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1. Disaster of the Day -- XNPT
By Timothy Collins
7:38 a.m. EST
is just getting destroyed after its application for a restless leg syndrome drug was denied by the FDA. You'll recall that we were leaning bullish and looking for a move to $25-$30 on approval; however, with events like this, you never know, and my post said that we could see the stock below $10 on a rejection. Hence, our play was long Feb 20-25 call spreads at 1.50 or better, and Mar 15 puts at .90. Our total cost ended up at 2.30 (we got the spread for 1.40), and now with the stock sitting at $7.25 in the premarket, we are buying some shares to lock in the 7.75 intrinsic value on a portion of the puts. Not bad for being wrong...
Short XNPT (based on delta calculation).
2. Wal-Mart Earnings, Outlook
By Ken Shreve
9:00 a.m. EST
delivers sluggish numbers, and its outlook isn't great. Big surprise. It's a laggard stock whose best days of growth are behind it. Since the March lows, the
is up 45%, compared with a 10% gain for Wal-Mart.
Yes, Wal-Mart is a bellwether, but don't get down on retail because of Wal-Mart's lukewarm quarter and outlook. There are still a lot of good stories of growth in the sector from specialty retailers, discount retailers and restaurants, among others. Consumers are spending, but they're spending at retailers that are showing leading price performance in the market, not lagging.
Lots of retail earnings reports next week from the likes of
report on Tuesday.
3. Recurring Basing Pattern in the S&P
By Robert Moreno
10:42 a.m. EST
, "Let the Battle Commence," points out that "our recent bounces after breakdowns have not had the same amount of vigor." This denotes indecision or confusion. In the fury of the moment, we can lose perspective, and I was prompted to take a longer view.
These two charts of the
are of our current time frame and of the period 2002 to 2005. The basing process that took place from late 2008 to early 2009 has similar characteristics in price and time to the comparable 2002-2003 basing period. The run from the July 2009 breakout level at 950 (price/time identical) has brought the S&P to the 50% retracement area of the 2007 high and 2009 low. This occurred in 2004 as well, with that break taking price to the 50% level of the 2000 high/2002 low, and that resulted in a five-month pullback that took price down 8%.
4. AMAT -- How Tough Are Semis?
By Brian Gilmartin
11:01 a.m. EST
If you've ever wondered how tough it is to invest in semiconductors, look no further than
today, which reported a great quarter and fabulous guidance but the stock is down 5% on heavy volume. Of the roughly 20 companies that reported quarterly earnings between last night's close and this morning's open, I count six technology companies among the group; every one of those companies raised guidance but only three of those stocks are trading higher. Sixteen of the 20 companies (regardless of sector) either affirmed or raised guidance.
Tough market, gang. The bears have been right for so long that this action has me wondering if something lurks just around the corner, but it sure isn't related to corporate earnings.
Long SMH (and a host of semis) but no AMAT.
5. No Love for Heartland
By Tim Melvin
2:36 p.m. EST
Heartland Payment Systems
are bucking the trend today, down a little more than 2.5%. The company reported earnings that missed Wall Street estimates after one-time charges. The company had a profit excluding charges of 16 cents a share while the Street expected 20 cents. The report also included a $23.7 million charge related to the settlement of a data breach in 2008 that occurred when hackers entered the system and stole Visa and debit card numbers. The bright spot was that revenue was up to $420 million compared to $385.9 million a year ago. The number of transactions processed rose by 5% year over year.
The stock of the credit card payment processor first came to my attention when David Nierenberg started buying the stock. He was adding to his position in the fourth quarter. Nierenberg is a great long-term stock-picker, so investors of a similar mindset might want to investigate.
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This article was written by a staff member of RealMoney.com.