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!