Stopped out of DISCA

I still like DISCA, but was stopped out of my long position this morning.  So I imagine the logical question is, why did I let myself get stopped out?  Sure, I could have canceled or moved the stop, but I could be wrong about the stock.  Stops are there to protect the downside and limit risk in case I've made a mistake on DISCA.

I still have my Feb 35 call on DISCA, and expect to keep that for now.

Re-visiting Priceline (PCLN)

Time to check back in on Priceline - to recap last week, I liked it and was ready to buy (Priceline (PCLN)), but held off because of the chart (PCLN Again).  I wanted to wait and see where it went short term within its 2+ month trading range (hoping it would drop to the bottom of the range for a better entry point).  Here is today's chart:

You will notice that it did finally break out of the range the very day I decided not to go long (and has stayed above since), but the volume (see yellow above) has been lackluster.  To me that's not a solid breakout and should be eyed with caution.  While I still like the stock, I think it's just as likely to drop back below what I view as weak support around $426 in the short term.  Holding off again for now.

Back To Gold Again (IAU)

As mentioned in a post from last week, My Current Gold Position, I'm looking to add to my ETF holding in IAU, but was waiting for some price stabilization after it dropped after the first of the year.  That's happened now, as IAU has closed in an 0.11 cent range since Jan 4th, and it's currently trading only .03 cents above my last buy.  I'm going to buy IAU before the close today.

DISCA Again

DISCA has continued to drop since my last post and is now down over 5% since last Monday and more than 1.5% below from where I bought more on Thursday morning.  Since this is currently my largest position I decided more research was in order (and some of this I should have done already).

To recap, DISCA is trading at a multiple more or less equal to the growth rate, very cheap.  I listened to the 3rd quarter conference call today (from Nov 2nd) and heard didn't hear anything to change my bullish view on the company.  Also took a closer look at the 3rd quarter financials:

• Current ratio is 2.7 vs. a 2.1 ratio at 3rd quarter 2009
• Long tern debt is up only slightly (4% from 3rd quarter 2009)
• 3Q net income was $186 million with only $49 million in interest expense for the quarter - And interest expense was actually down over 24% from 3Q 2009
• Margins were up over 3Q 2009 - 45% vs 43% last year

The decline seems to coincide with a Citigroup conference they participated at last Tuesday, 1/4.  So thinking there must have been bad news I listened to the presentation today, which was a 30+ minute Q&A session.  It was sort of bland, but I didn't hear anything to drive the stock down - on the other hand nothing was said you'd consider "exciting" for the company, and maybe that's what the street was looking for.

We should also look at the chart since I did note last week that it was approaching support at $40, which it has broken through - that $40 is now resistance.  However, I see the next level of support relatively close, around $39, which is also just slightly above the 200 day ema.

My bottom line opinion - I see nothing to change my positive view on the company.  This is yet another buying opportunity, but I do recognize that the stock could have some difficulty trading above the $40 resistance in the short-term.  Also, if you look at the chart above, we're not that far from my stop which I placed a little below the 200 day ema.  Maybe I'll leave my common position alone and go with a call for my next by...?

Discovery Communications (DISCA)

Discovery Communications is a current position that I made 2 buys back in November at $40.28 and $41.59.  It was profitable for awhile but has taken a 3% dip this week on higher volume.  It's also starting to approach support at $40 (see chart below) so I thought I should take a second look.

• DISCA is currently trading ($40.55 close) at 19.1 times 2011 earnings which is more or less even with its 2011 estimated earnings growth of 19.8%.  (Estimated 2011 EPS has actually been revised $0.02 higher than when I first looked at it back In November)  One times earnings growth is cheap.
• Median analyst price target is $45 - 11.1% from today's close.
• To get only a 10% upside, DISCA only needs to trade at 1.06 times the 2011 growth rate.

Bottom line - I still like it and will take this as another buying opportunity at tomorrow's open.  Look for tomorrow's How I'm Doing to show another purchase or I'll post an explanation if something changes.

Natural Gas (UNG)

Mentioned a couple days ago my trade in natural gas, UNG (ETF), had finally moved in my favor, but I stayed away because it had a huge 5%+ day.  Today it pulled back to about 2% above my initial purchase and I went back in for my second buy.  You can see the update on the How I'm Doing page.

I'll discuss stops in more detail in a later post, but on UNG, I had set my stop prior to today at 5.24, slightly below a long term low of 5.27.  Well, now I have more exposure and that's a 14% drop from today's close which is more than I'm willing to risk.  I don't set my stops the same way on each position, but I'll rarely have more than a 10% stop.  There's a recent low (mid-December) at 5.53 so I'm going to move the stop up toward that, which will put me just under 10%.

My Current Gold Position (IAU)

If you've looked at the How I'm Doing page, you'll see that I have a current position in gold using the iShares ETF, IAU.  I've made 2 purchases, the second about 2% above the first.  As stated in an earlier post, I'd like my first "addition" to any position in favor of the trade, and preferably about a 2% move.  So, done and done on that one.

Now, I still like gold and would like to add to my IAU holdings.  However, I'm OK with any further additions not being above the last purchase.  Take a look at the chart below - notice if I used the same guideline as above, I would be buying at about $13.80.

Purchase 1	13.27
Purchase 2	13.53	2.0% up from 1st buy
Purchase 3??	13.80	2.0% up from 2nd buy
Stop	12.38

In theory, my next purchase ("Purchase 3") could be anywhere between my 12.38 stop and approx 13.80.  In reality, I will probably never add to a position below the initial purchase price, in this case 13.27.  And I will probably never buy more than 2% above the last buy.  So that puts me between 13.27 and 13.80.  As gold has been taking a little beating the first few days of the year, I'm going to wait for it to stabilize a bit.  Most likely I will purchase more somewhere in the neighborhood of purchase 2 (13.53) after the price settles down.