All Eyes On Metals

This past Friday, I saw some interesting stuff happening with metal stocks. Right about noon time, all the metal stocks had a significant rally, so much that it ate all my profits (I was short Silver). I’ve categorized each stock with their related commodity, again noticed what happened at 12:00 noon (click [here] for all quotes):

[Gold]– Gold Corp (GG), Krystallex (KRY)


[Zinc]– Euro Zinc Mining (EZM)

[Silver]– Silver Wheaton (SLW)

[Copper]– Northern Orion (NTO)

[Palladium]– North American Palladium (PAL)

[Uranium]– Fronteer Development (FRG), Cameco (CCJ)

Now the interesting thing about this “rally” is that it moved contrary to the price of the related commodities:

24-Prices
Gold: -$23.60 (-3.47%)
Silver: -$0.13 (-1.04%)
Palladium: -$19.00 (-5.21%)
Copper: -$0.23 (-6.39%)
Zinc: -$0.09 (-5.9%)
Uranium: ??

This really baffled me! There are only two reasons I can come up with for this unusual behavior: 1) The fall in commodities was “softer” than expected Friday, and now there are very bullish investors who think the current prices are “bargains”. 2) These stocks were heavily shorted this past week, so probably around noon time we saw a lot of investors covering their position over the weekend which brings the price up (something I should have done!). Anyway, I think it’s a mixture of both, but probably more of the latter case. Anyway, I checked the message boards of those stocks on Yahoo and a lot of people feel nervous going long. When Monday comes around, if the prices of the commodities falls or we get another red day in the market, I would expect the air to be swiftly let out of these stocks. Now on the other hand, if we see commodities prices rebound and a green market, I think we’ll see a bunch of investors jump back into these stocks bidding it up pretty high. What a volatile place to be! Be sure to check the prices of gold, silver etc. on the Asia market in the next few hours. That’s usually a good indicator of how these stocks will perform. Frankly, I just don’t know what will happen.

Currently the bears are winning, and soon we will see the “buy-the-dippers” lose hope, which will give the bears another victory. With that in mind I have a few set-ups.




Short

• Gold- GLD is the safest short. GG is a tricky one. Every metal stock you can think of has fallen a lot already, so it’s a little hard to short at these levels.
• Silver- SLW has a lot of “weak holders”, and it’s very sensitive to the price of silver.
• Ethanol- PEIX is a primary short target, so let’s see if we can reach mid 20s. ANDE is flirting with $100. MGPI has more strong holders, but the Cramerites might let this one go.
• Reversals- AMD is overbought in the aftermarket, but we’ll see how well the news holds. I’m willing to short Q in the second hour- the Cramerites have brought this stock up about 4% AH.
• I’m still bearish on internet brokers (especially ISE and NDAQ), as well as the high flyers- TIE, ADM, ERS, DXPE, GROW, JOBS (grrrrr!)

Long

• SHLD had a great quarter.
• STP had a great quarter. I’ll wait for this stock to breakout first.

Day Trades

• ESCL, OLAB, BIDU, HW, Q

I’ll post some day trades on the other site.

Today was a pretty bad day for trading, at least for me. I did a day trade on Escala (ESCL), when I should have shorted Baidu (BIDU). My worst trade was covering 51Jobs (JOBS), which started the day nice and green, then I covered, then the stock fell apart. Another frustrating trade was buying EuroZinc (EZM) instead of Peru Copper (CUP); EuroZinc is a few pennies from my stop loss, and CUP seems to be the only stock benefiting from rising copper price today. A lot of related stocks are not acting in harmony. I was tempted to buy calls in American Science Engineering (ASEI) at the end of the day, but since I struck out, I’ll just have to see what happens tomorrow. Finally, Suntech Power (STP) had a strong quarter sending shares higher, but still not high enough to fill its gap.

Tomorrow I’ll be keeping an eye on gold stocks and silver stocks which I now hold a short position. I’ll also be checking on Timet (TIE), and a bunch of ethanol stocks, which I also am short.

Options expire this Saturday.

Before I went to bed I kind of imagined a day like this would happen. And now in the past week, the rest of my longs are stopped out- BVN and TRAD. It’s been one tough market. I think I need to set tighter stops in times like these. Anyway, today’s $200 drop in the Dow was based on inflation fears. The CPI data came out and it was better than expected, but here’s a case where good news means bad news.

I tried shorting Pacific Ethanol (PEIX) today because they have very heavy insider selling in the past month. The former CEO, Ryan Turner, has sold about $4 million of his shares since his resignation. However, Scottrade wasn’t working well, so all I got was an error message. Another stock I want to sell short is Global Investors (GROW). This stock has been hyped up thanks to the rise in commodities, but I think new money pouring into commodities is going to be tougher now that we’ve seen how easily the Dow can come down.

[Trading Radar]
The internet brokerage firms seems like a good place to short stocks. As a group, I track CME, BOT, TRAD, ET, AMTD, ISE, OXPS, NDAQ. Click [here] for quotes.

Finally, those high flying momentum stocks are coming back to Earth. These include Empire Resources (ERS), DXP Enterprises (DXPE), Pacific Ethanol (PEIX), and US Global Investors (GROW).

Now for some green stocks! Rentek (RTK) is looking very solid. And Krispy Kreme (KKD) had a nice rebound today.

New Charts Out

Just added 4 new charts to my other site, [Intuitive]Swing Trades. I’m going to have to change the name to something else because I do have a few option plays and long term plays there. Anyway, I’ve got…

• 2 picks from my Motley Fool newsletter, PDL Biopharma (PDLI), and Suntech Power (STP)
• 2 momentum picks- Rentek (RTK) which is hot, and Oralabs (OLAB) which is super hot for the next few days.

Well, the market was a bit cool today, although most indices closed slightly in the red. Right now the bears are still winning, but they may be in defense mode soon. Short term, we are in oversold territory, so I do expect a better bounce sometime this week.

A few stocks were returning to their trading channels, such as DXPE, SGG, and WIRE. A few stocks continued to be strong- JOBS, HOM, NCTY, GROW, ADM.

A particularly strong group is the Chinese stocks: FMCN, CTDC, SOHU, BIDU, NTES, NCTY, JOBS. Lots of upgrades. NTES reports this afternoon, but I never played the options. If it reports good, I’ll join the party a little late.

Is that an iPhone?

Commodities
As we all know, metals were hit hardest this past week. All metal commodities, except uranium, had corrections, but all metal stocks were down. That makes uranium stocks like CCJ and FRG the cheapest and most likely to rebound. Copper prices had a rebound today, so let’s hope this will keep the copper group in bull mode. The nice thing about gold right now is that people expect it to go down, but they’re still afraid to short it. All talk, no walk.