The Profit Prophet

Its already up 2% for the day, but that doesn't mean its too late. The stock is right under 4 and will hit 7 within the next few weeks. Buy and hold... I personally am looking at the March 2.50 calls. Shorting serious OTM Feb or Mar puts may not be a bad idea if you are an owner of this stock. It will lower your cost basis substantially. More on UXG later.

I'm bullish on gold, mining and drilling companies all together. The reason behind this is thus; low interest rates in the US will cause USD to weaken (relative to other currencies) resulting in a flight from US fixed income investment into inflationary hedges such as gold. I believe that gold will see new highs over $1,000 per oz. If history repeats itself, some experts believe that gold will reach up to $1,150 at the end of this bull cycle. I believe that with the hike in gold/mining/oil prices, we will see more of these companies expanding their business due to the low borrowing costs. I will take a more detailed look into some of these companies over the next few days and should have some bullish picks by the weeks end.

It's been a while since I have had a chance to search for some new picks, but I found some time today to search through various industries and found a promising one in Medical Equipment & Supplies. I chose this industry because of the recent flight of money from institutional investors. This industry was basically silent a few weeks ago, but recently has achieved a 'green' investools rating, and looks as if it will only get stronger in the weeks to come. I have been running 102030 tests on all the stocks in this industry group and found a winner in ISRG, which has just recently started an upward movement. ISRG is well under resistance and slightly above a critical support level, leading me to give this a STRONG BUY rating. I will additionally check the Morningstar ratings when I get into work tomorrow, however the only downside that I see with this stock is that insiders are selling their shares. I feel as if the high PE could be scaring insiders, who want to ensure profit now by selling. The high PE could also signal that there is room for future growth. I found what seems to be an anomaly in EZEM, which has been moving completely sideways since November. I'm not sure of the reasoning behind this, and will ask around on the GEI board to find the answer, which I will post as soon as I find out. As far as overall market condition, we've seen a nice +110 day thus far, and I can only hope that we will see more upward movement in the days to come, but I still expect volatility until the rate cut on Wednesday.

This is an excerpt from Bloomberg, "Jan. 25 (Bloomberg) -- U.S. stocks dropped for the first time in three days, led by financial companies, on concern banks will be saddled with more credit-market losses and the Federal Reserve won't cut interest rates enough to stimulate growth." This is even more evidence of how markets are going to stay volatile until the next rate cuts. Assuming that investors don't believe recession outlook is very serious, I'm expecting the Dow to hit 13000 by mid feb (at the latest). Commodity indices have started to trend upwards, yet are still 10% below any resistance, showing that there is potential growth there. On another note, I'm going to begin searching for jobs/intern positions for after graduation. I will start searching for Energy trading jobs, hedge fund groups, fund management and other risk management type jobs. For the meantime, I'm going to Aspen this weekend for the X-games! Maybe I'll post once while there.

So far, so good. The market is staying afloat at +14 pts and maintaining levels over 12000. I'm beginning to believe that the rate cut has put the market in a state of paralysis, atleast until the next rate cut on wednesday. From there, we will see what will happen. I believe that Bush's tax rebate stimulus plan has something to do with the stabilized markets. As we wait for the next job report, expect some volatility (VIX still at 29 afterall), but don't expect a huge market sell out. In other words, I think indexes and most large cap stocks will be safe from here on how. (Maybe the time to buy some calls?) Many investors feel the job situation is fine right now, and that will play a huge role in determining the market's behavior.

As I was sitting at my dining room table, feeding my face with Wendy's, I couldn't help but ponder how much money fast food makes off of Coca Cola products... then i started to think about how much Coca Cola must make. Do these international super-corporations (like Coca-Cola and McDonalds) be used as recession hedges? I looked at the charts, and unfortunately I have a feeling that due to the fact they are international, and international markets are taking a pounding lately, that they are NOT. Perhaps I'll look into finding a truer 'recession hedge' stock.

So this morning, I posted when the Dow was down ~200. Later this afternoon, to my surprise, the Dow is up 298... Unbelievable. It looks like IPSU (a Sugar stock I have been frequently checking, that I heard about from GEI) is doing well. I started thinking it could be a buy back when it was around 18, and as of today, its sitting over 21. Today as additionally a good day for Countrywide, as they closed up nearly 15% for the day. Apple and Google continue to get REAMED. I remember just a few days ago thinking that selling some 150 apple puts would be a good idea! (Thank god i didnt do it... apples at 130 now) My rationale was that there was support around 150. If I was forced to buy at 150, I figured it would just go back up! On the bright side, I guess this is a learning experience which is showing me how unpredictable the market can be. Taking a closer look at Apple, it looks like it hasn't seen the bottom yet. For the first time in a year, things look like they are trending downwards. RSI is at an all-time low, the 10 week SMA is trending downward on the 102030 test and stochastics show that bears are controlling the price of this stock. I'm under the impression that this stock will go down a bit more (not immediately, however... I would guess a small rebound tomorrow) before turning around. I'd still wait a bit before buying into AAPL or GOOG. Since tech stocks are slowly losing strength, week by week, I want to see signs of a reversal before recommending any buys.

It looks like the rate cut and cash injections still haven't had any positive effect on the market. I am wondering when we will see a bottom? I kept figuring that 12000 was support, but we are at 11800 right now. AMAT is getting beat down today, so there goes that theory. I have class soon, but I'm going to do some stock searching tonight and hopefully I'll find a REAL winner or loser for a rec. Looks like delta neutral movement trading may have been profitable (atleast for a 1 day trade). Another possibility, suggested on the GEI message board (one that I regularly post on, and highly recommend) was to set up a wide-gap straddle that would essentially function as a spot short of VIX. Hindsight, this would have been effective as VIX surged to 37 and settled back to ~31. I will post more details about this strategy later.

*knocks on wood* it started going up, but im holding back now... Here's a graph that shows what im thinking. If you check the MACD, it looks like the bulls are going to start controlling this stock. The 3 lines of the 102030 test show that the 10 day MA could trending upwards. (To set up 102030 test, use 10 day or week SMA, 20 day or week EMA and 30 day or week EMA. The convergence of all 3 typically means that a movement is about to occur. Check volume, RSI and stochastics to see which direction it will move. In the case of AMAT, the SMA looks as if it is going to begin to turn around. The weekly chart doesn't look too good though, so I dont think this would be a good hold. The Stochastic indicator is actually scaring me.. Im thinking that it could start trending downward now. We will see.

We all expected it, but this came from no where! When I woke up and checked the market it was down 290, and I'm sitting here thinking that we are about to go into another great depression or something... Well it turns out that the market is turning around, and maybe my AMAT pick isn't in the hole too bad. All the home builders are up, especially TOL which is up around 5%! (ouch) I actually checked the charts and TOL looks like a great buy, but if we are using CNBC as a contrarian indicator, then it sort of makes me worried... Anyways, we can check this later as TOL is at 18.10 right now. VIX hit an all time high today, showing that this is one helluva volatile market, leading me to the belief that delta neutral trading strategy might be a great idea. The main idea behind delta neutral trading is that you check the delta on options for what you believe is an especially volatile stock, then buy combos of options and other options or options and the underlying stock so that the DELTA (an option greek) is at 0. (Note: Puts have a negative delta, while calls have a positive delta) What does this accomplish? It essentially gives you a position that is completely hedged and can profit from a movement in any direction besides sideways. I'm not going into UBS today so I'll be able to sit home and check out what happens in the market today, so expect another post.

After a terrible run the last few weeks, I'm starting to wonder when we are going to hit a bottom! I am under the impression that the market will be continue to be shaky until the Fed cuts key rates on Jan 30. This is probably what everyone is hoping to happen though, isn't it? :) As far as this week is concerned, I'm Bullish on AMAT (Applied Materials, 18) and see it breaking 20 by the weeks end. AMAT released news earlier this week stating that they are cutting employees and expect 150 million in savings. I also applied a 102030 test to AMAT and it looks as if the charts will begin to trend upward. Stochastic indicator shows that AMAT could be approaching a break-through level. Going long on some Feb calls could be a profitable strategy with limited downside...