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.

Sunday, September 11, 2011

Ride the pain train for another week?

Whew, busy week indeed, in the economic and academic sense. Made some time to make a couple of trades which I will go over in a bit, but for now, let’s review last week. ES had a large gap down on Tue. morning, held 1,140 and ramped 25 handles to close at high of day. Same BS Wednesday, more ramp to 1,199 (bulls failed that 1,200 on the last candle of the day by THAT much) Thursday bears finally crawled out of the cave after 1,200 was challenged and broke through once again for the 3rd time in 3 weeks. I am still bearish this market, the longest so far we have held above 1,200 was 2 weeks ago for 3 days after Bernanke’s last ditch effort speech that fizzled out. Any huge ramp we get for the long term, take the profits.

Chart above is ES showing break down in S3 pivot Friday on a 31 handle selloff, brought us to lowest close since Aug. 22nd. From lows to highs, we see to be in an upward momentum trading range that has held for the last month. The range is tight (80-100 handles) trade the charts, always sell Bernanke and Obama. If we break below 1,150 (which is almost certain to happen, ES just opened down 15 Sun. night), downside to 1,100 is our next stop; I don’t anticipate anything above 1,180 this week, Expect a huge push to the upside on any sign of good news, then a fade.

Last week I made a profitable trade with $TLB pre-earnings release strictly in and out. Studied the charts, looked like a bottom, took a chance. The report was ugly, worse than expected, it dropped a good 8% pre-market before spiking higher in the AM. I bot @ 2.4 limit 200 shares [very small] got out at end of day @ 2.95 made a few bucks.

Chart above of $TLB shows tight range between the b-bands, broke through 2.4 earlier, did it again last week and bot it there.

Two weeks ago I mentioned I bot $CWTR @ 1.00 limit 300 shares. The report was also not good, but sold off substantially afterwards. Downside made it to .80, bounced back to the mid .90’s 2 days following. Next day huge volume spike to upside right out of the gate, had absolutely no idea what was going on, but glad I was not out of the position just yet. Found out CEO was buying up a bunch of shares ramping the stock nearly 25% that day.

Above $CWTR chart. Once again, I day trade so I really had no reason to hold this speculative company after a spike like that. I got out at $1.25, made a few bucks.

This week is going to be a very busy week for me, I’m looking at $NBG for a quick trade. Now I know there is still a lot of contagion going on over there with default issues, but this does not mean there will be a one day pop and out, right? I’m looking to get in under .80 in hopes of a shoot up over a dollar. Then again, anything can happen, banks are no longer “too big to fail”.

Above a chart of $NBG, notice the large spike up to 1.15 from .83 at the end of last month, if some rumor news gets out, could drive the stock up.

While on Twitter this morning, I found this chart of how commodities, equity and interest rates have fared in the last 10 years, via Very interesting to see how the market has gone basically nowhere in this past decade, but consumer prices and commodities have skyrocketed (money printing, anyone?)

I will close on this 10th anniversary of Septermber 11th with a picture, if you follow me on twitter of have seen my Facebook page, I put it up a couple of days ago. It is indeed me on the right looking out into the city with a friend of mine the weekend before 9/11. Props to my dad who happened to snap the photo with the American Flag flying over the towers. We will never forget the lives that were lost that day and the tragedy that struck us. Have a good week of trading everyone, God Bless America.

Sunday, September 4, 2011

A long labor-less weekend for all

Was last week exciting enough for you folks? From Aug. 26th close of 1,176 in the ES, we ramped up about 55 handles in 2 trading days, just to give it all back and more to 1,173 by Friday. Let me stress this again, nothing has changed. We can clearly see that with the three dismal jobs reports we got out, especially the +0 Non-Farm Payroll number on Friday, that we still have some problems that are not going away in the near term. The 55 handle move up was as one would say the “post Bernanke” rally that faded into oblivion. When Quantitative Easing 1 was announced, we saw a huge ramp up, that ended and QE2 followed. During this time, we were actually seeing “some” very little if any job growth, just to calm those perma-bulls down. Now Bernanke has come out saying they could take action (cough QE3 cough) if needed. The people who bought into the QE happiness in the past have now realized that it was a bad decision. Printing one more dollar devalues the previous one, soon enough we will be driving pick-up trucks to the store full of worthless dollars to buy a box of cereal. Investors have lost confidence and the zero job growth for the month of August was the nail in the coffin. Take the Birth/Death adjustment of +87K and we have a -87K job loss. In the past year, Birth/Death has added 491K jobs, with the biggest increase coming in January ’11 (via ZeroHedge).

Let’s look at a chart of the ES:

Below is a 2 yr chart showing S3 downside pivot of 1,170, no doubt we will smash through that we are already down about 9 handles pre-market for the open Tuesday (markets closed Mon. for Labor day). I still stress the 1,050 level or “begging QE 2 level” as being pretty close to fair value for now. At this level, P/E for the S&P will be below 15 but I believe it belongs to be around 10 until we see job growth.

I did some trading this week, bad result, probably never doing it again (I always say that) but I bought 300 $CWTR @ $1.00 limit before the earnings report, sad to say I got smashed on that call, lost about 60 bucks so far, for now will wait it out, not a big concern.

$CWTR chart gap down after report

I am a bit concerned with my holdings in my long $IVR fund, have lost about 20% since I put $$ in a month ago @ 19.75 (now @ 16.41) being a REIT it does pay a huge dividend of 23%, so I will wait this one out and get paid in the process. Below is a chart of $IVR, notice the gap down on the 18th on heavy vol, secondary offering diluting the shares took place that day.

Second week of classes begin tomorrow, first week went very well, I am really going to enjoy this semester, new interesting professors with different backgrounds to help me along the path to my dream job. Pretty quiet earnings front this week, so very unlikely I will be trading. Have a good labor-less holiday weekend everyone, always buy protection!