BAC Update 2

I hate that bank but I couldn't help it. I bought BAC at Thursday's close (the red candle in the chart three trading days ago) when the stock didn't break down below Wednesday's breakout. (I guess I was bored of inaction.)

The target is still $14.56, but I would settle for the 200-DMA ($14.39) if that happens within the next week or two. The stop is Thursday's low, slightly below $13.

It's hilarious to hear about CNBC pumping the stock market (as if the stock market is the economy), and one of the junk that they've been pumping is the financial sector, BAC included.

As I said in the previous post, the setups for the fins continue to look good. JPM and MS are breaking out of the range, GS may be forming an "ascending triangle" pattern, and C may be forming a handle on a cup that's been forming since April.

Silicon Valley vs the Rest of the US

Or tech vs traditional. Or companies that continue to innovate vs companies that don't. I don't know how exactly to define it, but take a look at the comparison charts below. (They are 5-year charts.)


The first four are the tech companies, three in the Valley, one up in Washington. Netflix (NFLX) broke to all-time high today. Intuitive Surgical (ISRG), Apple (AAPL), and Amazon (AMZN) continue to break out from the high. Their charts say it all: Recession? What recession? Also notice that, except for ISRG, their recent bottom was NOT March 2009. They bottomed sooner than the rest of the market, and off to the races ever since...

Compare them to the rest. First two of "the rest" are tech companies, Google (GOOG) and Microsoft (MSFT). Even though they have recovered from their lows, they don't compare at all with the first four. (That tells me, unfortunately, GOOG has already become MSFT...) Rather, they resemble big, traditional businesses that are listed in New York Stock Exchange, rather than on Nasdaq. Their charts look more like J.P. Morgan Chase (JPM) or Coca Cola (KO). The last one is Freeport McMoran (FCX), a copper and gold company. Although it has recovered a lot, it is still far from recapturing the all-time high.

They (NFLX, ISRG, AAPL, AMZN, etc) are clearly in a bull market, disregarding the rest. In a bull market, you buy a breakout from the high. That's what I learned in the book by William O'Neil (How To Make Money In Stocks: A Winning System in Good Times or Bad, 3rd Edition).

I am not advocating anything, going long or short, here. Do your own DD, but I sure wish I bought every single breakout from the high for these stocks.

Shoulda, Coulda: Citi, Again!

It's bad enough having missed one big opportunity in PALM. I have another one, my old favorite Citigroup (C).

I sold the shares at $4.25-ish average long time ago, and since then I was just watching, until about a month ago when I put the proceeds from selling XLF calls into C's calls. XLF March $15 calls unexpectedly went into money, and at that time C was trading between $4.20 and $4.40. I bought April $5 calls at 5 cents a piece.

Then the option went nowhere, as C lost momentum. Beginning of April, as the Op-Ex day was 2 weeks away, the option became basically worthless, a penny. No way in hell that C could go anywhere near the strike price. I left them for dead. (sound familiar?)

Then I happened to take a look at it two days ago after C made it above $4.60. The option was still 1 cents. PALM was still heavy on my mind, but C? How could this go any higher with no news? Nonetheless I called up the screen, and flirted with the idea of buying 1000 calls at 1 cents. It would cost $1000 to buy them. And probably I would lose it all when they expire on April 17.

So I didn't buy. (sounding more and more familiar.)

Then, JPM (J.P.Morgan Chase) struck this morning. (It was my carelessness - I thought major banks report next week and didn't check the exact dates.) And C went flying. 1-cent call option ended at 7 cents. After-hours trading shows C at $5.01.

Here's what C's chart look like. It is a 6-month daily chart, and since February's turnaround it is full of gaps that are not filled. When it gaps up, C seems to gap up over several days.

Today's jump was with solid volume (over 1 billion shares changed hands). Short-term (since beginning of April), there is no divergence in technical indicators. MACD histogram's negative divergence in March resulted in choppy trade but not in complete reversal.

Normally you would think it should correct right here, after a jump like C has had since April 1st, particularly after today. But traders were buying C's April $5 calls (volume was 392,352) all day today. What do I know at this point? Some drunken soul on Yahoo message board for C was calling for over $6 on Friday, $8 on Monday when Citi reports its earnings.

52-week high was last August, at $5.43.