No doubt you've noticed the changes to the site by now, and chances are you've notice the changes in the markets. The game is no longer buy the dips, buy any dip and keep buying the dips. No, it's changed.
You cannot make people accept change; you can only make them fear it less. The markets are changing, world economies need to change, and political positions are bound to change very soon. So, who is out there to make us fear it less? Unfortunately, for most traders, we are probably on our own. Since most media folks and talking heads -- and I am not excluding myself here -- are talking their own books and own interest, the reduction of fear in change needs to come from the adjustment of one's own risk levels, portfolios and goals; it shouldn't come from someone telling you it was a great time to buy last week.
I am doing a bit of buying here, but these are small positions with at least a six-month outlook in mind. I dipped my toes into two steel names, AK Steel (AKS) and ArcelorMittal (MT), which I mentioned the other day. The ArcelorMittal position is about 50% larger than the AK position since I see the latter with more risk. Both have attractive dividends, although I wouldn't put a ton of faith in AK not reducing its divvy, and both have call writing ability if the stocks pop a bit.
I also joined Doug Kass in buying some KKR Financial Holdings (KFN) as well as Kohlberg Kravis Roberts (KKR) with the same time frame in mind.
There are still plenty of earnings reports tonight and tomorrow morning, but between the volatility today and expiration tomorrow, does anyone really want to touch them? Salesforce.com (CRM) will certainly command a lot of attention. The first reaction here is often violent and dangerous to chase. There is always more to CRM's report than the headline, so jumping first may put you in dangerous waters. The stock has already sold off sharply, meaning that a pop right back to $125 is very possible on good numbers. A move even to $131 isn't out of the question. On the downside, I would look more toward $103 for support. My standard play here would be a skip strike butterfly using either the August 110-100-95 puts or the August 120-130-135 calls, both trading for about $2 each. A price movement player may look at both.
Footlocker (FL) may be the only play I like from a purely bullish standpoint and a historical reaction standpoint, while I also like Marvell Technology (MRVL) from the historical reaction standpoint. Anything bullish at this point comes with high risk, so the high-risk play on Foot Locker is the August 17.5 calls at $0.85, while a more conservative approach would be the September 17.5-20 call spread. The August call is about $0.15 less than the September call spread, but does offer good upside if Foot Locker hits my bullish $19.50 target. Disappointment could send shares quickly to $16.50 or even $15.75, but I'll stay with the strong run we've seen in footwear.
Marvell comes down to valuation. If this one misses and heads toward $11, or even $10, then I will look to start to accumulate for the longer term. Upside could tag $13.40, so an August 12-14 call spread for $0.70 is attractive. There is no doubt any August play here or on any earnings name runs big risk today.
Lastly, if I were looking for a lottery ticket play, it would probably be Foot Locker or Brocade (BRCD). It is possible Brocade has all its bad news priced in, so with a stock sitting around $3.35 and the August 3 calls at $0.45, it is an interesting look. If Brocade says anything encouraging about next quarter at all, then this one could easily pop to $4. Unfortunately, it is not as if the technology sector has been springing better-than-expected news on the markets, so it is a tough call.