Yesterday did not turn out as well for us as some of the past days, but we were still able to make a slight profit on our short sale of Shanda Entertainment (SNDA). The short sale was bought out of the gate at 49.75. The stock never got down past 49.55 again, and we sold it at the end of the day for 49.63. It was worth 0.25% in gains. Our buy pick of the day was for Mosaic Co. (MOS). The company was picked due to what I thought would be a rally on the day before last evening’s earnings report. Instead, the stock plummeted three percent from our buy in of 46.60. So, we went a weak 1/2 yesterday.
Buy Pick of the Day: Short Sale on Pepsi Bottling Group Inc. (PBG)
I only have the one pick today. I am short selling Pepsi Bottling Group. The company reported earnings that beat earnings but were down in revenues, the beat on earnings was only 0.01 cents per share. The company’s earnings were led by lowered commodity costs and higher prices. Revenues were down 5%. The earnings beat has sent the company up only 1.3% in pre-market trading, show that the buying interest has not really picked up due to the earnings.
Secondly, the company’s technicals are in such a way that they are showing a definite pullback today. The stock is out side of its upper bollinger band, it is overvalued extremely on RSI, and it is overbought. All signs are pointing, technically, to a pullback today. This pullback will be led fundamentally by the weakness in the earnings we see from the company.
The general market has set this up nicely, in my opinion. Futures are up on basically just sentiment overall, and Australia’s decision to raise its interest rate, but there is really nothing tangible that is driving this market. For that reason, it will be much easier for investors to back out of PBG, compared to a day with fantastic rallying points. In my opinion, the market probably will fall down after opening today, which will even further help PBG.
Entry: We want to enter our short sale around 37.80 – 37.90.
Exit: Cover on a 2-3% gain from that entry.
Stop Loss: 3% on the high side.
Good Luck and Good Investing,
David Ristau
