Yesterday, we opened two new positions to add to our already open two positions (one of which we closed). We bought ERX after the report that crude oil inventories were down from last week 1 million barrels, signaling an uptick in demand. We got into the ETF at 40.50. We sold at the end of the day for a nice 1.40% gain, getting out at 41.06. Although, we were not able to reach that 2% threshold, we still made some money. The Short Sale of the Day was Helen of Troy Ltd. (HELE). We got into HELE at 22.05, but the stock kept a steady gain throughout the day, almost stopping us out. In my midday message, I commented that it would not hurt to hold this one through at least today to see if it can go down, since we were already so close to being stopped out. HELE, therefore, is still open. PBG is still open, and it has not even hit the 1% gain we are looking for yet, and we have not been stopped out. Finally, we closed out Family Dollar Stores (FDO) for a sweet 10.69% gain over 3 days, which was originally recommended on Friday afternoon for an entry of 26.60. So, we finished yesterday 2/2 with 2 still open positions.
Let’s keep making money…
Buy Pick of the Day: Ultra Financial Proshares (UYG)
I am concerned about the market’s ability to keep things going, but the fundamentals appear to be there for the market to rally today. We have some mixed news coming through the door, most of which appears better than worse. Yet, we have a market that has rallied significantly without much of any pullback, and I am not sure we can keep things going. The market looks to open much higher with futures up 75 points as of 8:45 AM. It is rallying behind positive earnings and outlook from silver producer Alcoa and a beat in initial jobless claims that saw the country lose 521,000 jobs last week, beating the expected 542,000. Alcoa is seen as a bellwether stock and the first test of earnings season, so it was definitely great to see them beat. Even most retailers were able to beat expectations in September.
The financial sector is the one that is staying under the radar and with the rally that we should see today, it should have a larger benefit because we can get into it at a cheaper price. UYG is only up about 1.5% in pre-market trading and is a very cheap stock around $6 per share. The only news coming out of the financial sector was that Citigroup’s management got a solid rating, but they said that some shuffling of management may be necessary. I am not sure how much this will affect the stock or a financial ETF, but its something.
Really, UYG will follow the market. I think we might see just a small pullback to start the day and rally from there. UYG is overvalued, but on stochastics it is right in the middle of oversold and overbought, and it just changed directions towards moving up with more buying. The stock has room on its upper bollinger bands to around the 6.50 area, which is still around 8-9% before I would guess we would see a lot of resistance. Technically, while it is not a red alarm buy, we can justify that this one has the potential to keep moving up.
If you believe today we will rally, then you should believe in UYG.
Entry: We are looking for an entry of 5.92 – 6.02 after some pullback in the morning.
Exit: 2-3% on top of entry.
Stop Loss: 3% on bottom.
Unfortunately, we will keep it to just the buy pick today. We have 2 other open positions, and I am running out of time to make the thorough investigation of a short sale. We have shorts on PBG and HELE open that probably will be stopped out today.
Good luck today and Good Investing!
David Ristau
