Sunday, May 15, 2016

5 Stocks To Watch This Summer

In the list below I will list 5 stocks I think traders/investors could possibly make profit playing come this summer. Stocks are in no particular order:
  1. Amazon (AMZN): A leader in this very difficult market environment (which is quite rare the past two years). Just made new all times high thanks to blow out earnings. What's impressive is it's rebound from the nasty correction it had a few months ago.
  2. Apple (AAPL): Apple has had a rough time with earnings, its recently made new 2 year lows. However, if it can continue correcting down to the mid 70s (my technical buy point), I think it would be a great long term buy. As a bonus it pays a dividend!
  3. Tesla (TSLA): This stock is a retail investors favorite. Unfortunately Its a bit off from its all time highs. A few months ago it had one of the most incredible V-shaped bounce I have witnessed in a long time. If this continues to correct it may be a quality long term buy.
  4. Celator Pharmaceuticals  (CPXX): An impressive biotech company with an incredible strong stock chart (these are rare these days). If it pulls back strongly, it may be worth a buy. (Warning biotech stocks come with great risk).
  5. Twitter (TWTR): Badly beaten down stock, with an ugly chart. However, it's hard to fathom Twitter won't attempt some sort of come back. If one occurs I think retailers would bid this up.

Sunday, May 8, 2016

What to Expect From the Stock Market This Summer

NYSI Summation Index Chart Technical Analysis

Two months ago I posted about the bulls leading the Market higher, which indeed did occur. However, the bulls overextended themselves, thus the Market pulled back. Once the overbought conditions have been completely alleviated the Market will attempt to make new highs. As I will explain why this scenario is likely in the paragraph below.

 The Ratio Adjusted Summation Index is a great tool to measure the strength of a bull Market. The chart above is the Ratio Adjusted Summation Index ($NYSI). The $NYSI is calculated by adding the daily values of the McClellan Oscillator. Readings above 500 convey the message that stock market is in a bull Market and will continue to make higher highs. The Market has just had an extraordinary high reading compared to the the last few years. The chart above shows the $NYSI broke well past the 500 threshold. Staying above a 500 threshold in a very convincing manner promises the Market will make higher highs. Note how previously the 500 threshold acted as resistance causing the NYSI to pull back on the chart. The failed breakout hinted at a massive pullback, which then a few months later the Market ended up declining over 20%.

Tuesday, April 12, 2016

The Crazy Oil Trade

Note: What is described below is highly speculative and not recommended for any sort of real money trade execution.

I believe there is a severe mispricing of many oil stocks that are now below/around a $1. The market is being too pessimistic as it once was in 2008. It is unlikely the entire group of mid/small cap oil companies will ALL go down under. Even if some do, or most, the following trade idea will likely still be profitable.

Looking back at the financial crisis of 2008, many prominent  large cap companies turned into penny stocks especially in the banking and automotive industry. Not all stocks survived. For example, General Motors ($GM) share holders eventually got wiped out. However, Ford ($F) recovered, giving exponential returns (eventually making new 10-year highs). Thus, a pair trade would of been extremely profitable (purchasing both stocks and holding simultaneously). Similarly, in the financial sector, Citigroup ($C) and Bank of America ($BAC) had an epic recovery eventually. 

The thesis of this trade is that the Market is being too pessimistic when it comes to these oil companies as a whole failing and the share holders getting wiped out completely. Thus, giving them no chance to profit once oil prices eventually stabilize.  In some of the worst cases within the last year, a few companies that have already restructured through bankruptcy were able to retain some equity to their shareholders (beware many got wiped out as well). Therefore it is not always game over when filling for bankruptcy (I do not recommend in this type of speculation, just stating a fact).

As per my thesis, I believe an incredibly profitable trade would be to purchase a basket of distressed oil stocks (the more stocks purchased the better in increasing your chances of holding some that will survive long term). Those that survive will likely give at least 10X in returns, with the expectation that these will be held for a very long time (possibly 5-10 years out).