This is not a predictable market. I think Alpha said it best last night, “Anything can happen overnight.” It’s amazing how [[MER]] & [[COF]] can bleed in afterhours, but look strong in premarket. Now I remember why I stopped buying stock in afterhours. I closed out my [[SKF]] for a loss, as it looks like the market is ready to rally for the third straight day.
I will be leaving for a fun filled weekend in New Orleans (best friend getting married). I leave today with the feeling of victory, ready for a bunch of white rhino’s.
This was a fantastic week for the Cajun that started with a nice strangle trade and only got better from there.
See you guys Sunday night.
Update: Added to [[HOC]] @ 29.10
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Have a great weekend Cajun. See you Sunday night.
Note: Great call from Phil via CVD
Yep, saw Phil’s post on CVD, great work.
I hope you keep posting your ideas, Phil.
Note: HA is a monster!
gheez rage, you need to skip New Orleans and head for Hawaii for the weekend andcheck out HA’s holdings – now I’m sorry I did not get into it, of course. Been getting whipsawed. Do you see more upside or +9% in 2 days is over the top? thanks
just bought some puts in UYG, now I’m off to New Orleans.
Buylo: Yes.
sold UYG puts, WM on fire. Rally time?
Friday afternoon squeeze on WM, wow.
Check out MA for Aug puts.
Are you going for a wedding or Bachleor party?
THEME: STAY SHORT ENERGY/METALS
Though oil does look oversold and the folks at CNBC may try to spook you out of short positions by touting an upcoming storm, any bounce in oil should be seen as a better entry point for shorts — if we even manage to get a bounce for that matter. In fact, my bearishness is not confined to oil, but extends itself to all commodities. The best opportunities seem to be in steel and energy (oil/natgas). One might say, “Phil, resouce stocks have dropped so much already, how can you possibly still want to short this stuff?”. My reasoning is that key proxy stocks that I track have broken down and have only travelled a portion of their measured moves thus far. This indicates a good chunck of downside to come.
PROXY #1
Take BTU. The high-flying coal name broke down from a H&S formation last week. The verticle distance from the top of the head (88) to the neckline (70), spells out an 18-pointer to the downside. That means we have a 52 target on BTU. Okay, so maybe the measured move doesnt work to perfection. Sometimes, I concede, a move falls just short. So, let’s use a more conservative target that is actually applicable to BTU: the 500-day moving avg. BTU tested the 500-day in January and April 2008, before igniting to an all-time high of 88. So, there is precedent. Currently, the 500-day sits at 54. So, even if you apply a more conservative target, BTU needs to drop another 10 points! That’s another 16% lower!
PROXY #2
XLE. This solid-performer YTD also started heading south in a hurry last week. It’s now below both the 50-day and the 200-day and doing very heavy volume. “Okay”, one would say, “it’s so beat up”. “Looks like the move is done.” My response would be: think again. Last time XLE cleared the 50-day and 200-day moving avgs on serious volume, we saw a test of the 500-day (there I am again, talking about this seemingly untalked about M.A.). Anyway, guess where the 500-day is on XLE? 70! XLE currently trades at 76. Hence, we need to see another 8% on this ETF before energy has a chance of a meaninfull bounce.
PROXY #3
FCX: For many, the equity equivalent of copper — the best-of-breed way to play the base metals. And yet, it too, has started to blow past a number of support levels in recent weeks. The 50-day and 200-day moving avgs now stand as overhead resistance. Last time we saw these two critical averages violated, we hit… yes, the 500-day. And where is that now? 88. The stock currently trades at 103, so that’s another 15% lower.
I may be wrong. Perhaps the bottom is in for oil right now. But, my weekend run through the chart landscape points to more downside in the immediate future for natural resource stocks. Some stocks, like ACI, have had climactic moves and no longer present shortable opportunities (though, I still think they’ll move lower), but I have come across a few this weekend that still look pretty juicy.
These are my top picks in order of attractiveness in the nat-resource theme:
1) NWPX (descending triangle/ bear flag)
2) MEA (descending triangle/ bear flag)
3) GGB (desending triangle / bear flag)
3) USAP (broken channel support retest)
4) OIH (bear flag)
5) JRCC (descending triangle/bear flag)
6) CLF (wierd looking-H&S)
Note to Fly: There is currently a rounding top formation on RIG, which spells trouble. I will defer to short out
of respect for the “time machine”. 🙂 In any case, as a tip, don’t buy more here. If you like RIG, perhaps add once XLE taps 70. It seems like the good risk-reward time to do it.
Right now, natural resources are in a state of red alert and there are ample opportunities to profit from the current state of affairs.
Good weekend to all, and have a happy trading week!
-Phil
Oh, one more thing: fuck the banks (not shorting, but not buying either).
Oh, and another thing: be prepared to continue buying biotech/healthcare.
The XBI has broken out of a long-term base and is now outperforming the SP-500 with reckless abandon. If you don’t feel comfortable shorting via my fuck-the-metals-and-the-energies theme, this is your play.
In spite of the occasional casualties of war (GILD and VIVO) — come on, it’s biotech! So you thought you could juggle live firecrackers without losing an eyeball? — healthcare seems to be on the move. Last week, DNA missed by 4 cents, sold off for one day, then reignited higher to 52-wk highs as analysts looked past the nunbers at DNA’s seemingly-robust pipeline.
Look for continued technical strength in CVD.
As for the majors, I like the action in MRK and BMY.
On a sidenote, I did a little research today on http://www.j3sg.com. It’s a great tool for insider buying/selling power searches. And guess what? I’ve noticed that stocks with active and heavy insider buying in the healthcare field (ie. the sector of choice for the next few weeks) over the last 3 months on my scan are, for the most part, breaking out.
Here’s a list of stocks in the healthcare space that are ranked highest in transaction value buying by insiders in the last 3 months and have market caps exceeding $400M. I have also picked out only those which also happen to be showing good relative strength on the charts either in the very short term or the medium term.
ALTH – $550M market cap ($21M purchased by insiders in last 3 months) – unbelievable! This stock has the highest transaction value/market cap ratio on the screens and…. happens to be the best performing biotech with a cap higher than $400M as of late. Coincidence?
HALO – $1B market cap ($19M purchased)
GHDX – $577M market cap ($7M purchased)
ALNY – $1.2B market cap ($5M purchased)
EVVV – $1B market cap ($2.5M purchased)
BMY – $43B market cap ($2.3M purchased)
Just thought these ideas might be off the beaten path and may yield good trading opportunities.
-Phil
Thanks for the analysis, Phil.
I’m still long a little GGB. Will let it ride.
Much longer FCX. Will have to look at that again.
Will kick my big fat DTO hedge against all my effing oil stocks loose tomorrow. The kid who pumps my gas is now making more money in oil than I am. (No more tips for Julio’s blunt fund now.)
Phil from Brazil is a fun handle, btw. I like it anyway, tho.
– Anton (Not from Scranton)
No problem, Anton. Also, feel free to post some of ur trading ideas. I often add the stocks free-floated here @ IBC to my gameplan.
Cheers,
-Phil
Just wanted to set the record straight on the commodities trade: Fly wins, I lose. hehe
Commodities negated their patterns today. The action in gold and silver (retesting channel breakout points Friday and setting up narrow range bars) indicates that they were to be bot today. Given the 7.3 historically low gold/oil ratio, I’m inclined to believe that gold will outperform oil in the second half of the year. Especially with last week’s release of CPI numbers for June (the highest in 25 years). When even the gvt-manipulated stats cant hide the inflation spectre, get out of the way.
For my money, I like the higher beta exposure of silver. Bot some SLV today for a multi-month trade.
I will also begin to build a long-term position in TBT — the inverse 20-year note. With Teasury’s bailout of Fannie and Freddy, the gvt has added another $5 trillion to its unfunded liabilities — on top of Social Security and Medicare and record federal deficits. This, worsens US gvt debt’s risk profile. On top of that, you’ve got inflation accelerating. Can you say, exploding long-term yields? Right now, the TLT is working out a long-term rounding top formation. It’s setting up for the trade of the next few years: yields will explode and bonds will collapse. TBT is the inverse of the TLT. TBT is to be bought on any weakness for a long-term hold. I will build a core position and trade around the rest.
In sum: America is fucked on a long-term basis. Fuck 2009 or 2010 recoveries. We are fucked. Period. And the US bond market is the last bubble that remains to be popped.
In 2006-2007 — Housing cracked
1H 2007- 1H 2008 — Subprime cracked
2H 2008- 1H 2009 — Banks plunged
2H 2009 – 1H 2010 — Bonds will get annihilated
Good luck to all.
-Phil
Phil,
What do you think of DGP here? I try to pick my entry point in the leveraged ETFs carefully now and almost always exit a little early these days to preserve my profit.
DGP looked like it had made a bit of a move, so I whiffed today. Tomorrow will be bloody all over the place, so I may get another shot.
Interesting points about TBT. But as Jim Rogers was asked, “Do you really think the entire $5 trillion in Fan/Fred mortgages is unrecoverable?” Not disputing your point that we’re fucked, only that the TBT thesis may take longer to play out than you might expect.
“Long term” outlook for me right now is 24-48 hours.
That’s a valid point. That’s why technicals are imperative. The rounding top formation I see on the 2005-2006 TLT indicates a very similar construct being etched out now. I believe we’re on the last month or two of price action before a break of the neckline.
Right now, however, the TLT is very oversold and put in a reversal bar today on volume. This means we will get a bounce of sorts. That translates to a sell-off in the TBT. If the TBT can pull back to the high 68s low 69s, I’ll begin buying.
There are two reasons to like the TBT on a short-term basis (notwithstanding the 24-48 month outlook).
1) Mkt Averages Still Very Oversold –The mkt is still very much oversold and favors a bounce of sorts — this typically favors a sell-off in bonds/notes, which would be good for the TBT.
2) Moneystream and Stochastics price divergences on TBT in the last low — this indicates a good likelihood that a tradeable bottom was set in TBT on July 10.
Just My 2 Cents.
-Phil
Thanks, Phil. Just starting to read up on tech analysis. I admitted to Woodshedder not long ago that I get lost with a GPS device, so my chart reading skillz are sub zero.
But enough people I know make money with “asshatted” (Fly) chart reading, so I’m trying to pick it up. (Option Addict, Dan Fitz and Rev Shark have been helpful online resources BTW.)
Will try to steal a few $$$ with REW tomorrow morning, unless Cox bans shorting outright. Will be a crowded trade, starting AH tonight, so will have to look hard. FXP could be good, too, tho it behaves weirdly lately.
Oh, and I posted as “Freud from the Void” over at Fly’s, just to be “funny.”
Thanks again.
No problem.
-Phil
PS: Btw, DGP looks good, but I like silver better here.
Wish Deutsche had a double long silver ETF for maximum precious metal high-beta thrills.
Silver and gold trade in lock-step with silver always outperforming by about 12-15%. You get anomalies every now and again which quickly get corrected by the mkt. Right now, gold is near all-time highs and silver has lagged for the past 4 days. I believe silver is set to close that gap (perhaps tomorrow). Though, admittedly, you might not be able to capture it if silver gaps higher.
If you like very short-term moves, there might be one on silver on a catchup play to gold tomorrow (not even factoring in a potential directional move higher in gold, which would further accentuate the catch-up move in silver).
Good luck.
-Phil
Thanks, Phil. I’ve gotta study those charts for set ups like you’ve described.