trade aggressively because the market doesn’t seem to want to go lower too much as the Fed seems to be getting good at convincing the market they are going to keep rates low. So one way I can play the Fed taper story is by shorting Gold. I shorted it last week. It has been dropping nicely and there have been some gold mining stocks that have already broken out to the downside. In hindsight, I should have probably shorted the gold mining stocks or gold mining ETF since that may drop more, but currently I just have on a small short position in Gold. I think Gold has bigger downside potential than bonds. I also think there is the slight potential for a mini crash in the Gold market in December, if good US data comes out or if the Fed tapers in December. Various risks to the trade include if the Fed delays taper to March, etc.
That’s all for now. I hope I didn’t jinx any of my positions.