The Sultan & I: A New Trade Idea

Sultan BCS and Prince Citifrog both took a wrong turn today, leaving my portfolio with a bit of a twisted ankle when all I wanted was a tiny bit of upwards momentum:

-1.55% on the SBA
-1.10% on the Roth IRA

I have decided to do the following with BCS. I'm going to watch the levels carefully and if the opportunity arises, I may or may not switch gears and move in with BAC. Timing a move is very difficult to do with a high beta stock such as BCS. BCS has a beta of 2.7, which is even higher than HWD. The bid and ask differentials are often very big with high beta stocks, which is where the fun comes in. Winners win big and losers? Well, they can lose their shirt in basically one untimely WM Moment.

BAC has been hovering near the $13-$14 range for a while now and since I got out of that hundreds of shares position earlier in the year, I haven't had much going on with BAC for quite some time. So, I decided to look at some potential reasons to buy BAC. Options are not looking particularly pleasing and there may be some more downwards momentum - perhaps to sub $13. However, one very interesting thing about BAC is that the Insider Activity in BAC seems a bit on the compelling side.

Cotty Neil, an affiliated person, is planning a sale of 15,000 shares on 20 August 2010. The aforementioned affiliated person has sold numerous times since June 2010. I think it's right to disregard this as a bit insignificant. He's sold over 25,000 shares from what I could see. It could be seen as selling with everyone else, including CEO Moynihan, who also sold tonnes of shares.

On 22 July, BAC's CFO Noski bought 6,000 shares at $13.50 - $13.70. Now this is the compelling part. This purchase occurred a few days after the BAC earnings announcement and if I recollect correctly, BAC earnings disappointed. So, if I am forced to get out of position with Sultan BCS, then I'll see if I can get in with BAC below the CFO's entry level - perhaps coinciding with Cotty Neil's timely departure. The CFO getting in with some shares is significant to me - perhaps even more significant than the CEO selling. He's the guy who knows more about the real financial status of BAC - perhaps even more so than the CEO himself.

I will only get out of BCS if necessary. I like the Sultan's balance sheet a lot more than BAC, but price action wise, BAC could also be due for a jump on the treasure trunk.

Overall, I am a bit confused as usual. Shanghai closed above the 2,500 level and Nikkei even rallied +2.7%. FTSE and Europe failed to follow through. Gold and oil declined slightly. The greatest love story of all time in the foreseeable future would be Shanghai staying above 2,500... DJIA moving above 10,700... S&P keeping the 1100 level... Nikkei breaking 10,000... FTSE above 5500... Europe firmly above 1000. That would be a Major Bwahaha to the Short-Sellers to the 500 Quadrillion Power, wouldn't it.

I am going to start observing the direction of corn just to see if there's any correlation whatsoever. Who knows? It could be meaningful, or it could be a complete waste of time. But if I find something insightful by studying corn futures, it could give me an edge.

The important thing is that I am open and ready to learn about the market more once again! I am not going to have any secret fantasies (or try not to at least) about how we'll have unrelentless, unwavering growth for the next sixteen quarters and how all the short-sellers will be forced to join in the Rally of the Century.