TGIF but what a week we have had. Thursday was another terrific day for us in the market with both of our picks working for solid 3% gains on the day. This is the third straight day of going 2/2. Our Buy Pick was DRV (Direxion’s Daily Real Estate Bear ETF). We bought DRV based on the news of the existing home sales being worse than estimates, and it was a great decision. We got in right at the news report for a price of 19.50, and we instantly turned it into 3% at 20.00. The stock jumped up more than 9% from our buy in price. The short sale of the day was a bit more drawn out. After entering early on the day’s morning rally, we shorted Shuffle Master Inc. (SHFL) at 6.50. The stock rallied to 6.70 almost stopping us out before decaying back to 9.26 right before the end of the day. It was literally a Short Sale of the Day, but we got the 3% we were looking for in this one, as well. This weekend I will update my virtual portfolio’s value, but this week alone so far our buy picks have been good for 10%.
Let’s try to continue that success today…
Buy Pick of the Day (Short Sale of the Day): Hovnanian Enterprises Inc.
Durable good orders came back weaker than expected this morning from the Census Bureau. The durable good orders were expected to increase by 0.90%, down from 1.10% in July. The report came back with no increase whatsoever at 0.00%. This has reversed futures on the day, which were positive going into the report. Now futures have turned south, but there is still a lot of data to come out on the day. The Michigan Consumer Sentiment Index will have some definite market influence at 9:55 AM and new home sales at 10:00 AM will also be crucial to the market’s movement. 
This situation makes it yet another tough day to decide now what to play. With the market turning south, it will most likely take something to reverse this trend, so we can expect it to decrease until that happens. Therefore, short selling and inverse ETFs seem to be the way to go today. That is why I have combined my buy pick of the day with the short sale of the day. Hovnanian Enterprises looks to be a solid short sale to start the session, and it may be a great buy at 10:00 AM.
With the existing home sales coming out much weaker than expected yesterday, it put a definite dent in all home stocks and the sector that is continuing over to today. Then, this morning, KB Homes reported very weak earnings with an EPS of -0.87 versus the expected -0.58. The company saw its revenue drop 33%, but the company did see a 62% rise in orders. The company is definitely in a state of transition, but there is still weakness in the home market. Many of the housing stocks have dropped significantly over the past couple weeks, but Hovnanian has not had the same downwards pressure. The stock sits in the middle of its bollinger band range, is netiher oversold or overbought, and not relatively strong or weak. It is right there in that position where it can decrease significantly or increase significantly.
To start the day, HOV definitely looks ready to plummet. However, at 10:00 with existing home sales coming out, it could give a boost back to the stock and the market, as a whole. Therefore, the stock is a short sale to start the day. We will then readjust to either buy more or short sale more at 10:00 AM based on the sales data.
Entry: For our first entry, look to enter within the first couple minutes to take advantage of what should be downward pressure to start the day. This exact range will be defined in the Oxen Report Morning Levels Alert. Then, we will enter more at 10:00 AM with more shorts or some buys and a sale of our shorts.
Exit: We will want to take 1-2% in the morning on our short sale in case the 10:00 AM report is strong. Then, on our second short sale or first buy, we will want to take 2-3%.
Stop Loss: We will only put a stop loss on our second order.
Let me know if you have any questions, since this is a bit atypical for me. Since its Friday, though, its a good day to try something a little unique.
Good Investing and Good Luck,
David Ristau
