The Oxen Report: Tuesday’s Market Looking to Housing Data, Consumer Confidence

Yesterday was definitely a good day in the markets for The Oxen Report. Our Buy Pick of the Day was Ultrashort Proshares Financials ETF (SKF). We got into the ETF at 24.00 after adjusting the entry price in our Morning Levels alert from 23.85 – 23.95 to 23.95 – 24.00 because I was not sure I was going to be able to get in at those lower prices, which we were correct since the low of the day was 23.97. We were able to make a solid 3% on the ETF, getting out at 24.72. On the flip side, our short sale of the day was not as successful, but we were still able to make money. We bought shares of Riverbed Tech (RVBD) because we viewed the stock as overvalued on an upgrade. The entry place for this one was also adjusted in the morning levels alert, and we were able to get in at 22.30. The stock had tough resistance all day, so in the Midday Alert, I recommended taking profits at 22.00 in the afternoon. We did that for a gain of about 1.40%. It was a good 2/2 day, and let’s keep it rolling on Tuesday.

To the markets….

Buy Pick of the Day: Proshares Ultra Real Estate (URE)

The markets are not making a lot of noise this morning going into the day. It is pretty quiet, overall, and that makes it difficult to gage where this market is headed. At 9:00 AM, we will be getting some pretty important housing data that should shift the markets initial direction. At 10:00 AM, the CB Consumer Confidence report will also give us some direction. On the earnings front, the only major earnings we saw were beats by US Steel, BP, and Honda.

So, the market got a nice surprise from the Case-Shiller Index, which showed that prices of homes in 20 cities are on the rise. The composite index, which measures the value of selling prices, rose 11.30% in the month of September. The index was forecasted to drop by 11.90% after August’s 13.30% loss. The rise came as a healthy surprise, and I think could be a lot of fuel to what as I see a possibly big day for the real estate sector.

In addition to the news on the Case-Shiller, in after hours we got some solid earnings yesterday from Kilroy Realty beating estimates 0.66 vs. 0.59. One REIT that reported, Plum Creek Lumber, beat earnings, as well, reporting 0.14 EPS vs. 0.08 expected. SL Green Realty met expectations. In pre-market, Kilroy is up 0.50%, PCL is up 1.5%, and SL is neutral. I think that these reports are definitely positive signs for the housing market, which has been trying to find its foothold for awhile now.

URE has been flat as the rest of the housing market has been over the past month, and the chart is showing a squeezing of the bollinger bands, which means we should start to see some volatility to a break out. The stock is exactly neutral on stochastics and its relative strength is neutral, as well. The fact that it is so neutral means that it is waiting for direction. The Case-Shiller should be a first step in that direction.

Today, URE is pretty undervalued in pre-market with the slew of news we have gotten, and I think it is well positioned to make some movement. Good luck!

Entry: We are looking for an entry of 5.65 – 5.75

Exit: We are looking for an exit of 2-3% on top of buy in price

Stop Loss: 3% on bottom.

Long Play: Aetna Inc. (AET)

Yesterday, I published a Long Play Alert at 3:30 PM for getting into AET. Here was the reasoning behind my position. You can still get into it today:

I think Aetna is a great pick up at its current price with the company reporting earnings on Thursday. I expect that over the next two days this stock will definitely be able to rise in price. I am excited for the health care plan stocks this time around with UnitedHealth’s beat on last Tuesday. Aetna is a similar company to UNH, just smaller.

I like this trade because Aetna is undervalued going into earnings, and I think that we should see the stock get some strong buying support at these levels. We want to get into today on the 3% discount the stock has come down today before Tuesday and Wednesday, which I am expecting to be green days. The stock is near its lower bollinger band, and it has been trading below its moving average for over two weeks. The stock is oversold on fast stochastics, but it is trending upwards on slow stochastics. I think this upwards trend shows that there is some interest in the stock, but it has not matriculated enough as of yet.

Aetna is well below its 52 week high, and it has made strong runs into earnings in the past. Further, the United Health major beat on earnings should give other health care plan providers, such as Aetna reason to move upwards moving into earnings. That movement has not happened yet for Aetna, but it usually does not come until the days prior to the stock’s announcement. Aetna has a very similar P/E ratio to UNH, so expectations for earnings are very similar for the two companies. The 17% beat for United gave the stock a 4% one day boost for a stock with a beta close to 1.

The downward momentum Aetna is experiencing cannot be met, and we have good reason to expect a turnaround. I would not recommend holding into earnings unless we don’t see any movement. My expectations are that we will though, so this should not be a problem.

Good Luck and Good Investing!