Buy Pick: SKF
Courtesy of David at Oxen Group
The Oxen Group, for Tuesday, is looking at a continued bearish market. There has been no news to bring the market up, and investors are not involved, meaning light volume, less buyers, and lower prices. Financials should recede even further on Tuesday off of a down day on Monday. In after hours, most news coming out of the sector was bearish. To start, American Express Co. and Bank of America Corp. announced that they saw extreme inreases in credit card defaults in April. This may play into a larger tune that has been played that financials earnings in Q2 will be weak. Further, UBS, while a Swiss bank, was being reviewed by Moody’s for a potential downgrade as it sees the Swiss banking industry, as well as, UBS’ positions in America because of possible losses. The downgrade, if tomorrow, will send waves through the industry, and even if it does not come, the rumor will be bearish. Asian markets were being driven down on Tuesday, led by financials. Further, the market for tomorrow will be led by inflation news. If it is bad at all, this means higher interest rates and less loans for banks. There seems to be too many fundamentals going against the market. That is why playing Ultrashort Proshares Financial ETF (SKF) is a perfect inverse play to the financials. The ETF cannot easily be analyzed on technicals, but its underbought and undervalued. This means that there is a lot of potential for buyers. On a day like tomorrow, SKF could have a nice run.
Entry: Recommend buying within first 20 minutes.
Exit: We recommend exiting after a 3-5% increase.
Upper Resistance: 44.50
