Hello Oxen Report readers. First off, I want to thank you all for your continued support of my report and endeavor. If you ever have any suggestions of things you would like to see in the reports, any suggestions, or anything…please let me know.
Tuesday turned out to be a pretty nice day for us when all was said and done. We went 2 for 2 on the day with both our buy pick of the day Ultrashort Proshares Real Estate (SRS) and our short sale Pacific Sunwear (PSUN) making us some nice profits. We got into SRS for a solid price of 9.70, which was in the recommended range in yesterday’s post. We were looking for an exit range of 9.88 – 9.97, and we were able to hit that 9.97 in the morning as the market made a major pullback to start the day. SRS was good for 3%. PSUN was a short sale that worked out well for us too. We got into PSUN at an entry price of 6.60, which was adjusted in my Morning Levels alert sent out before the market opened. We were looking for an exit of 6.47 – 6.41. We were able to hit that lower part of the range and cover at 6.41 in the morning for another solid 3% gain.
Two solid picks that should have made you some great money. Hope we can keep these picks a rollin’
Here are two new ones for you to play today.
Buy Pick of the Day: Airtran Holdings Inc. (AAI)
Well, well, well. This market looks primed for a rally. Core retail sales are up 0.20% in the month of September versus the 0.15% expected. JPMorganChase reported unbelievable earnings, hitting 0.82 EPS, which beat the 0.52 EPS expected. Last night, we got beats from Intel and CSX. This morning, we got beats from Progressive and Abbott Labs. Between the last two days of earnings reporting, there has not been a single miss from a major company…what?!
So, with the news, futures are up to nearly 100 points on the Dow and 24 on Nasdaq. The futures are high, but I do think fundamentally deserved. This may be one of the best day of economic news I have seen in some time. The financials appear to be in really great shape because of investment banks that continue to make extremely high amounts of revenue in the Q3 as the market continued its rally upwards.
With that said, where should we invest? We want to find stocks that have not had significant movement upwards this morning or have some weakness going into the day that will be surpassed by a strong day in the markets. One of these companies is Air Tran Holdings Inc. (AAI). Barclays Capital moved their target price down from $8 to $7, moving from "equal weight" to "under weight." The company does not see the long term future of AAI being strong. I would not be bullish on this company either, but for today, it is a great place for movement. Even with the target price of AAI, it still needs to move upwards 40% to reach that price.
Further, the stock is technically in a position for more movement. The stock is riding right at its lower bollinger band, it is extremely undervalued on RSI, and it is oversold. The stock will definitely some downward threat to start the day, but if the stock can start to rally even slightly, a lot of shorts will look to cover. The stock has moved down 33% in the past three weeks. That momentum is simply not sustainable. Finally, airlines, as a whole, got two major upgrades on the day in AMR and Continental that should overshadow the lesser Airtran’s downgrade.
Entry: We are looking for an entry of 4.95 – 5.05 for a slight pullback.
Exit: We are looking for an exit of 2-3% gain.
Stop Loss: 3% on the bottom of entry price.
Short Sale of the Day: Ultrashort Proshares Oil and Gas ETF (DUG)
Hard to think of shorting anything with the fundamentals we are seeing, so we will leave it up to shorting inverse ETFs. I think all of them are prime candidates, however, all the Proshares and Direxion bearish ETFs are down more than 3% across the board. These ETFs all have the capabilities of moving down 10% in a given day, but I am not sure they have that kind of potential with the amount of rallying we have had as of late. Of all of them, the energy ETFs have had the least movement even though oil has hit a one year high today.
Therefore, I think we can see some significant downward movement on the Ultrashort Proshares Oil and Gas ETF (DUG) or at least enough to make 2-3%. The ETF is going to move down on the market momentum, sentiment, fundamentals, and continuing rising prices of oil. The only thing that will turn this direction around would be something very negative coming out of the FOMC minutes or other breaking news. Otherwise, oil could be pushing $76 by the end of the day on pure momentum.
DUG is down 2.9% today, and we should look to buy it for around this level. It might move down pretty fast, so we should definitely position ourselves to benefit for a quick fallout in the market.
Entry: We want to enter right at the start of the market, but we should avoid the trade if the stock opens 12.60.
Exit: 2-3% on bottom to cover.
Stop Buy: 3% on top.
Good Luck Today, Good Investing, and Go Markets!
David Ristau
