What a day for us yesterday in the Oxen Report. Second day in a row that we were able to make money off both of our buy pick of the day and the short sale. For our buy pick of the day, we went with ERY. We wanted to play the commodities market and buy the Direxion Daily Energy ETF that corresponded with the crude inventories. If inventories were rising, then it was bad for the price of oil, and we would want to buy ERY. Crude inventories rose by over 2 million in the past week, and this sent the price of oil plummeting. We picked up ERY right as the news came out for a price of 13.86 and get out at 14.26 for a 3% gain. On the short sale side in the post, we decided to short Hercules Offshore Inc. (HERO). We picked this stock because the company had gotten a severe downgrade that havled its target price and was technically ready for a drop. I recommended in the entry/exit of the stock to wait for it to bounce up to 6.60 before buying into the stock. We were able to get into it there and exit at 6.31 for 3%. The stock got as low as 6.15, so much more money could have been made. We still were 2/2 with 3% gains on both selections.
And now, it is time for Thursday.
Buy Pick of the Day: Direxion Daily Real Estate ETF Bull or Bear (DRN or DRV)
Today, the market has some pertinent economic data that will really influence where it is going. At 8:30 AM, the initial jobless claims data is to be released. Last week, the 
numbers came in much lower than expected at 545,000 claims filed. This week, analysts are expecting the same number. Anything higher will hurt the market, but anything lower could help to restart the rally that faltered yesterday. The real gem, though, comes at 10:00 AM, when the market will be presented with existing home sales for the month of August. Existing home sales, which is the annualized rate of how many residential buildings will be sold during the year, will be adjusted to the number of sold in August. The rate last month was 5.24 million homes, but this month the Natl Assc. of Realtors is expected to announce the rate has increased to 5.40 million.
With the market being exactly flat (Dow up 1 point in futures as of 8:00 AM), these two data pieces should really give the market its direction for the rest of the day, especially the latter. Therefore, in my opinion, we should play that housing data similar to the way we played the energy data. We will take two housing ETFs, and buy the one that makes sense, according to the housing data. The market was pretty flat to even slightly bullish yesterday, but neither ETF had gotten so overvalued that the data would not have a large impact. The same is true with Direxion’s Daily Real Estate Bull and Bear ETFs (DRN and DRV). DRV is slightly up at 0.25% increase, but that could be reversed in five to ten seconds.
If the data comes back, and the existing home sales annualized rate is below 5.4 million, then we want to pull the trigger on 
DRV. If the data comes back better than expected, so above 5.4 million, then we want DRN. If it comes back exactly neutral, we will want DRN because the market is more likely going to be a bull. Set up both trades and make the one that makes more sense based on the data points and my guidance.
DRV is definitely the more attractive of the two ETFs for some significant movement, like ERY was, because it has been beaten up lately, and it is down over 50% in three weeks. On the other hand, DRN has plenty of room to the upside. Trading around $140 per share, it should not see any resistance until it reaches around $160 – $165, a 15% premium on its current price.
Entry: We will be taken DRN, if existing home sales meets or beats the estimates of 5.40 million annualized, and we will be taking DRV if it misses.
Exit: 2-3% on top of entry price at 10:00 AM.
Stop Loss: 2-3% in reverse.
Short Sale of the Day: Shuffle Master Inc. (SHFL)
Futures have edged higher after some positive economic data about jobless claims that has made the market look like it is
set to open in the green. That changes the way that I am looking at short sales. If claims had been weak, I would short stocks that were already showing some weakness. Since the claims are positive, we have to look for way overvalued stocks that are getting too much of a bump up due to positive fundamentals and the positive data. The news was good for claims, but jobless claims has never been a market mover for the whole day. It typically just is able to set the table for an open. I think we will come down off these higher opens, due to the weakness in commodities and the way the market acted in the last two hours yesterday.
One of these stocks is Shuffle Master Inc. (SHFL). The company, which produces electronic gambling and gaming products, got an upgrade from Roth Capital this morning, which is a less significant brokerage firm. This, though, has pushed the stock up nearly 4.5% in pre-market trading. The higher it goes, though, the closer it is coming to its 52 week high of 9.90. The stock has traded pretty flat since hitting that high one week ago, and while the company is definitely in a strong growth stage, for today, it is going to come down off of highs. The market won’t be able to hold the rallies this morning, and SHFL is going to see a lot of selling coming in that will compound on itself.
The company, technically, is oversold but in a downward trend that appears to be starting to gain momentum. That will be reversed today, but it does show that seller interest was picking up prior to this upgrade. Further, the stock’s RSI is right at the all important 70 level. Anything above 70 is a red flag to investors that this stock is way too overvalued and will not be able to continue that type of momentum. Finally, the room to the upside of its upper bollinger band is very narrow. This thing is going to see a lot of resistance at 9.50 – 9.60 area, which is pretty close to its current 9.30 range in pre-market.
One issue with the stock is its low volume. If you cannot find shares to short, you can play it through options. Buy some 7.50 puts to play this one in reverse if you can’t find shares to short.
Entry: I am looking for an entry price with a bit more of a rally of 9.35 – 9.45.
Exit: Looking for 2-3% downward movement for cover.
Stop Loss: 3% upward movement for cover.
Good Investing,
David Ristau
