Today, to make up for yesterday’s missed write up, I am going to be making four different picks for the market. Hope you enjoy! Before we get to that, let’s recap what happened on Wednesday. We went 2/2 on the day. The Buy Pick of the Day was Fifth Third Bancorp (FITB). The stock we bought at 9.90, before watching it decay to 9.70, then rally all the way back up to 10.15 for a solid 2.5% gain on the day. On the flip side, we were betting against oil after a crude inventory report showed inventories did not rise any further the past week. We got in Proshares Ultrashort Oil and Gas at 10:30 AM after hearing the report at 14.80, looking for an exit of 14.30 – 14.45. We were able to get out for a solid 3% gain at 14.30. Wednesday was good to us. Let’s hope Thursday is more of the same.
Buy Pick of the Day #1: Direxion Daily Financial Bull (FAS)
The main report this morning was the unemployment rate, which came out at 9.8%, the expected amount. That was probably better than most people had expected, however, non-farm payrolls dropped over 260,000 compared to the expected 190,000. The average weekly hours worked by an American adult dropped to 33.00, compared to the expected 33.10. Further, the average hourly earnings rose by 0.10% in the month of September, but the expected rate was 0.20%. Overall, this data paints a pretty bleak for the day, and the futures are down nearly 100 points for the Dow as of 8:31 AM.
So, why in the world, would I be bullish on anything that is not inverse. The market has priced in these expectations. Everyone after the ADM Nonfarm Employment Change was expecting the Nonfarm Payrolls to be down and unemployment to drop. Unemployment stayed the same and did not fall…that is in some crazy way a bullish thing. With the market decining 4% coming into today, it appears that these results were already priced into the market. This morning’s selling frenzy is simply scared investors. So, we want to position ourselves to take advantage of this rally off morning lows. Over the past three days, the stock has declined 1/7 in value or around 15%. That is way too fast!
This ETF, I like over others, because of some large financial upgrades we saw coming out this morning. The first one was BB&T Corp. from Keefe Bruyette. The stock was upgraded to Outperform from Market Perform. Keefe & Bruyette also upgraded US Bancorp. Both were upgraded due to what our expected to be good Q3 results.
Technically, FAS is looking like a great buy, as well. The ETF is way oversold on fast stochastics and is moving downwards quickly on slow. The stock is now undervalued in RSI, and it is moving closer to its lower bollinger band, which is around the $70 level. In pre-market, FAS is trading down 5.30% to 68.75. That sort of momentum just cannot be kept up, and this morning, we will see a lot of profit taking and investors getting back into this ETF at such a discount.
Entry: You will want to check back for morning levels, but I think buying in at 68.65 -68.75 is ag reat place to enter this ETF.
Exit: Let’s be a bit greedier, 2-4% on top.
Stop Loss: 2-3% on the low side.
Buy Pick of the Day #2: Advanced Micro Devices Inc. (AMD)
Here is another stock that has been getting killed the last couple days, dropping about 10% in value while the market dropped 4%. Then, the stock is down another 4% in pre-market trading. Why such a sell off? It is understandable with the 3x ETF FAS, but AMD has no reason to be down so far. The stock should be getting a boost this morning from a couple of crucial tech upgrades that for the moment are being overlooked, Intel and Apple.
Intel got an upgrade from Oppenheimer, and Apple was upgraded by UBS. This should be a rallying point for all of tech since these two stocks are such leaders. Intel is very closely associated with Intel, as well, giving it more reason to feel the brunt of any tech upward movement on this news. Futures have continued to drop, which is actually what we want. The more selling in pre-market means the more reason that we can hit a bottom earlier.
Technically, AMD has declined towards its lower bollinger band and fast stochastics are showing that they are getting to a breaking point. The RSI is moving very close to being undervalued, and the stock is moving very close to its lower bollinger band. With the levels this one is at this morning, you have to see a bottoming out process. The bollinger bands show a bottom at 4.75, but it is doubtful that this one will continue to decay to that level. The Nasdaq futures, after taking into account, fair value are only down about six points.
Entry: Entering AMD from 5.00 – 5.10 is a great entry point.
Exit: Exiting on 2-3% from the buy in.
Short sale: 3% below buy in.
Short Sale of the Day #1: Ultrashort Technology Proshares (REW)
The tech ETF is only up 1.5% in premarket with most other inverse ETFs up to much more significant amounts. Reason: APPLE! Apple’s upgrade from UBS this morning has kept the stock in the green, even though futures are down over 100 points. The stock was upgraded to a buy, and it has a new price target of …265!!!!! Yikes.
From Minyanville.com, "UBS based its upgrade on “recurring” iPhone hardware revenue, continued growth of the App store, and new partnerships that will expand the reach of the iPhone. In the note, UBS also said it believes upward revisions to consensus estimates are likely because they believe gross margin potential has been underestimated."
This seems like some pretty solid long term information, and with Apple being down an unwholly 5% in the past few days, the stock looks set to rally today and lead tech higher. That is bad news for REW. The ETF should not be able to hold onto the gains it will open with at the beginning of the day. The strength in Apple I seriously believe can put all of tech on its back and bring the market higher.
REW, technically, has seen a solid rally over the past few days, moving up nearly 8%. The ETF, which is down significantly over the past couple months, has moved very close to is upper bollinger band and is looking toppy. The RSI has moved above 50 points, meaning it is overvalued. With the price it is looking to open at, the ETF should be ready for a pullback.
Entry: Looking for an entry at 30.70 – 30.80 for out short sale.
Exit: Cover on 2-3%
Stop Loss: 3% on top of buy in price.
The last pick of the day is to come later in the day. A long term pick I like that we should buy today to position ourselves well for next week. It will be released as an alert. Enjoy!
Good luck today and Good investing,
David Ristau
