Sunday, December 18, 2011

Looking for a place to settle out

Welcome back, it’s been a while since I’ve written here so let’s look at what has happened since then.

The S&P 500 has been on the trek down and has broken a key resistance 1,220 level on Wednesday, after Ben Bernanke said that there will be no immediate monetary easing, though interest rates will continue to stay low through mid 2013, which we have already known. With no fed intervention, we will see the US dollar strengthen, and the market weaken a bit, which is what has happened since Bernanke’s speech Tuesday afternoon. This combined with continued European uncertainty, and possible Euro printing, we could be in for the start of a rough 2012. Though a strong US dollar is not a bad thing; to make a country grow, we need GDP growth. Macroeconomics 101 says that GDP = C+I+G+NX. 70% of that equation is the C which is consumer spending. With a stronger US dollar, consumers’ money goes further. Oil prices also come down, like we have seen; off of the $100 dollar mark and making its way down to $90. With a stronger dollar and lower oil prices, consumers now have more $$ to spend.

I estimate that the broader market (S&P 500) will close out the year roughly unchanged (my range is 1,245-1,270 which is 1% above and below flat on year 1,257). Between now and then, I don’t anticipate on anything being solved, but be aware of false rumors, which seem to run this market day by day.

Above the S&P 500 and my ranges

As I also discussed, the US dollar index, which is a measure of the strength of the US dollar compared to a basket of six of the most used currencies in the world, is another important indicator to watch for economic strength/weakness. More than half of the weight to compose the index is from the Euro (58%) and the rest is from the Japanese Yen (JPY) 12.6%, Pound Sterling (GBP), 11.9%, Canadian dollar (CAD), 9.1% Swedish krona (SEK), 4.2% weight Swiss franc (CHF) 3.6%. Recently, we have seen a big push up above the 80 level, one not seen in quite some time. This index tends to inversely relate to the S&P 500.

As you can see there has been a quite nice U shaped recovery in our currency, up 5 pennies since the beginning of last month to relatively flat for the year. It is in a bullish pattern now, with long-term resistance looking to be 75 ish, I see the US dollar holding strong through the beginning of 2012, given no easing tactics.

This week I want to focus in on my long positions. Currently, I have $1,500 for my long fund ($700 in $FTR and $800 in $IVR.) I bought $FTR at $7.00 a little over 2 years ago and $IVR at 19.70 early this summer. On Monday, I came across an article with a nice picture showing a technical breakdown in both charts. This analyst had a very negative sentiment on both names, so it looked like I missed the boat on pulling the trigger here. This past week, Frontier broke below $5 for the first time going back to the 1980’s. The bad news of lower revenues and having to continue to payout a large dividend has hurt their bottom line, and weary investors can see that. My take is that the bad news has been priced in, seeing the stock has dropped roughly 50% this year alone. Invesco Mortgage Retail has also suffered after the August collapse, though not as bad, and slowly but surely crawling back to respectable levels. They will be paying out a smaller dividend than their last, so this could possibly be good for some share growth.

Above the technical breakdown in both names this year, remaining optimistic for ’12.

Above Frontier Communications Corporation, RSI, VWAP and BBands

Made one trade on Dec 8th, bot 300 $THQI on a big move under a dollar, on headlines looks like the company will be reporting not so good sales on their next report, guided down. Saw moves like this from ERTS couple yrs ago, they have come back and I think that a move below a dollar is overdone. I want to protect myself though and limit my losses to .70 and upside to a minimal gain @ .98.

Above $THQI

Not so much in the way of earnings reports this week, with it being very slow and before the holidays, don’t expect the market to move much, but look out for ConAgra Foods. I actually have a sell on this name based on valuations. Their profit margin has decreased since the beginning, of the year, Cash flow/share is down, Debt to EBITDA is up, and EBITDA/share is roughly flat. These are a few warning lights for the company, even though it is trading at a respectable 13 P/E ratio.

Above these 4 charts show what I’m saying, the stock is up about 15% for the year, so it has beaten the broad market, but in comparison to other names in the related space, like General Mills, who also report this week, are at all-time highs. CAG’s problem appears to be larger expenses with decreased revenue. Notice in the picture below the drop off in income q/q from their last report, that is huge.

Expect the broad market to not do much this week, volume will be very thin. (or could we get another rumor?)

Have a good week everyone, catch me on twitter @peter_eller10 for updates!

Sunday, December 4, 2011

Has Europe been saved?

What a week it was indeed, seems like everything is back to normal, right? We saw all of the broader market in the green: SP500 +7.4%, Nasdaq +7.6%, Russell +10.4% Oil +3.3%, Gold +3.7%, Copper +9.1%. The Volatility index saw a huge drop -20.2%. Year to date we are still in the red, but not by much: SP500 -1.1%, Nasdaq -1.0%, Russell -6.2%.

To me, for the fed to intervene like this and basically stimulate the world, what does this say about the stability of the global monetary system? Clearly something was going wrong and something was bound to SNAP any second. From the close the previous Friday to this Friday at the open in the AM, we saw a 100pt S&P rally, we saw this before in the beginning of October, which that rally lasted 3 weeks. Then again, we did sell off pretty hard last week, so on a fundamental/technical basis, we were due for a correction up.

As we saw Friday, unemployment is still weak, anyone who reads the headline will get all high and jittery, but the reason we dropped .4% off the unemployment rate was due to discouraged workers leaving trying to find a job, 300,000+ of them infact. Do you think that is a good thing? It seemed that this news was almost ignored due to the fed intervention earlier on, and by Friday, the buying programs were out of juice.

Above the S&P 3 week chart, I have 1,260 as short-term resistance now. We could not break above that barrier on Fri morning before we slowly chugged down 20 handles to close the day flat. We need a 3-4 day hold above this level to be long, then 1,289 would be the next level, seen at the end of October. As Evan McDaniel said (@sellputs) “Interventions and headlines regarding the Fed or hand of God like tactics can nullify tech analysis on smaller time frames” With that said, watch out and position correctly.

This past week I lost about a $100 on a pretty stupid trade on my part. I really don’t know what I was thinking when I bought $FTWR after it dropped from $1.00 to .30 about 2 weeks ago. I have lost 50% of my position this week, did not read into it that much to see just how bad off this thing is. I will sell my position on the open Monday and learn from my mistake.

Above $FTWR huge downturn this week.

This week going to highlight a few names to trade off from earnings reports. First is Dollar General. Looking at their internals, they continue to do very well, with a q/q increase in revenue and profit by 10%. Notice also how they have been compared to the broader market in terms of outperformance. Since the downturn in August, they are up roughly 30%, this could be due to the number of people still unemployed who need cheap items. Dollar stores will continue to do well in a weak economy. At the close on Friday, they are a little over a dollar off of their all-time highs that were seen last week. I’m sure there has been some buying into the report, nevertheless I have a buy on it, and would expect a selloff from the report, that would be when you get in. The last report has the stock sell off about 8%, since then it has rallied 15%. They do not pay a dividend, but would not be surprised if they instated one soon.

Above Dollar General, notice the tight range it has held the last 2 months compared to large gyrations in broader market. The report will be coming out Monday.

Next name on my list is National Beverage Corporation $FIZZ. This is also another name that will be reporting Monday and quite an interesting one infact. They are the makers of Shasta and Faygo products. I remember years ago my grandfather a huge fan of Faygo, he probably drank a 2 liter a day, was eager to find out the maker of the product and assumed they were doing well, and they are. Between the beginning of this yr and June, they have managed to almost double their income from 7.4M to 13.4M. with a p/e of 18 it is a bit on the expensive sign, but an incentive long term is their special dividend with started in 2009. It has increased from $1.35 to $2.30 in 2010, I expect them to pay out more from the great year they have had, up over 20% and trading near all-time highs.

Above $FIZZ I anticipate a slight selloff in the name, but I would buy, company looks very strong, and as stated above, large yearly dividend helps.

Last one is one I first reported to here on their prior report, AutoZone. This name is another good one for long-term growth. A good percentage of the time, it tends to selloff a good amount, usually 5-10%, then run it right back up to all time highs. This year, they have more than doubled their income from 148M to 301M, the do-it-yourself auto repair still looks to be the space to be in, as people do not have enough $$ or do not want to spend to buy a new or used car and will squeeze as much out of the one that they have using these products. The only thing concerning is the large price of the shares. To make the company more attractive to invest in, In my opinion they need to do a 10x split do lower price to 30ish bucks.

Above AZO showing the continued move up

My thoughts this week are that we will see some profit taking from the huge run up we saw last week, we need to hold a key 1,200 this whole week to continue the bullish momentum, break below and in for more trouble. After this week, we usually see the low volume melt-up prior to Christmas and after, so beware of that any of you who short (probably already know this).

That is all for this week, will for sure not be posting next week, final exams are here ugh, but home in 11 Days could not be more excited. I’ll keep you all updated as much as I can via twitter (@peter_eller10) on any moves I make this week. Good luck to everyone.

Sunday, November 27, 2011

European Collapse on the Way?

Hope you all have been well these past few weeks, been going through a rough patch with this foot injury and grades not so stellar, so the trading has been limited but they all have been not so good. Let’s review what has brought us to this point:

Last time I posted on here, we were looking at 1,260 on the SPX. Basically what we have seen from the lows on October 3rd 1,068 ish to the highs around 1,290 on October 27th is a short covering rally. I marked below 1,140 a key level to watch. Since August when the selloff began, we have breached it 5 different times, the first two on a large volume down day then bounce back up. The third we closed below for 2 days, the fourth, same story and the fifth time we saw the shot down breach of 1,100 then shot up. We traded below 1,140 for 3 trading days. My gut tells me that there will probably be some sell stops under 1,140, but if we can sustain more than 3 closes under 1,140, there is more downside to come. I mentioned at the beginning of last week on Twitter we would be 1,150 end of week. Intraday Friday ES low was 1147.5. Last week was the worst for Thanksgiving in over 60 years.

Above S&P 500, key level 1,140

As far as Europe, the situation there is not getting any better and something tells me that the Euro will be gone soon, if not by the end of the year. Italian yields are out of control, Spain and Portugal are both getting there and Germany cannot support the EU by itself. The European Union will not print more, leading to an all-out debt crisis that would affect not only EU countries, but whoever bought their debt. More haircuts anyone? Doubt it.

Spain and Italy now have to pay more to borrow in two years than a decade. Spain’s 2 and 10yr spread have been cut in half in a month. How much more borrowing can continue? As of now, Italian 3yr notes are above 8%.

I am still long-term bearish because after the EU satiation gets resolved (will it ever) our debt problem is next. Like playing a game of ping-pong, though when the ball is in the air, (unknown) buy the market; seems to be the theses we are following. We will probably end the year lower.

Trades I have made in the last 3 weeks have not been so good. My first was Delta Petroleum on November 11th. I had a buy trigger set for .58 at an open of .71. If it did happen to fall that much (which it surprisingly fell to .52) I owned at .58; I got out at .54 for a small loss, since then it has flat-lined around .56, was looking for a short-covering bounce, but missed it by a day.

Above $DPTR on the buy+sell

I made another losing trade (could have been much more) on CVR Energy. WTI spiked to $103 2 weeks ago and the refiners got slammed hard on the contracting Brent/WTI spread which at one point was just above $9 dollars (Was $25+ at the height). I bought and sold the next day for a 20 dollar loss. So far, down 45 bucks. It was good to get out there seeing as it traded below $17 briefly.

Above $CVI

Last trade I had to make to support my 4th, which was my American Airlines sell. I bot $AMR at $1.9 on the initial slam back on October 3rd. Did not have the brains to pull the trigger on the 13th when it could have been $100 profit. Sold out at $1.80 for a $30 loss. As of now, it is trading below 1.60, so it was good to get out now. Company looks dead, losing $$ due to pensions to retired employees and low profits from high fuel costs.

Above $AMR

My last trade of the week was right after the $AMR sell. I bought $FTWR at .30, so far I have been flat this one, dipped below there to .28 and above to .38 which was the end of day ramp on Friday I missed due to being at the gym lol. Looking for another possible week in this name before I pull the trigger, it is a small amount compared to other trades I have recently made. The reason for the huge selloff from the 1.00-.80 range was a 40% cut in their workforce and a missed interest payment on 9.00% convertible senior Secured notes due in 2012, resignation of directors, continued delay in 10Q filing and continued issues concerning listing on NASDAQ exchange.

Above $FTWR

Going to be very limited trading this week, back into work mode for me for the next 2.5 weeks then semester is over, can’t believe it. I’m eyeballing one name though if I can get it for a good price. Talbots surprised me last week trading below $2 for the 1st time since 2009 lows. Below are some stats on the company for a potential trade; looking for possibly under $1.8 before the report comes out Thursday.

That's all this week guys, catch me on twitter @peter_eller10 I'll let you all know if I do any other trades.

Sunday, November 6, 2011

Some Europe, Some MF Global, Some earnings..the usual

Another week of European madness along with the bankruptcy of MF Global rocked the US markets; S&P and broader markets finished down about 2.5%. What we are waiting for now is clarity from Greece, and what is exactly going to happen with the MF accounts. Markets opened up ugly Monday and Tuesday following the prior week of MF Global in an unstable position after investing in European sovereign debt. They had to file for Ch. 11on Oct. 31st, as of now clients are out of work and will not be getting paid until the middle of the month. A further FBI investigation will tell us that there was more than bad investments going on there, but mingling of accounts to cover up losses. Very messy, indeed.

The ES got down to around 1,215 Tuesday, a strong pivot that I was watching that day was 1,208; we didn’t get there and we rallied off of the lows. 1,260 was accomplished by day end Thursday.

Trendlines still show we are rangebound, 1,214 was the breaking point which was closely breached then a bounce right off of.

I expect we will hold a 3% up/down range this week, not really sure as to where we go yet with Greece, and the CME/MF Global margin news. Plus, with a slew of earnings reports this week yet again, anything is possible. Looking to breakdown under 1,220 and a breakout to the upside 1,280. Will we slam it again, or will we have an early Thanksgiving rally? (lol)

Was not trading last week, finally done with busy week of tests till beginning of December when finals start thank God, but besides that, saw all of my positions release their earnings statements this week with one being positive and the rest negative. Let’s look first at Eastman Kodak.

Kodak posted wider loss than expected, losing $222M dollars in the 3rd quarter, with cash reserves falling 10%. Revenues also fell, by 17% with the biggest percentages of the loss coming from the film and digital camera business. Much competition from Fuji and Canon are leading to continuing declines in Kodak shares. For now, I plan to hold my small position in the company, as I bought it very cheap in the first place (unch to minimally neg. as of close Friday). CEO Antonio Perez is bullish on 2012 with their continued growth of Inkjet printer sales (to the US Fed, lol kidding) or patent sales, which could still be in the works, will raise share prices, imo possibly upwards to $2+

Above, $EK breaking down below pivot, touching S3 @ 1.05 before bouncing off. What remains for the future of this company is to be determined….

Frontier Comminucations also reported, another not so good quarter for them with declining revenue and increasing expenses. Shareholders punished them pretty bad down below a key $6 level, then to $5.5 which held. Revenues were down over $100 million q/q due to decrease in residential and business customers switching accounts to other telecommunication services, probably that are cheaper. Revenue decline has been a problem with Frontier the past year, but they are still very ritual with high yielding dividend which can almost offset all of my losses in the company. I don’t want to feel like I’m married to it, but it was my 1st ever trade and currently my biggest position.

Studying the chart, I can see from where it previously breached 5.5, bounced off traded in a $1 range for a month broke down again, held and traded up again. Looking for it to stay above 5.5 for the continued time, will only sell out (finally) if we breach 5.5, due to company concerns, and not broader mkt bringing it down.

Invesco Mortgage Capital $IVR reported a 5th straight quarter of double digit profit, though margins are declining. I am holing $IVR for an IRA account (got to start sometime) pays the highest dividend right now out of all the REIT’s publically traded. Since they do not have to pay income tax on profits, they have to distribute 90% of their income as dividends. In doing this, they have to consistently price secondary offerings to raise capital, increasing amt of shares, decreasing share price. I am long $IVR, regardless of share price, just my opinion.

Above you can see major drop off, about 40% at the lows, after the secondary offering in August.

Earnings this week looking at Kohl’s $KSS. With the holiday shopping season right around the corner, I would be a buyer of Kohl’s here. Their fundamentals and sales appear to be very strong. They saw about a 33% growth in Net income q/q while cutting expenses. Trading at a p/e under 15 (14.1) looks cheap on valuation also. Consensus EPS is .78, I see Kohl’s trade up near $60 or breaking above it.

Above 2 photos, a chart of $KSS and Return on investment + profit margin + Gross Profit margin

One more I’m looking at for a trade is DryShips $DYRS. I had a buy stop in this name a couple months ago, but missed it by a cent on a huge ramp following. They are expected to report .15 a share. Looking at the business from 2008-present they came from a 361M loss to 172M profit, so they have definitely turned themselves around. If I can get in at a good price, I’ll pick some up.

Above, $DRYS holding above $2 right now, but well off it’s normal $4 level.

One final thought, will we continue to see more can kicking in Europe? now that Italy’s bond yields are beginning to become a bit risky, are we at the tip of the iceberg? We can’t forget about our debt problem either. Nowhere close to be out of woods yet, but trade the markets day to day, up and down, that is all you can do, watch the charts.

That’s all this week guys, I’ll let you all know via twitter (@peter_eller10) If I make any trades, have a good week of trading everyone!

Sunday, October 30, 2011

Will unemployment week stall our recovery?

Another week for the books indeed. Last week we saw a big up move Thursday on more kick the can news for Greece. Take this as bullish for now, bearish later, eventually we will come to that day where we can no longer be doing this anymore, enjoy it while it lasts. We saw the ES jump from 1,220 to 1,290 in 2 days, stops looked to be in place around 1,290 as there was a small amount of selling pressure towards the last 15 min Thursday. We are positioned to go either way this week, so a couple levels to watch:

Downside: Support and 200 DMA are both around 1,266, 1,256 is UNCH for 2011

Upside: Resistance: 1,294 (Got here Thursday then pulled back off the highs) then 1,306

I see us possibly creep higher to 1,300, then pull back a bit, have a selloff possible below out 1st support on the jobs report Friday.

Last week I highlighted Manitowoc, Bunge and Dominion, appeared to be right on all 3 of those.

We saw a big push to the upside in $MTW on a stellar report

Big move above the $10 level in $MTW definitely bullish signals

Also saw Bunge with an ok report and a nice move up above $60, still in my opinion very cheap on valuation.

Above $BG

Downward move after earnings from Dominion Resources after the report

Trading range appears to be compressing, still long imo

Earnings this week I will be focused on my own holdings since they will all be reporting; Frontier Communications, Invesco Mortgage Capital, and Eastman Kodak. Frontier $FTR has recently broken down once it crossed $7.00 which was huge support. I have been holding onto this name for 2+ years now and the return has been basically flat when the large dividend is included. After the report comes out this Thursday, I will make a decision to dump it or not. EPS looks to come in around .06 There is still a buy rating on the name, though the P/E is rater high at 39.

Above FTR, looking for a possible breakout to the upside after it has been beaten down pretty bad.

Invesco Mortgage Capital has also been hit after the US government shutdown fears, then the broad market decline and has not recovered much of its losses. In my opinion, this is a very safe company as long as there is no talk or action of US default/shutdown. $IVR has been hanging between $14.00-$14.4 for a month, finally broke out of that range last week up to $16.

Above $IVR with a nice move up last week, looking for another good report here and a possible move toward $17

Eastman Kodak I bought at $1.50 and holding a small position spec. only. There is a lot going on right now with patents and I figured I’d put a couple hundred dollars in, might go up, might not, but I think that they are working very hard to try and recoup losses and cut costs. They are expected to post a .62 cent loss EPS.

$EK is given a slight bias sell rating.

Have a good week everyone.

Sunday, October 23, 2011

Commentary/Earnings week preview

Well, it has been awhile since I’ve posted (about 3 weeks) and before I begin, I just want to say thank you for whoever reads these, I hope you understand and get something out of them.

I have been quite busy with school, as to why I haven’t been writing, grades have not been where they need to be for the semester, been pretty anxious about that. Getting halfway through the semester already and having a 2.4 is not good news, but on the bright side there is nowhere to go but up from here. Just one more semester of these required classes then the real stuff comes, honestly cannot wait.

Lets look at the last three weeks in review: The Monday and Tuesday following my last post we saw some huge volume pushing the ES down from 1,130 to near 1,068 by Tue. AM, that seemed to me like a bit of capitulation, and a rally off of that was possible to take us back up to 1,100. Last hr of trade Tuedsay we rallied 40 handles to begin the 2 week long buying on no news (hope) to bring us to where we are now. We closed out Friday on the highs, right about 1,240; mind you NOTHING AT ALL has been resolved in Europe and we still have our own problems here. Unemployment still sucks, although we created jobs, the U6 is at all-time highs which is the real indicator. Thank you to the Federal Reserve for inflating all of these companies balance sheets over the past 2 yrs, we are reporting stellar earnings, probably somewhat of a contribution to run this thing up 180 handles in 2.5 weeks.

I keep stressing this, but we have seen no real signs of growth, keyword “green shoots” (yes I know that term was used Mar ’09) but literally until we get a handful of +300K Non-Farms and strong positive Philly Fed, Chicago PMI, Housing turns around, etc. we’re not going anywhere. I am a seller of any run up, including this one.

This does not mean I am a seller of every single stock, there are still value plays out there. Consumer staples and Utilities are what I am bullish on, people still need to eat and need electricity; the dividends they pay are also a plus. We have many companies that will be reporting this week, almost 1,000, but I want to focus on a few names I will be looking at. Before I get to that, how I see broad markets setting up and trades I have made.

I expect to give a little bit back from the run up we’ve seen. Closing below 1,240 and not hitting it intraday tells me we could be in for a rude awakening. I can see possibly one more squeeze up to 1,255 (Fibonacci #), but one can only juice a dry lemon for so long. I still like the 1,230 for resistance, so trade that. 1,200 or below definitely a possibility by the end of this week if we get a few bed reports and EU continues to disappoint.

Notice how we pushed up above 1,230 then pulled back then ran it up again, watch that because even though it broke resistance doesn’t mean it is a buying opp.

I made one trade in the past 2 weeks, and it has done quite well actually. American Airlines on the huge slam it had on Oct. 3rd on rumors of bankruptcy. I got in at $1.90 still holding on for now and has made it’s way back to $2.9.

Right now it is hanging around the 2.74 pivot, I’m looking for a little break to the upside, especially if we see a nice selloff in WTI this week. Unless they actually do file (In my opinion they are pretty safe) then seeing it drop below $2 again is unlikely.

Potential trades this week: [Monday] Manitowoc ($MTW), [Thursday] Bunge ($BG), [Friday] Dominion Resources

Manitowoc is a capitol goods service company that specializes in crane service and food service. “engineered lifting equipment for the global construction industry, including lattice-boom cranes, tower cranes, mobile telescopic cranes, and boom trucks. Foodservice is a manufacturer of commercial foodservice equipment serving the ice, beverage, refrigeration, food-preparation, and cooking needs of restaurants, convenience stores, hotels, healthcare, and institutional applications” (Google Finance). The food service part of the company interests me, people are starting to eat out more and food is a necessity. I can see with the reaction of Darden and other restaurant names they have rebounded quite well. The stock got killed in ’08 and has not really rebounded.

Looking at their past reports, they actually are not bad at all. Comparing March to June, they dug themselves out of a 52.4M deficit to make 2.7M, definitely a start. Revenue increased, though expenses also increased. I’m looking for a pop to above $10 on the report of better than expected earnings.

Bunge ($BG) is a global agricultural and food company The agricultural business is “involved in the purchase, storage, transport, processing and sale of agricultural commodities and commodity products. The sugar and bioenergy segment produces and sells sugar and ethanol derived from sugarcane, as well as energy derived from sugarcane bagasse, through operations in Brazil.” Like I mentioned above, I am bullish food and agriculture, I see this as a very strong growth stock as the world population continues to increase. From September of last year, their net income is up 30% while increasing revenue from 11.6B to 14.4B, though expenses were 2B more than expected which contributed to a large decline on their last release.

Above $BG, the median price target is $80 and with a p/e of 8 it is still very cheap based on valuation, I have a strong buy.

Last is Dominion Resources ($D), they produce and transport energy in 14 States. Dominion has and in my opinion will continue to do well due to demand for energy and utilities. The 3%+ yield is also very nice. They manages to cut expenses 400M q/q though revenues were a bit lighter. I would buy any large dip in this name (5% or more) they usually selloff on the report then jump right back up in a couple of days

That’s all this week guys, we are getting right into the middle of earnings season, look at the beaten down names with strong reports and make some $, I may also be getting in a few others this week but these are the big ones that caught my eye. All of my trades are done on my twitter (peter_eller10) so you can catch me there.

Good Luck Everyone!

Sunday, October 2, 2011

September Jobs report Friday

Yet another rollercoaster ride this week to bring us 60+ handles up and down to end up on Friday basically unchanged. Technically speaking, the markets are breaking down and the lows are nowhere close to being put in for the year. My guess is that we will continue to play this rope-a-dope for another couple weeks until the EU can no longer give us “good” rumors. Speaking of rumors, that is basically what the markets have moved on the last 2 months, it only takes one person to say something completely untrue to move the ES in a ten handle range within a minute. How do you expect to make money when the game is rigged?

The third quarter ended Friday and it was the worst quarter since Fall ’08. Broad markets down 8-10%, small cap Russell 2000 down 20%. I honestly would not be surprised to see continued downside and heavy selling into the closeout of the year, granted the Fed does not step in. You can all very well see that out gov’t has done absolutely nothing but put a band-aid on a gushing wound twice. Right now, we are slamming it down because this is what should have happened 2 years ago. We would literally still be at S&P 700 if the government did not intervene. Unemployment is worse, banks are still in bad or worse shape and still losing money, jobless claims still printing above 400k, Chicago PMI, Philly Fed, consumer sentiment, etc. all multi-decade lows. Those of you who buy on these slams, especially the banks, good luck with that in the next few months because we won’t be seeing a next day ramp; it might work now because investors are so confused. The problem with banks is they are not at all benefitting from the low interest rates set by the US gov’t, while still suffering from the housing crisis. Read this great piece in the Fiscal Times written last December explaining how lower interest rates can be beneficial to our economy:

Alright, that’s enough of my view, back to what happened last week. As I was saying, we moved quite a bit but still stayed pretty tight in the range. 1,130 held support this week, but don’t trust it next week, we have a lot of data coming out, especially the much anticipated September jobs report. As you all remember, August’s was not very nice at all +0 with revisions negative. This one may very well be negative, and I’m going with the fact that it will be a loss; we will break below 1,100 by Friday. We are literally at the breaking point.

An updated ES chart showing what happened this week from last, once again we literally did not move, just some huge swings. Also, drew in some predictions which I explained below.

What I see happening in the ES this week leading up to the jobs # is a nice ramp to start off Monday on an oversold bounce, close at or near highs, Tuesday unch to slightly neg, Wednesday open lower, move up midday then 3:00 slam to lows, unch to positive Thursday and Obliteration Friday.

If you look at what happened last month, exact same thing.

As some of you may have noticed, I have been completely off Twitter for a week now. Got three test grades back and they were not the best (72, 76, 80, one of them Economics) nowhere close to where I should be, figured I was spending too much time on there so this is just an experiment; I will probably be off for another week or two, I need a break anyway lol. I was active at the desk this week though. Before I begin with Eastman Kodak’s huge plunge Friday, let me say that yes I did buy some at $1.50 and I’ll explain. Basically this is probably the biggest spec stock right now, no one knows exactly how much their worth, but I saw an opportunity for a bounce above $2.

Notice how back in early Aug we saw a dip, then recover. Friday’s move was very very overdone strictly on rumors of a bankruptcy filing. Even in after hours, they are back up to over a dollar, but whoever bought it at .54, congrats you just doubled your money in 2 hours. Still waiting it out for now.

Got lucky on Ener1 $HEV on a slam Thursday. Broke below the .12 pivot Thurs, bot at .1 and sold out at .14 on Friday made $60 bucks, so that would negate out about 2/3 of my loss on $EK this week.

Above $HEV

Not much in the way of reports this week, going to stay pretty quiet until mid-term exams are over with Friday, then get back to it next week when Q3 earnings come out. Good luck everyone and stay safe.

Sunday, September 25, 2011

Range bound or get loose under 1,100?

Another wild week we had, markets were very ugly: Dow -6.4%, SP500 -6.6%, Nasdaq -5.3, Russell -8.8%. Commodities took a heavy beating also: Copper -16.5%, Gold -9.6%, and Oil -9.2%. Only two indexes up last week were the volatility index +30% and the US Dollar +2.5%. The moves we have seen in the US dollar since Bernanke spoke in April have been bullish to say the least. With no set idea of anymore stimulus, it is pound town for commodities as investors flock back to King Dollar and treasuries.

Bernanke’s speech was anticipated by many on Wednesday afternoon to once again prop the economy up with “Operation Twist” buying of long dated maturities (30yr notes). Investors did not like this as they sold the ES off 35 handles in 90 min. Those hoping for a rebound Thurs. morning were not going to get it as it continued from 1,166 breaking through a strong support of 1,120 to 1,113. Shorts covered in the last half hr to 1,130. Friday was more of a digestion/ slow day pretty much with a 10 handle range from unch to positive.

It was also a historic week for the 10 year note; we saw the yield dip under 2% earlier this month just to shoot right back up to 2.13% last week on a hope rally. This week was the sure test of Jeff Killburg’s (@thekillir) 1.67% target. We took a huge gap down to 1.7% this week, a 30+ basis point move, something not seen since Fall ’08. As of right now, the 10 year note is at historic all-time lows.

Picture above is the 10 year note showing huge drop-off since ending of QE2 in June. How many more weapons does Bernanke have up his sleeve?

I have also established new trading ranges in the ES this week. Even though we have broken through a huge 1,120 level, we have not closed below there. Thursday afternoon was indeed dicey trading under 1,120; it seemed as though the bulls were trying to defend, lost for a few minutes then bought them back again. This to me signals a bullish sentiment, if we closed on those lows, the ES could have gone anywhere below 1,120 Friday.

Notice how the same thing happened back in late August when we broke the pivot, we saw huge gyrations for a couple days, then shot back up again to the upper 1,230 resistance. If we start off the week with 2 red days and a close below 1,110 sell it till my next ultimate low target 1,050.

Did not do any trading this week, so I have nothing to update in that way, though I would like to highlight what I mentioned in last week’s blog about AutoZone ($AZO). As I said, after the earnings report, we would see profit taking down to near $300-310 then load back up. The report was very good, still seeing a lot of growth in the company as they blew past expectations.

Chart of $AZO above shows a nice bounce after breaking through pivot near $312; sold off about $20 from its all-time high. I’d be a buyer if it did a stock split, too pricey to trade as I have said before.

Earnings front this week has me looking at a couple cheap names where I could put some $ to work. First is Sealy Coropration ($ZZ). Via Google Finance they manufacture and market a range of bedding products, including mattresses and mattress foundations. The Company’s bedding products are manufactured and marketed in the Americas under its Sealy, Sealy Posturepedic, Stearns & Foster and Bassett brand names. In addition, it manufactures and markets specialty (non-innerspring) latex and visco-elastic bedding products under the Embody, Stearns & Foster, Reflexions, Carrington Chase, and MirrorForm brand names, which it sells in the specialty bedding category in the United States and internationally.

The company has recently hit a new Mar 2009 low of 1.55, closed at 1.59 Friday. Quarter By quarter, the company has had a loss since August of 2010 to their recent report in May 2011. Aug. 2010 showed a 15M loss and they have managed to bring the loss to only 377K this May. I am being optimistic in them reporting a slight profit to a better than expected loss. I will buy $ZZ if it goes under $1.55 Monday before the report Tuesday.

Shown above is a chart for $ZZ with my target.

Another is Micron Technology ($MU). Micron specializes in making semiconductor chips and RAM. Looking at their income statement comparing March and June 2011 q/q they appear to have brought their operating income from $179M to $237M by cost cutting from 1.82B to 1.66B. They also ended up with less revenue (2.25B v. 2.13B) Net income went up by only $3M dollars compared to March. I’m looking for a little more bottom-line growth and a test of the 7.00-7.25 range. Median target for Micron is 9.65 via Yahoo Finance.

Above is ($MU)

Going to be another fun, volatile week folks, stay tuned to @peter_eller10 for more. Good luck trading!

Sunday, September 18, 2011

Profit from a good week

Wall St. expected to open lower last Monday, instead stayed down 1% to unchanged until the last hour were we saw a 20pt ES ramp, starting a week-long 55 ES pt churn higher. This was the best week for investors in almost 2 months, but are we out of the woods just yet? From chart patterns, I can see that we are still stuck in this range that has been hard to get out of since early August. The ES bounces between 1,120 and 1,220, then if broken through those levels, we see huge volume spikes, and movement back down to the range again. Since end of August, we have held that tight rage. The ES seems a bit toppy here around 1,220 though with Europe always in the rumor mill, a lot of hot air can push this up or slam it down at any second. Breaking above the R3 pivot (1,234) is key for those of you who are bullish.

Notice ES range still staying very tight with this near 5% move up last week.

I was very busy at the desk last week making 3 different trades, 2 of them doing well and the 3rd looking for an exit point this upcoming week on a minimal loss. Intraday Monday, National Bank of Greece hit a new low at .76, looked like a buying opportunity for a quick in and out bounce. Bought 500 @ .78 shot up to .82 Tuesday, but hung on for one more day till end of the day Wednesday and sold there around .95 or so. These European banks, especially $NBG are huge rumor names and just by looking at the chart and hearing the news, something might be getting done. Investors flocked to bid it up huge but then knocked it down again Thursday and Friday.

Chart above shows $NBG breaking down through S3 but then the last green candle on the line showed a bid up.

Another trade on the whim was PMI Mortgage insurance. These bond insurers and the line have been total dead money since Ambac’s collapse 4 years ago. Was looking at the S2 pivot on this name and seemed to bounce off it nicely. I literally had no idea what I was getting myself into, but this trade was pure luck. I bot at a .2 limit early Thursday AM and sold it when it scraped .27 on a nothing but hot air bounce.

$PMI seems to bounce off .2 rather nicely, if it dips again, I may put the money to work for a quick day trade.

Third and final trade was a hail mary pass that sort-of failed on Friday. Via Brenna Hardman (@RMBrenna) on twitter, I got quick word that $YRCW was stopped, took a look and it was down 70%+ , a definite circuit breaker to say the least. This Trucking company has basically dealt with bankruptcy and now got a second notice for a de-listing from the NASDAQ. They will convert their preferred shares and all other shares in the company to common leaving about 1.9B shares outstanding vs. current 47M now. It has been trading under $1 for quite some time now, even after its 1:25 split last October. Honestly, I thought 70% was a bit overdone, and that some bidders might bring it back up a few cents before closing down hard. I was about half right.

$YRCW Initially was trading mid .20’s then got a huge sell order for .11 got a bid to .17 then another slam back to .09 and a grand finale (which I thought was day’s low) to .08 I bought 2,000 @ a .09 limit then watched it tick up to .14 by midday, would have been a nice profit, but ended up losing $40 when it closed at .07; looking to hang onto it through this week to see if it can make its way back to that level again. Huge volume on this name by the way, traded through the company 7x (353M shares; 5-10M on a normal day)

Earnings front this week looks rather busy, but I only trade stocks under $15 (A college student w/o the $$)

Looking at $AZO (would never trade, too expensive) but this company is a monster. All-time highs basically everyday, very good recession name, people keep buying parts for their car to keep them running, rather than outright buying one. Expect some profit-taking on the report, stock is up 20%+ in a month’s time and they usually sell-off on the report a bit, but then get right back in for the ride.

One I’m looking at this week is Rite Aid $RAD. If I can get it for the right price, this could be a winner. Looking at q/q, although still a loss, it was cut down almost 75% from 205M in Feb from 63M in May. Expected earnings are (.17)/share.

If $RAD can make it’s way to between $1-$1.05 that’s the sweet spot.

That’s all everyone, have a good week ahead, get at me @peter_eller10 on twitter if you have any questions.