Tuesday, January 08, 2008

First Real Trade of 2008

The slow stochastics crossed over on NDX so the model is long at the close. My models have been doing very well recently. I now have four: NDX, SPX, Nikkei, and All Ordinaries. After integrating the three separate econometric models into one it's now easier to maintain models of more indices. Anyway, I sold one BZH put (I keep one) and bought 400 QQQQ, 200 RICK, 200 SBUX, and 100 IBKR. The idea is to put on a more diversified model based swing trade. For some reason also stock feel safer than futures. I also went long NQ in my papertrading - the short trade I closed would have made $3000. I'll continue paper trading Australian and Japanese futures too. Barron's recommended Starbucks at the weekend and I am also playing a bounce in the restaurant stocks idea. I shouldn't have sold all of my RICK and planned to buy back at the next low. So here it is. Same with IBKR. I'm accounting all of these as trades, though, rather than investments as I don't think this is the market bottom yet. I'm wary of Starbucks as an investment too. The stock looks cheap based on earnings and their growth rate. But those earnings are only growing through massive capital investment. As a result, SBUX's free cash flow is a fraction of earnings. And it is free cash flow rather than earnings that we should use to value stocks.


I got a lucky break on this trade - right after the market close SBUX announced they are bringing back Schultz as CEO and undergoing a restructuring. The stock is up 8% last time I looked.

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