Wednesday, July 16, 2014

NASDAQ poised for another bounce, but will it hold?

NASDAQ suffered a lot of volatility on Tuesday, but managed to survive with only moderate losses. An encouraging Q2 quarterly report from Intel (INTC) has NASDAQ futures up sharply, poising NASDAQ for a sizeable pop at the open. Now the big question is whether that pop kicks off a significant short squeeze that can last throughout the day and then some, or whether that initial pop peters out. Bearish short-term speculators may try to sell into this rally, or the more moderate bears may "go with the flow" and pile on to the rally, knowing that they can quickly and easily reverse their positions as soon as the rally runs out of steam (again) within a few days.
My short-dated Intel call option contracts that I acquired on Monday will present me with an interesting challenge, whether to take my profits at the open, ride them up further over the next couple of days – risking any short-term pullback if the rally loses steam too quickly, or simply exercise them on Friday and maintain a long position in Intel for the longer-term. I have mixed feeling about Intel – I personally like them, but so many investors out there have abandoned them that judging the stock's upside over the next year is rather speculative about investor sentiment, as opposed to their business prospects. I might decide to balance the risk and return, and just take a more modest long position.
It is worth noting that Intel is a Dow Industrial component, so the overall market will get dragged up by Intel – and has been for the past nine months.
-- Jack Krupansky


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