Cam at the Close 3.13.12

APPL closed on the highs of the day at $552.50 and was up 1.35%. Some notable movers today were Tudou Holdings (TUDO) and Yoku Inc. (YOKU). YOKU announced today that it plans to acquire TUDO to create China’s largest video sharing website. TUDO jumped over 150% to close at $39.41 after closing in the mid $15’s on last Friday. The street reacted well to the news and bid up shares of Yoku by over 30%. I learned after the fact, but there was very bullish option activity in Yoku last Friday. Did someone know about the merger? There is no doubt in my mind that SOMEONE did, but once someone makes a trade, it is public information for everyone. You just have to know where to look. This is another reason why Andrew’s unusual option activity reports can be a vital tool for trading. YOKU provided some great intraday trading opportunities on the short and long side. The shares plunged from $31 to $28 in the first 2 hours of trading. YOKU found buyers willing to support it at $27.80 and once this was established, the stock never turned back. It ended up taking out the morning highs to close at $31.85. The CBOE ^Vix closed under $16 today at $15.90. Despite the recent spike we saw in volatility last week from the selloff, it appears that volatility is in a downtrend. It is really important that investors and traders don’t get complacent in this tape because one news headline could change this market around in a flash. I really like the TVIX down here in this $14 area. I think it is a good risk/reward given that the ^Vix is under $16. I would personally start a position here, and then cost average down every .50 decrease on the ^Vix. Normally, I would never cost average down anything for a trade, but volatility can never go to zero and it has extreme ranges. I think we are getting near an extreme ^Vix range on the downside. I would be very comfortable holding a long TVIX position with the ^Vix in a $14-$16 range. The 52 week low on the TVIX is $13.80. Spot Crude, Gold, Silver and Copper were all down -0.83%, -0.75%, -1.9% and -0.34% respectively.

Written by Cam Patrick