The DJIA is hitting a key point next week.  Both the longer trending downward line from last October and the upward trending line that just starting in March are hitting a triangle and could both provide support.  From last week’s chart I also mentioned that the Dow finally broke above the 13,000 mark.  I should have waited for another day closing above that mark before considering it a true break above.  Having 2-3 days close above the potential ceiling are really needed for confirmation.

Take all this with a grain of salt this week (as if you should ever treat it with any more validity).  I hurt my neck again on Friday and have been fairly doped up for the past two days and didn’t sleep much last night due to the steroid medication the doc added to fun to go pack of prescriptions.

9:08AM Overstock.com issues press release related to Reg. SHO (OSTK) 20.15 : Co announces that “yesterday marked the 800th trading day that the co has appeared on the Regulation SHO threshold list”. The CEO said “While this may seem paradoxical, the facts can be reconciled. One need only understand that our capital markets have been hijacked: our settlement system no longer settles, our New York financial media no longer investigates, and our regulators no longer regulate. For further explanation, see the fine example of investigative journalism that appeared this week on DeepCapture.com”.

Deepcapture.com posted a long (about the size of a small book) article about the corruption in shorting stocks on Wall Street including names of the alleged culprits.  I have no idea if this is true, but it’s a great read.  I didn’t get through all of it due to time constraints and thought many of you would enjoy reading as much of it as you have time for.

AA ended the day up a few cents to 38.09 on an overall down day for the market. ~35 has offered good support for the past two months, so I’m banking on it working for me again.  I might have gotten back in too soon since AA is still in its trading channel and could come back to the 35 range before perking up again.  Then again, with it up on an overall down day I might have timed the dip exactly right.

In my rarely discussed IRA, I sold in the money covered calls on PAYX for a June 35 strike.  I’m nearly fully invested in both my wife’s and my IRAs now and can return full attention back to my taxable account.

Speaking of blogging, investing and social networking less lately, my boss who has been sitting in the cube behind me for the past few weeks was let go on Monday.  We have a new boss already.  He’s younger than I am.  That’s a weird feeling to realize that I’m getting old enough to have a boss who’s that much younger.  He plans to make a lot of changes here and that could lead to me leaving this place.  A lot of the reasons I came here are about to change, so it’s about to be an interesting few months of adjustment.

Some of the changes will be good, but as much as I looked for the exact right place for my needs, this doesn’t appear to be the same place any more.  My goal is still to retire from day to day work I’m 41.  I planned for this to be my last place to work, but that could change.  It’s a weird feeling.  Maybe this new boss will help me make more money and I can retire sooner.  The unknown sucks!

While MON was trading at 119.48, I sold one MON June 110 naked put (MONRB) and received $429.25 after commissions.  My June options expiring are starting to get better balanced versus my May options expiring.  I try to have half my account expire each month so I’m never fully uninvested and never over committed to any one month period.

As I mentioned MON has pulled back from its highs.  I opted to get back in now because they reiterated their five year plan and seem to be stable enough to weather any short term dip with their large cash piles.  MON closed above its 50 day moving average yesterday and today moved up above its 10 day moving average.  I think the 50 day moving average could offer support on a slight pullback.  In case I’m off by a few bucks, I sold farther out of the money.  With such high premiums I didn’t need to sell the puts too close to the current price. I also see a short term trend line showing up over the past four days that shows an upward direction of higher lows.

My reasoning was simple.  Earnings were already out and good and the chart didn’t look like AAPL would pull back lower than $170 by June expiration.  Throw in the good premiums and I’m back to repeat previous trades.  I know part of my mindset is to get in deeper invested and AAPL trading that high made it easier.  Had I been on my toes I would’ve gotten in as soon as AAPL posted the good earnings report.  I didn’t move quickly, so my strike is higher and my premium is lower.  I’m still in though.

I planned to make the trade in my IRA, but didn’t have $18k available.  AAPL could easily be a long term trade.  You know my mindset for long term is 6-8 months, not quite a lifetime.

Due to this break above 12,700, I’m changing my sentiment to slightly bullish on my home page.  I went Bearish in January when the DJIA was at 12,500 and should have changed it two weeks ago.  At least I’m awake at the wheel again now.

I opted for slightly bullish versus just flat out a raging bull because I see potential for some factors that could weigh us down still.  If the DJIA can get down to that lower trend line of higher lows, I’ll be ready to jump in more than I have already.  As of this weekend I’ve sold enough naked puts combined with my long positions covered with calls to equal 102% of my account value.  I have a lot of options expiring in May, so I’m in a position to sell new puts on any stock I like for the foreseeable future.  It all comes down to finding those stocks which hasn’t been as easy as I’d like if we are truly starting a new bull run now.  That’s another reason for my caution.

I listened to about 30 minutes of the earnings call yesterday afternoon while I was on my way home from work.  I thought the numbers would be bad which is why I sold SFLY naked calls twice before the announcement and it looks like I’ll be rewarded for my risk taking.  As much as I like to base my trade decisions on the charts (and the chart was right again for SFLY), I also like to listen to conference calls for earnings announcements.  I advise listening whenever you have the chance.  I only catch a couple per season, but am almost always happy I did.  They are free to call into and you can gain more information than just what’s in the numbers.

What doesn’t show in the summary below from Yahoo! Finance, InPlay is the tone of the analysts covering SFLY.  Here’s the summary:

4:11PM Shutterfly reports EPS in-line, misses on revs; guides Q2 EPS below consensus, revs below consensus; guides FY08 EPS in-line, revs below consensus (SFLY) 16.35 -1.48 : Reports Q1 (Mar) loss of $0.15 per share, in-line with the First Call consensus of ($0.15); revenues rose 28.5% year/year to $34.3 mln vs the $35.6 mln consensus. Co issues downside guidance for Q2, sees EPS of $(0.19)-(0.24) vs. ($0.15) consensus; sees Q2 revs of $35-38 mln vs. $39.75 mln consensus. Co issues mixed guidance for FY08, sees EPS of $0.30-0.50 vs. $0.44 consensus; sees FY08 revs of $225-245 mln vs. $252.03 mln consensus. For FY08 a non-GAAP basis, gross profit margins are expected to range from 53% to 55% of net revenues.  

I thought I heard a lot of frustration in their voices from the officers not answering the questions the way the analysts thought they should be answered.  Obviously I’m biased, but I liked the group mentality of questioning how SFLY would turn this slowing revenue trend when it has so many competitors that are selling similar items cheaper.  They went with the standard technology improvements for some of their answers, but that didn’t seem like enough to me.  In addition, they hung their hats on their increase in user registrations.  To me, that is not a direct translation into greater earnings or revenue.  They might have said it and I missed it, but I didn’t hear them mention how many return customers they have.  Retention should be a key element for growth I’d think.  That number must be down if new customers were up and revenue was still down.  It’s like they were saying, “Hey, look over here, this thing is shiny and cool.  Don’t bother looking at that old thing in front of you.”

Also, I heard them mention that they have no immediate plans to cut prices.  I translate that to mean they do plan to cut prices, but will wait until they lose more market share.  I’m keeping my bearish stance on SFLY.

I’m still not convinced we won’t have another pull back before we take off again, but hope the Fed has finished with rate cuts for a while.  That can only be the case if they see an improvement in the economy, which apparently they haven’t seen enough of yet.

My account summary for April 2008: 

My current account value according to Ameritrade is $85,140.39 and according to Quicken is $85,388.20.  Here’s how the returns break down:

• 12 month return: -2.18%
• Since my blog’s beginning (4/8/07): -0.01%
• I deposited $2,000 on 4/2/08

According to Morningstar, here’s how I compare to the major indices:

• 12 month S&P 500 Return: -5.06%
• 12 month DJIA Return: +0.11%
• 12 month NASDAQ Return: -5.13%
• 12 month Russell 2000 Return: -12.25%
• 12 month S&P Midcap 400 Return: -4.05%

I continue to enjoy comparing my results to the major indices.  It helps me keep my eye on the end goal of total portfolio gains.  Every month I’m reminded that each individual stock or option gain or loss does not matter as much as my overall growth is still positive.  I still have the DJIA to catch, but I’m gaining ground again.  My goal is one month closer to becoming a reality.

Just three days ago SFLY was trading below 15 which makes me think this run-up before earnings tomorrow is going to turn into a sell-off soon after they announce, unless they destroy expectations.  I’m expecting the old “sell on the news” price action.  Also worth noting is that although SFLY closed at its high of the day, it hit a ceiling that has been rising of it’s higher highs.  The 100 day moving average is below 19.  That’s higher than I want SFLY to go, but good to see another road block in it’s path to the moon.

I’ve been tempted to sell June 15 calls, but have held off because I wouldn’t be too surprised to see SFLY below 15 by the end of the week.  If it fools me and moves higher, I’ll sell naked puts at the 20 strike to cover or could even buy shares (turning my naked calls into covered calls) if I think it’ll actually have legs.  I’ve thought about buying calls for the May strike, but opted not to hedge yet.  They are scheduled to announce Wednesday, tomorrow.  That, combined with the Fed will make tomorrow extremely interesting for me.