FA, from a technical perspective

I frequently see debates ensue between those that take a FA (Fundamental Analysis) approach versus those that rely solely on a TA (Technical Analysis) view of stock charts. Today I found myself needing to pay attention to both sides in earnest as I was involved in 2 trades that required a lot of focus, but more importantly I needed critical data from both.

Trade #1

I have been short BKS (Barnes & Noble) since Feb but had started to see a lot of rustling from those that were looking to get long. I keep an eye on the charts daily, but elected to ferret out more information on the FA side of things. Although I don’t see a real case for a viable business there, there is still chatter of a possibility for a LBO as a possibility. I am not one to answer whether that makes sense or not, but I would not want to bet against that possibility at this juncture. A view of the chart for 4/19 & today show that someone has a belief in that possibility. So I have closed that short position for now, but will certainly keep an eye on it for a revisit.

Trade #2

There are days where it seems there is an opportunity fest all day. Today was one of those days. I picked up on some PUT option activity in OCZ (OCZ Technology Group) and saw various messages on twitter regarding a Seeking Alpha article on possible fraud. I do follow this stock regularly so I was comfortable in just following the herd into the May 10 PUT options. The waterfall move wasted no time in forming and the stock headed down to the 6.5 level rather quickly.

A bounce occurred at 6.25 and the stock began to retrace. I began to sell some of the option contracts. I sold most of these contracts in the $3 range. I then began to review some of the FA information that was being put out on twitter and elected to play a retracement from the long side.

Although I made the decision on my PUT option exit based on technicals in the chart, my decision to then consider a long position was based on technicals AND information from reading the SA article as well as other valuable information reviewed (HT @firstadopter).  Below is the how the chart of OCZ ended for the normal trading session:

So technically, I made some of my decisions from a fundamental perspective. LoL

4 thoughts on “FA, from a technical perspective

  1. Enjoy your articles. Might I ask how did you learn of the OCZ? I first saw it on the stream from someone I follow but it was around $7 to $6.80. I didn’t get to see/partake in the fall. Did get in for a quick bounce but afterwards I had internet connection problems the remainder of the trading day.

    And I hope you might have an answer on what will be a ridicules question from where you’re sitting (experience wise) but I would greatly appreciate it. On your long term BKS short is it possible to have another stream of income on your shorts writing options? I know if I was long a stock I could write Covered Calls but if you’re short can you write Puts or any variable? If it’s a long answer that you don’t feel like going into no problem but a “go here and read all about it” would be greatly appreciated.

  2. My stream on twitter provided a quick response on the Seeking Alpha article and put action. One had to be quick indeed on OCZ
    As far as ? on a short position, there is no way to juice an equity short without getting even more short (selling OTM calls)

  3. Thank you for sharing. Every bit counts and that will save me from leaving $ on the table.

    Good keen maneuvering w/ GDI today switching gears from short to long for a twofer.

    Enjoy your 3 day. Who am I kidding you’ll be working the commodities & currencies. Remember last holiday CL went bananas on the “off day” because that’s when the Libya story broke. Happy Hunting

  4. I am hoping that SI is active today, would like to trade that. The last time I had a “day off” I traded it with great success (caught at 140 bip move in it).

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