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.