I am not going to do my recap because I did not have any picks yesterday, and I have a whole new story all about all my historical picks that was posted last night. Check it out here. To highlight the story, our Buy Pick Virtual Portfolio is up over 80% this year in value, while the Short Sale Virtual Portfolio is up almost 10% in just over two months of existence. You can view all my historical picks there.
Let’s get into today’s session…
Buy Pick of the Day: Ultrashort Oil and Gas ETF (DUG)
The market is looking at a morning pullback as of now. The futures for the market are pointing to a lower open with a 64 point drop in the Dow and 10 point drop in the Nasdaq as of 8:25 AM. The market is being hurt by weaker earnings from Bank of America Inc. (BAC) and General Electric Co. (GE). The two American giants showed some weakness in their earnings, which is capitulating with a heavily overvalued market. The only thing that could turn things around this morning would be economic data from the Treasury International Corp. Net Long-Term Transactions, which measures the monthly difference in value between US purchases of long-term foreign securities and foreign purchases of US long-term securities. This is a big number for the demand and strength of the dollar. If it is positive, it could help the market turn around.
The oil market did not follow the market lower yesterday. Today, it is facing some serious pressure as it has risen $10 per
barrel in the past weeks. It has become highly overvalued, and it refuses to follow the market lower. Of all the inverse ETFs, the oil and gas inverses are the only ones down less than 3%. The price has begun to drop slightly, but it is still above $77 per barrel. I am expecting a large pullback in the market, which should help DUG start to move much higher.
The ETF has been hit pretty hard as of late, down 25% in the past two weeks. It has moved much below its lower bollinger band, is way too far oversold, and too far undervalued. Oil futures have just moved up way too fast. The price of oil in Asia breached $78 before falling to the low 77s. This downward movement should be even further accentuated in the market.
The TIC report just came in really positive, which is very good for our position. It should further bring down the price of oil. Let’s hope it is not too much.
Entry: I like an entry of 12.15 – 12.25, but check back for the morning levels alert to see how TIC is affecting DUG levels.
Exit: We are looking for 2-3% entry.
Stop Loss: 3% on bottom of entry.
Short Sale of the Day: Citigroup Inc. (C)
Bank of America loses $1 billion in the Q3, and Citigroup is only down 1% in pre-market trading. All other financial institutions are down nearly 3% up to 10% in some cases. Citigroup, one day after reporting neutral earnings, is still extremely overvalued, overbought, and near its upper bollinger band. The stock should not see any lower resistance until 4.30s. The stock is currently trading at 4.70. With BAC’s earnings and how overvalued the market is, I can see the financials falling on their face pretty hard today.
Bank of America was hurt by defaults of consumers on loans and credit cards. This is something that should continue to affect these financial institutions moving forward. Citigroup is definitely one of the companies that should be seeing a lot more downward pressure than they are currently. I think we can get into Citi for a nice premium at these prices.
Entry: We are looking to short at 4.70 – 4.80.
Exit: 2-3% below entry price.
Stop Buy: 3% on top of entry price.
Happy Investing Today,
David Ristau
