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I used to run a limited partnership, boutique hedge fund in the 90s. Retired in 2000 and moved from New York City to Toronto, Canada, got married, raised a family and basically settled down. After a few years in Toronto, my wife got tired of the city’s 8 months of cold weather and insisted that... More
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  • Market Predictions And Stock Tips For 2015

    First and foremost, I want to wish all of you who still follow my blog a Happy, Healthy and a Very Prosperous New Year!

    My postings here have become somewhat infrequent and I will try to be more active in 2015...After reading this very detailed post, many of you may feel that I have more than made up for the radio silence and may want me to crawl back into my shell...

    ;)

    I don't know about you guys, but 2014 was not a banner year for me...Had to navigate through a pretty dense thicket of challenges, both personal as well as professional, which in turn, sapped a lot of my energy, thus not leaving much to expend on my blog...hence the reason for fewer postings...And if that were not enough, the absolutely crazy and out of the blue implosion at GTAT didn't help matters, leaving in its wake, a pretty decent size hole in my pocketbook... :(

    However, things are setting up very nicely for 2015 and I'm very excited about a number of opportunities that are currently on the proverbial vine...and between now and Spring 2015, as these opportunities ripen, I hope to be in a position to profitably pluck them one by one. I will be sharing 4 of those opportunities with you at the end of this post...

    But first, getting back to my read on the US equity markets for 2015...

    Thanks to a brand new dose of Quantitative Easing, I believe that the first quarter of 2015 is shaping up to be very bullish for US equities...

    Did Karim just say Quantitative Easing (QE)???

    But has not the US Federal Reserve changed its QE policy and decided to tighten the spigots that has allowed the markets to go up in an almost vertical climb over the last few years?

    You all may be wondering if I have lost my marbles...

    No, I have not taken leave of my senses...at least not yet...

    But before I elucidate further, let me first share some context and background...

    Many of you may recall that in a somewhat recent post here, I had mentioned a comment that I had posted back in June, 2010 on someone else's blog... This is back when I had just discovered the Seeking Alpha website and had come across a post that was all doom and gloom about the health of the US equity markets as the Dow was sinking below 10,000...In disagreeing with his very pessimistic outlook, I had posted the following:

    "Th(is) is a market that is awash in liquidity and for someone who has been around the block a few times, high liquidity means high stock prices...PERIOD! All the doom and gloom is just what the doctor ordered so that all the weak hands let go of their stocks...What you are seeing is a consolidation of the 10,000 floor for the inevitable climb up...And mark my words, this market is going up and the ride is going to be a doozy!"

    seekingalpha.com/user/665090/comments

    Fast forward today, and surely no one can deny, that the ride indeed has been a doozy! The Dow is comfortably ensconced above 18,000 (!!!) and itching to go even higher...My prediction for DOW in 2015: 20,000

    That is another 11% climb from here...

    What makes me think that the markets still have room to go up from here after already making a pretty monstrous move over the last 4+ years?

    Today, we are very fortunate to be blessed with yet another round of QE...except that this time around it is not the Fed that is supplying the liquidity...instead, it is OPEC that has decided to keep the coolaid flowing by allowing oil prices to fall and thereby producing the same effect as the Fed's QE policy...

    Here is my reasoning: According to the government data, in 2013, US consumers bought 134 billion gallons of gas ( www.eia.gov/tools/faqs/faq.cfm?id=23&t=10 )...Now with gas prices down an average of $1 nationally from a year ago level, (actually here is San Diego, gas prices are down almost $2 per gallon), this, in effect, equates to at least $134 billion of Quantitative Easing. The $134 billion are real dollars going back into the wallets of US consumers who are all itching to spend it right here at home, thereby giving the US economy a much needed boost. In fact, as a rule of thumb, the net affect on the US economy of this latest round of QE, à la OPEC, will actually be 3 times the $134 billion number, or about $400 billion! (If anyone is interested, I will be happy to explain how the 3x multiplier comes into play.) And just like in 2010 when I predicted a doozy ride because there was a lot of liquidity in the US financial system, it is precisely for the same reason again that I predict that markets will continue to go up, at least through Spring 2015. As the sun sets on 2014, a boat load of dollars will again be chasing quality stocks in the new year and the markets will have no place to go, but up!

    I have absolutely no doubt that this new round of QE will help the US equity markets to claim newer highs...Many of you may recall that for more than a year I have been predicting that the US markets will not rest until the NASDAQ makes a new all-time high. Even though the index has consistently been making new, 52 week highs this year, it is actually a laggard because unlike its siblings that have been notching new, all-time high, the NASDAQ has been unable to score its own all time high since March of 2000(!!!). In my June 8th, 2014 blog post titled "David Tepper Couldn't Be Reading Options2Wealth...Could He?" I had gone out on a limb and predicted that the NASDAQ would make a new, all-time high before the end of the year...

    Unfortunately it looks like I will be wrong...again! :(

    Today, the NASDAQ stands @ 4,806.86, some 326 points away from its all-time high of 5,132.52 established all the way back on March 10th, 2000...with 4 trading days remaining in 2014, I don't believe it can climb that many points to help me save face and avoid yet another embarrassment...However, I have no doubt that with OPEC's QE, there will be plenty of juice left in the tank to take the NASDAQ above my target in the first quarter of 2015...

    RUSSELL 2000 ($RUT):

    As many of you may have noticed, I prefer trading options in Nasdaq small caps...in other words, Russell 2000 Index ($RUT) companies that mostly sport market capitalization of less than $1 Billion...

    Unfortunately, in 2014, it is the lack of performance of $RUT that had me flummoxed all year...As you will see from these charts, in 2014, the $RUT seemed to have hit a wall @ 1,200, and every time it tried to break free, it got smacked down...So while the S&P 500, the DOW and the NASDAQ were making new 52 week highs, and in fact, the DOW and the S&P were making new all-time highs almost weekly, the $RUT did nothing but marked time and consolidate...Its consolidation over the past year has turned the index into a tightly wound coiled spring that, imho, is about to breakout with a vengeance...In fact, on its PnF chart, it is less than 5 points away from breaking a Spread Triple Top...I expect this breakout to occur as early as tomorrow...but if not tomorrow, then certainly this coming trading week...Talk about New Year's fireworks...can't be any more fitting! And btw, IWM, which is an ETF and acts as $RUT's proxy, has already telegraphed $RUT's impending move by breaking out of its own Spread Triple Top resistance...

    (click to enlarge)

    Here is the chart of IWM, proxy to the $RUT, giving us a heads up on the underlying index's upcoming move:

    (click to enlarge)

    The above 2 charts helped crystallize for me the value of the opportunity developing in $RUT and hence my bet in IWM CALL options...Barring a cataclysmic event, natural or man-made, my level of confidence in this bet is darn near 100%...very exciting indeed! I hope to double the value of my bet in the next 2-4 weeks, if not sooner...we shall see...

    :)

    Specific Stock Tips for 2015:

    1) IWM (Proxy ETF for the RUSSELL 2000)

    2) Exact Sciences (NASDAQ:EXAS)

    3) Halozyme Therapeutics (NASDAQ:HALO)

    4) Orexigen Therapeutics (NASDAQ:OREX)

    IWM: I have already explained my rationale above.

    EXAS: This has been my favorite stock for the last 3 months...Its PnF chart is shaping up for yet another breakout...Once EXAS prints $30, it will come out of a very bullish "flag pattern" and score a new Double Top Breakout! Could do it this coming week, but certainly in January 2015. Also, the stock's fundamentals are rock solid.

    (click to enlarge)

    HALO: I love the way its PnF chart is shaping up...As you can see, the stock price is itching to pierce its Bearish Resistance Line (BRL) and you all know how important that break usually is...Also, based on a number of fundamental developments, I believe that it will be successful in piercing through its BRL in the next week or two...I currently have taken a small position in HALO options (CALLS) and once it pierces its BRL, I will increase my position significantly...

    HALO 2014-12-27 19.24.29

    OREX: Unlike HALO, OREX's chart has already broken through its BRL and on its daily Candlesticks, its charts is about to form a Golden Cross, the widely followed technical indicator generated when the stock's 50 day moving average line pierces through its 200 day moving average line from below...this signal should not be confused with my personal favorite, the Diamond Cross® which is generated when the stocks 50 week moving average price line pierces its 200 week moving average price line from below...Based on my calculations, the Golden Cross signal should be generated in the next 4-5 trading sessions...in other words, hopefully this coming week...And like EXAS, its fundamentals are pretty solid...

    (click to enlarge)

    Impending Golden Cross:

    OREX Golden Cross 2014-12-27 20.50.30

    It is getting late here on the West Coast and I need to catch some sleep... Wanted to make sure I publish my post before the markets open in less than 5 hours...

    Happy New Year to all of you! Stay safe and please don't drink and drive...

    Best~

    karim

    DISCLAIMER: All postings made here are strictly for my personal record keeping and in no way, shape or form, am I even remotely suggesting others to follow my Buy and Sell moves. Trading options is definitely not for the faint of heart as one's portfolio can move up, or down, anywhere between 10%-30% during a single trading day. Feel free to follow my progress here, but PLEASE do not follow my moves. However, if, in spite of all my exhortations, should you decide to do so, be advised that you, and ONLY YOU will be responsible for any losses that you may suffer...In other words, the onus is strictly on you. On the other hand, if the move(s) result in a profit for you, I am open to discussing a split. ;-)

    Disclosure: The author is long EXAS, HALO, IWM, OREX, QQQ.

    Dec 29 4:39 AM | Link | 2 Comments
  • Silence Is Golden...

    Let me start by stating the obvious...

    I have egg on my face.

    Am guilty as charged for straying from my original investment thesis and getting carried away in the wild-eyed spectacle surrounding Apple's iPhone 6 launch...And amid all the cacophonous "leaks" of "sapphire in" and "sapphire out" I threw my weight with the "in" crowd...and landed flat on my face...

    Am bruised...but intact...

    But there is a silver lining...I believe...

    Actually, I am pretty certain!

    So why all the brouhaha?

    When Apple earlier this week (September 9th, 2014) announced their new iPhones, sans sapphire, GTAT's stock price took a tumble...The market, impulsively, and without bothering to make even a modicum of an effort to connect the dots, took the stock to the woodshed...Lost in this Stampede out of Dodge was the very high probability that the company may have snagged (at least for now) the consolation prize of supplying screens for the upcoming Apple Watch...But last Tuesday and then especially on Wednesday, Mr. Market was in no mood to give a listen to the suffering longs' whining(s) and instead bellowed, "let's just shoot the darn stock first...there will be plenty of time for forensics later..."

    Unlike Mr. Market, I will try and analyze the matter calmly and rationally...

    Could it really be possible that GTAT's management got blindsided by Apple's September 9th announcement that their new iPhone 6s won't include the much ballyhooed, "indestructible sapphire?"

    Like, the day before I found out?

    Naw...

    Can't be possible, can it?

    Of course not!

    They had to know, heck, at least, a few months before Apple's September 9th launch...and knowing the meticulous care and painstaking thoroughness that Apple invests, especially time, in product development before lifting the curtain of secrecy, the more likely answer is: at least 1 year...On the extremely unlikely and logic defying chance that GTAT's management, for some inexplicable reason, did get blindsided, then, to avoid any potential legal jeopardy, they must file Form 8-A and divulge this new and material reality. The law dictates that they have only 4 business days to inform the SEC...

    www.sec.gov/rules/final/33-8400.htm

    The fact that the management has not filed this form tells me that they are quite sanguine about the company's prospects in delivering on those pretty lofty revenue projections...very bullish indeed! And hence the title of this post: Silence is Golden

    So what if their sapphires don't adorn the latest reincarnation of the iconic iPhones...The fact that they haven't announced a material change in their guidance tells me that Apple continues to buy their production...For what? I don't know...and honestly, I don't give a rat's ass...lots of speculations being bandied about on various chat boards...but all that is just noise, and therefore, to me, immaterial...The parking lots at the company's Mesa, Arizona plant continue to be packed, and the worker bees coming in those cars are clearly producing sapphire that Apple needs for something and continues to purchase from GTAT...This in turn should result in pretty impressive revenue numbers over the next 6-12 months. And of course, most of the above should also get confirmed in their next earnings report, due out in early November...

    Here is a quote lifted directly from GTAT's First Quarter Earnings Conference Call on May 8th, 2014...In response to an analyst's question, the company's CFO, Raja Singh Bal said:

    "...the Sapphire Materials business is a book and ship business, okay. And there's no linkage to -- there's got to be an end product in the marketplace or anything else like that. We're selling sapphire. And so as we ship it, we recognize it. In the early phase of the program here, there's some things that hang-up revenue on the balance sheet, which will then release throughout the balance of the year. So you should not link, okay, that deferred revenue into any assumption as to how revenue will actually clock out once we get into the back half of the year. And again, it's not linked to any particular product launch or anything else like that. And as you know, we can't speak to whether or not there will be one or there won't."

    seekingalpha.com/article/2203333-gt-adva...

    Regular readers of my blog know that I am basically a chartist / technical analyst...Only when a chart points me to an interesting prospect, do I bother to kick the proverbial tires (fundamental analysis). And in my checklist of fundamental analysis, the item at the very top is: rate of acceleration in revenue growth. Absolutely the first set of numbers I look for...Period.

    The original thesis that sold me onto GTAT was the rapid acceleration in the company's revenue growth, not just year over year, but even more impressively, sequential quarter over quarter...those who know me personally have seen and heard me stand up on the bully pulpit and wax superlatives about GTAT's projected rapid revenue growth...We already know that in the first half, the company reported total revenue of $81 million ($23 million in the first quarter and $58 million in the second, which btw @ 152 % sequential growth is pretty impressive in itself). Management has guided full year's revenue to be between $600 million and $700 million. I should emphasize, that management has repeated this guidance not once but twice in the last 5 weeks. Taking the low end of their guided range, I am looking at some serious acceleration in revenue growth...From $81 million in the first half to at least $519 million in the second! In percentage terms, that works out to a growth of 640%...I don't know about you guys, but in my book, that is blistering acceleration in velocity...and it is precisely the kind of escape velocity needed before a stock can leave the earth's gravity for the ride to the moon...In other words, GTAT is on the launch pad...last week, upon ignition, the engines sputtered a little, so the mission to the moon had to be aborted...but only temporarily...But thanks to the aborted mission, the true believers got to salivate Mr. Market's unexpected gift of a 30% SALE on the price of its stock...WoW! But the current sale price does not mean that Mr. Market can't become even more generous...and if so, then Praise the Lord...However, going forward, I have no doubt that we shall soon hear the magic words:

    Houston, we have ignition!

    And the longs should be on their way, hopefully for the ride of a lifetime...

    Again, all of the above is imho...

    :)

    Another reason I am a believer is because the company continues to hire...Should they have lost any Apple business, they would be retrenching for God's sake...not hiring, ...Here's a link to the current job openings at GTAT...Note the more recent listings...

    gtadvancedtechnologies-openhire.silkroad...

    There is no escaping the fact that GTAT is the dominant company in the industrial sapphire space and the future of sapphire is very bright and getting brighter with each passing day...This link to an article in the MIT Technology Review points to a future where sapphire screens will dominate smartphone displays and the article talks extensively about GTAT and its budding partnership with Apple...

    www.technologyreview.com/photoessay/5306.../

    And bear in mind that GTAT is more than just a sapphire company and the next few months will reveal the company's other, very promising technologies...

    In light of the above I believe that my original investment thesis on the company continues to be valid...and therefore the current weakness in the company's share price, is, imho, a gift...

    :)

    Again, in the absence of any intimation from the company about a reversal in its fortunes, I continue to believe that GTAT is chugging along just fine, thank you.

    I have no reason to doubt management...they have forged a partnership, with one of the most admired companies on the planet, retrofitted a massive factory shell into a state of the art plant for the production of industrial sapphire, hired, trained and deployed, more than 1,000 workers, working round the clock, 24x7 and projected to generate revenue of more than a billion dollars for the company in 2015...and they have been able to deliver all this in less than a year...They obviously have done a good enough job so far to secure from Apple 3 of the 4 milestone payments with the last remaining, management expects to receive by the end of next month... This is a very credible and efficient management team and I have no reason to doubt their guidance...

    When the short sellers wake up from their drunken stupor - having earned the right to party, and party hard - they'll realize that the next path of least resistance is up...They made a terrific bet on the short side, and won...more power to them! But if they intend to hold on to their shorts because they believe that GTAT is nothing but a house of cards, then they will wake up to a rude awakening...

    The shorts are clearly pretty smart...they certainly got the best of me on this last bet...GTAT may, in the short term continue to act weak...may even break the Double Bottom support @ $13.00 on its PnF daily chart...But I don't expect it to pierce the more important, Bullish Support Line, currently @ $12.50...For the benefit of the uninitiated, GTAT stock price will need to "print" $11.50 intraday, for it to violate this very critical technical support line...

    Here is the daily PnF chart of GTAT:

    (click to enlarge)

    And here is the weekly PnF chart of GTAT...as you can see, on the weekly chart, the support lines are further down...However, I don't expect the stock price to break the daily supports and come down to test the weekly support...we shall see...

    (click to enlarge)

    Technically, being that the stock has taken a severe beating, it needs to consolidate here......Hopefully the above mentioned supports will hold as the stock goes through the normal, and healthy, process of back testing...Once the consolidation phase is complete, GTAT will start its inevitable climb up... and soon! Of that I pretty certain...

    Final Thoughts: The markets from time to time, suffer from bouts of "irrational exuberance." That's of course when it is going up...On the way down, the markets tend to suffer from a different malady...I call it irrational depression...I believe that the current malaise in GTAT's stock price is due to irrational depression and all it needs is a dose of Xanax and it will turn around in a hurry...and I expect it to receive that dose sooner rather than later...In their last earnings conference call, the CEO stated that this Fall the company will be hosting a webcast to "to provide more detail on our Hyperion and Merlin strategic initiatives and the potential we see as these reach maturity over the next several years." Last I checked, Fall starts in a week...with the current state of depression pervading over GTAT longs, I believe that Management will throw a few needed morsels by announcing this webcast soon...and that should provide the needed shot in the arm and help lift the current heavy cloud of doom and gloom...

    seekingalpha.com/article/2382785-gt-adva...

    Again, all imho...

    Best~

    karim

    DISCLAIMER: All postings made here are strictly for my personal record keeping and in no way, shape or form, am I even remotely suggesting others to follow my Buy and Sell moves. Trading options is definitely not for the faint of heart as one's portfolio can move up, or down, anywhere between 10%-30% during a single trading day. Feel free to follow my progress here, but PLEASE do not follow my moves. However, if, in spite of all my exhortations, should you decide to do so, be advised that you, and ONLY YOU will be responsible for any losses that you may suffer...In other words, the onus is strictly on you. On the other hand, if the move(s) result in a profit for you, I am open to discussing a split. ;-)

    Disclosure: The author is long GTAT.

    Sep 14 10:52 PM | Link | 4 Comments
  • Scoop: Apple's IPhone 6 Will Have Sapphire Screen!

    About 13 months ago, on July 26, 2013, in a post titled The Impending Move in Apple, and with Apple's stock trading around $440 (pre-split), I called the end of its long slide from over $700 to the low of around $385 and predicted that having broken through its Bearish Resistance line on its PnF chart, Apple was going to make a new all-time high:

    "My humble prediction is that Apple has made its lows and has just started the inevitable march..Upward...in pursuit of its recent $700+ peak...in other words, a $260+ move in Apple's stock price could be in the offing and it may happen sooner than many believe...after all, only with Apple's help can NASDAQ achieve Nirvana...and achieve it will...you can count on it...

    This impending move in Apple should be explosive, and the ride, pure doozy...I am counting on it!"

    seekingalpha.com/instablog/6566781-optio...

    For the record, my Apple prediction came almost 3 weeks before billionaire investor, Carl Icahn disclosed in a Twitter post on August 13, 2013, that he had taken a substantial position in Apple.

    Better late than never...it took Apple a little over 13 months to finally make a new all-time high @ $103.74 (which works out to a split-adjusted price of $726.18)...

    Of course, in that same post, my other prediction that the NASDAQ would make a new all-time high in "6-9 months" unfortunately turned out to be a dud! However, in my defense, since that post, the NASDAQ nonetheless has made a pretty impressive move, up over 1,000 points, or 28%.

    Today, with Apple now back as Wall Street's darling, and 2 days before the launch of its iconic iPhone's latest re-incarnation, scheduled for September 9th, 2014, the most pressing question in the publics' mind is whether or not the new iPhone 6 will come with an indestructible sapphire screen?

    Most of the analysts who cover Apple have come out and said that the new iPhone 6 will come with the same old Gorilla Glass..Even the most reliable Apple sleuth, KGI Securities' Ming-Chi Kuo, in a research report that came out 3 days ago, has also predicted that the new iPhones will not have sapphire screens.

    I have been doing some sleuthing of my own and have come to the opposite conclusion...So here is my scoop...

    I believe that the iPhone 6 will indeed have sapphire cover.

    In this post, I will share a couple of pieces of circumstantial evidence:

    Yesterday, I asked a friend in Arizona to take a trip down to GTAT's massive plant in Mesa to ascertain how busy the place is on a weekend...Here are a couple of photos from his reconnaissance:

    (click to enlarge)

    (click to enlarge)

    (click to enlarge)

    What the above pictures prove to me is that even on a hot Saturday afternoon in Mesa, there were a boatload of people working at the GTAT sapphire plant rather than enjoying the weekend with friends and family..Even though this piece of evidence is very circumstantial, I believe it bodes well for all those clamoring for a sapphire screen...

    My next piece of circumstantial evidence is very intriguing..Earlier today I was tipped off to an article in MacRumors that mentioned a former GTAT employee, Paul Matthews, who apparently played an important role in selling GTAT's sapphire technology to Apple...I located his Linkedin profile in which, this former GTAT employee made the following statements:

    "Closed $966M in new bookings in the first year of the products launch; achieved more bookings than all of competition combined.

    Drove internal programs that increased customers yield by 50% while reducing their cost by 40%; this program led to an additional $100M in sales"

    "After marketing and selling the ASF into the LED market targeted mobile screen covers as a market for growth, conducted a focused marketing campaign and developed a cost model across the supply chain that has brought sapphire to Apple's mobile display"

    Note the use of present tense above when he states that : "has brought sapphire to Apple's mobile display."

    In other words, Paul Matthews, who claims to have played a major role in selling GTAT's sapphire technology to Apple, openly states that sapphire is Apple's new mobile display!

    What makes it even more intriguing is that a couple of hours after I read his above claim, he took his profile down, only to repost it a little later but sans the word "Apple" from the above statement...

    Unfortunately for him and Apple, I had saved his original Linkedin page...

    (click to enlarge)

    And here is a close up of it:

    (click to enlarge)

    Based on the above, admittedly circumstantial pieces of evidence, I believe that Apple's new iPhone 6 will indeed come with GTAT's indestructible, sapphire screen.

    You heard it here first!

    Now I will keep my fingers crossed hoping that I don't have egg on my face come Tuesday...

    :-)

    karim

    DISCLAIMER: All postings made here are strictly for my personal record keeping and in no way, shape or form, am I even remotely suggesting others to follow my Buy and Sell moves. Trading options is definitely not for the faint of heart as one's portfolio can move up, or down, anywhere between 10%-30% during a single trading day. Feel free to follow my progress here, but PLEASE do not follow my moves. However, if, in spite of all my exhortations, should you decide to do so, be advised that you, and ONLY YOU will be responsible for any losses that you may suffer...In other words, the onus is strictly on you. On the other hand, if the move(s) result in a profit for you, I am open to discussing a split. ;-)

    Disclosure: The author is long GTAT.

    Sep 08 12:28 AM | Link | 16 Comments
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