Teck Gives a Lesson in Timely Tactics

[excerpted from Bill Cara's Daily report]

In the Week In Review this past weekend, I gave you a heads-up re Teck Corp (TCK).

A week ago I wrote, “I cannot see either the base metals like copper or the precious metals soaring without some preliminary warming up in the Xstrata, Vale (RIO) and Teck, which I use as a tell. These are the companies that understand forex and credit markets as well as anybody. Their goods are sold by Letters of Credit. It’s a tough time for them.”

This week things improved. The RIO soared +25.0%, but the TCK gained just +2.4%. However, the Rio Tinto ((RTP) +26.3%) and BHP ((BHP) +25.2%) also soared. The movers are all much bigger than Teck. I suspect the TCK under-performed because the Toronto index under-performed this week. Let’s watch TCK next week.

Xtrata [XTA.L] trading in London was up +35.7% this week – just flying on Wednesday through Friday. Wow. Metals are on fire. TCK to follow next week!

TCK closed Wednesday at US$12.54. When I wrote “TCK to follow next week!” the stock was $9.81. What followed has been a two-day gain of +27.8%.

Internally, the market had surged +10% on the 28th right before we put on eight bull spreads. No one could accuse us of cherry picking a situation to boost results (the VIX had dropped -20% on the 28th prior to us selling premium).

The results, within our managed risk strategy, were: PBR +27.7%, Suncor (SU) +1,550%, Goldcorp (GG) +3,200%, BHP +139%, RIO >+3,700%, TCK +88%, RIMM -12.84%, and GOOG >+200%. The Google option spread was put on for 1 dollar credit and gained by 2.10 in price.

Not bad!

My intention here is to show that Cara Trading Advisors manages portfolios via sophisticated and timely strategies and tactics. What I write as a blogger for the Cara Community is day and night different from my trading.

I trade for profit, but I blog to educate and inform. Then you can learn how to trade with a higher probability of success.

Comments

[Chickenpookie:]

Bill, Thanks for teaching us about how markets function!

2008 Nov 06 01:43 AM

[dr.doolittle:]

still listening. the incredible rise and collapse of commodity prices cannot be explained simply by supply and demand. It says yet another speculative bubble has burst. "crisis of confidence" is nothing more than a euphemism for "there's no money." demand is drying up because of what the old time bankers called "forced savings." in other words, since people don't save money themselves, governments through Social Security and the like, save for them. Of course this must come through taxing the productive. So who does have money and spends it? Seniors. And what do they buy? Bonds, if anything as an asset class, although more than likely healthcare and food. What stocks have survived this incredible collapse? Wal-mart, Mcdonalds, Medco. Who's been killed? Reits and the entire manufacturing industry save a few defense contractors. I don't see how this helps in creating demand for speciality or "semi-precious" metals. Precious coins interest me because their value can never go to zero. Paper based assets? Only truly need based ones seems plausible as individual stocks for the time being. Insosfar as growth is concerned, big pharma and philip morris and for some reason telecom--slow and steady wins the race I guess. some foreign stocks seem interesting, especially ones closely related the US econcomy--perhaps in that sense Teck is a good buy. Right now Brazil, South Korea and Hong Kong have been included as part of "America's new economic order" as they are the "low cost leaders" in all the right ways--great products at a dirt cheap price sold direct to cash strapped American consumers. I'm still not hunkering down for the Apocolypse, but it seems to me the past two months have been more significant than say a "Titanic" moment. The US government has categorized it more along the lines of a "Pearl Harbor" type incident, a time when industrial production was absolutely huge but base metal prices were quite low. I think this makes throwing caution to wind in the metal space very risky indeed.

2008 Nov 06 11:38 AM

[anand:]

Would you buy TCK at current prices? What CAPEX are you building into your model over the next couple of quarters?

2008 Nov 11 05:23 PM