Food for Thought

I’m basically out of the office all day today, returning after market close. But, with all the concern about unemployment and how bad the economy is, I wanted to leave you hungry folks with this to ruminate on:

“The nation’s unemployment rate jumped by 1/2 of 1% (to 5.5%) in May 2008, just the 12th time in the last 50 years that the unemployment rate has risen by at least that amount in a single month. In the 12-months following the previous 11 times, the S&P 500 has risen by at least 17.6% and has produced an average gain of 26.8%.”

(source: Department of Labor, BTN Research)

Odd, no?

Just wanted to leave you with that thought as the S&P is forming a triangle:

Have a good day.

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Continuing a thread from a previous post,

Here are a few ideas in some sectors gaining visibility for the long side:

Biotech:

Genomic Health, Inc. [[GHDX]] , $21.83; $32.50 target

Medivation, Inc. [[MDVN]] , $22.42; $36.50 target

Gen-Probe Incorporated [[GPRO]] , $60.37; $85 target

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Drugs:

Abbott Laboratories [[ABT]] , $57.26; $70 target

Warner Chilcott Ltd. [[WCRX]] , $16.99; $23.50 target

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Finally,

Banks:

SVB Financial Group [[SIVB]] , $58.28; $83 target

City Holding Company [[CHCO]] , $44.93; $69 target

Valley National Bancorp [[VLY]] , $20.01; $32.50 target

Bank of Hawaii Corporation [[BOH]] , $52.52; $64 target…..Gio, any comments?

(Hank approves and applauds)

Disclaimer: Trading involves risk. Not FDIC insured. (Duh)

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Anatomy of a Trade:

Here is a company that is focused on the development and commercialization of genomic-based clinical laboratory services for cancer that allow doctors and patients to make individualized treatment decisions. In 2004, they launched their first test, Oncotype DX, which has been shown to predict the likelihood of breast cancer recurrence and the likelihood of chemotherapy benefit in a large portion of early-stage breast cancer patients.

Just before the close, I bought 2,125 shares of Genomic Health, Inc. [[GHDX]] , @ $21.77 basis.

Interestingly, Genomic Health, Inc. [[GHDX]] , $21.83, formed a bullish triangle breakout on Friday, and held it throughout today, prior to it’s scheduled earnings release tomorrow. You can listen to the earnings call at 4:30 pm ET by calling 877-356-8064. Please call early enough, as the CEO will not wait for you to drag your lazy ass into his conference call.

The bullish price objective on this stock is $32.50.

With the market in oversold territory, lots of depressed equity investors, and this stock in the “favored” biotech sector, I think we can see it print that most glorious price.

I’m willing to risk about $4,800 on this trade and have set a stop loss at $19.50, a little below the 50-day MA.

If the trade hits my stop loss, I’d lose about 1% of my trading account value, which would be 10.4% of my investment in GHDX, or a little over $4,800 in cold, hard cash.

If the trade eventually hits my target price of $32.50, I would make a 49% return, or about $22,800—and my trading account would see a gain of about 4.7% from this stock.

The risk/reward is 4.75

That’s certainly above my 2.0 minimum to put on a trade.

Done.

Disclaimer: Biotech stocks can be hazardous to your peace of mind. This is not a recommendation to buy this stock, or  to follow the same techniques that I employ here. Trading involves risk, and you may end up in a homeless shelter if you insist on trading without adequate capital, knowledge and discipline. 

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It’s often hard to look for opportunity in the midst of crisis, but that’s how you succeed in business and in life.

We’re continuing to see a shift in leadership away from commodity related names. You can even see it reflected in the way the country ETFs for Canada, [[EWC]] and Australia, [[EWA]] have been trading of late.

Right now, leadership is shifting over to the transports (non-air), environmental services, REITs, business products and services, biotech, drugs and banks. Even S&L’s are showing some signs of life. That’s what I’m seeing.

Take note that I am speaking strictly from the technical underpinnings of the market, not from the headlines.

The following look good here:

Transports:

Canadian National Railway (USA) [[CNI]] , $52.25; $71 target

Kansas City Southern [[KSU]] , $53.14; $69 target

J.B. Hunt Transport Services, Inc. [[JBHT]] , $36.36; $51 target

Marten Transport, Ltd [[MRTN]] , $20.63; $32.50 target

[[UACL]] , $25.04; $37.50 target

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Environmental services:

Casella Waste Systems Inc. [[CWST]] , $12.76; $22.50 target

Donaldson Company, Inc. [[DCI]] , $43.94; $79 target

Tetra Tech, Inc. [[TTEK]] , $29.13, $47.50 target

Waste Connections, Inc. [[WCN]] , $ 35.19; $47 target

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REITs:

Acadia Realty Trust [[AKR]] , $22.70; $35 target

Digital Realty Trust, Inc. [[DLR]] , $42.51; $56 target

Equity Lifestyle Properties, Inc. [[ELS]] , $48.02; $66 target

Health Care REIT, Inc. [[HCN]] , $50.62; $71 target

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Business products and services:

Accenture Ltd. [[ACN]] , $41.33; $61 target

Apollo Group, Inc. [[APOL]] , $62.90; $84 target

DeVry Inc. [[DV]] , $55.69; $71 target

FTI Consulting, Inc. [[FCN]] , $71.62; $105 target

ICON plc (ADR) [[ICLR]] , $81.88; $101 target

Gartner, Inc. [[IT]] , $24.65; $32.50 target

Staples, Inc. [[SPLS]] , $22.92; $34 target

 

Developing………….

Disclaimer: Make sure you understand the risks and potential sacking and pillaging that could happen to your account if you trade blindly, “lazy-mouse-clicker style”, without doing your own due diligence.

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Elan Corporation, plc (ADR) [[ELN]]  printed an intraday high of $11.74 at 11:15 ET, after closing at $9.93 on Friday, so there is a bit of a dead cat bounce this morning and a good possibility that this stock is in the midst of confirming a reversal.

My basis in Elan Corporation, plc (ADR) [[ELN]] is $10.33, and I have moved my stop up to there.

Developing………

Disclaimer: This stock is for experienced navigators only. Trade with tempests and peril in mind. 

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I’m staying with the biotech/healthcare theme, so I bought [[TMO]] Thermo Fisher Scientific Inc. , @ $60.22 (15:59 ET).

Big base breakout, bullish sector, reward to risk, 2:1.

This company is the “one stop shop” for scientists, researchers and healthcare pros to order—-whatever it is they order—-from one source.

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[[ELN]] Elan Corporation, plc (ADR) , $9.93, an adventure in bio-fuckery, is testing my resolve, as I’ve reduced my basis down to $10.33 on this bad boy with more indiscriminate buying. I’ve also ordered a dead cat bounce (sorry PETA people) on this stock for next week. We’lI see if my order gets filled along with some kind of a profit.

The price objective on the chart is showing that this stock is going to zero. Funny.

Make it a great weekend.

Disclaimer: Do your homework and be diligent to know the reason why you’re buying a stock. Trade and risk your money knowing that you could someday end up homeless, sans a bullshit Scottrade account.

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