Yesterday was an okay day for our picks. We only had one buy pick of the day, which was Ultra Proshares Financials (URE). We got into the stock in the morning at 5.65, and we saw the stock trade down to neutral all day. The day at 5.55, which is where we exited because I was not excited about holding the stock overnight, which appears to be a good choice to start the day today. On the flip side, our longer term play was Aetna Inc. (AET). The stock we bought in on Monday at 25.25. We are looking for an exit today at 26.25 – 26.50, which I think is very attainable. We went 0/1, but our long term play is working very well.
Todayyyy…
Buy Pick of the Day: Direxion Daily Real Estate Bull/Bear ETF (DRN/DRV)
The market is looking pretty curious today. We have a slew of pretty solid earnings reports this morning, but none of the companies are true market movers. Asia and Europe moved down significantly on the consumer confidence news from America way more than the USA. Core Durable Goods Orders came in very solid this morning, beating expectations by rising 0.90% versus the expected 0.50%. New home sales at 10:00 AM will be pretty important to the day. Yet, the market’s futures are still down pretty significantly. So, where are we going?
I think your guess is as good as mine. Therefore, on days like these, I like to take the approach of positioning ourselves for a movement we can expect. With the release of the New Home Sales report at 10:00 AM, if the news is good, the housing and real estate market should move upwards, while weak news will move the sector down. The expectations for new home sales are set at 445,000 new home sales. If we beat that number, we want DRN. If we are below that number, we want DRV.
One of the reasons this trade can work well is when we have two ETFs that are inverses that are pretty neutral on the technicals. DRN is just slightly undervalued, oversold, and closer to its lower bollinger band, but it is mostly neutral. DRV is the exact opposite. I think we can expect either one to make a major movement in either way based on this.
The way you want to set this up is by opening multiple screens, entering order positions at market price that you want based on your capital divided by an expected buy in, and wait for the news. Check Marketwatch or CNBC for the news at 10 AM. We have to act quick because it will allow us to position ourselves before major movement.
Good Luck!
Entry: We are positioning ourselves in one or the other based on the New Home Sales data that is released at 10:00 AM. A bullish reading will mean an immediate buy of DRN. A bearish, DRV.
Exit: 2-3% on top of ETF.
Stop Loss: 3% on bottom.
Short Sale of the Day: Switch and Data Facilities Company (SDXC)
Switch and Data Facilities might not be a company that you are very familiar with, but they are a smaller interconnection facilities company we want to make some money on. The company, last night, reported earnings that were pretty strong, beating expectations of 0.07 vs. 0.03. The problem is that the company is acquiring another company, Equinix, which was not taken well by most analysts. The company was downgraded by Collins and Stewart and Merriman this morning.
Collins said, "We are downgrading Switch and Data to a Hold rating from a Buy due entirely to valuation and the proposed merger with Equinix, which currently values Switch and Data’s stock price at $17.87 as compared with this evenings closing price of $17.63. The stock remains within 10% of our $19.00 target price."
Yet, even with the downgrades and the unexceptional earnings, the stock is still in the green on what is looking like a down day, which is most likely due to low market volume. If the market moves down, as my sentiment is currently held, then SDXC is going to drop significantly.
This news only is really interesting because of how overvalued the stock became moving into the earnings report. The stock has increased nearly 30% in the past couple weeks before earnings, is near its upper bollinger band, overvalued, overbought, and ready for a sell off. Let’s take advantage.
Entry: We are looking for an entry of 17.60 -17.70.
Exit: 2-3% on bottom for exit.
Stop Buy: 3% on top.
