Hey everyone. Over the weekend, I posted a virtual portfolio account update here. We are up over 91% on our Buy Pick Virtual Portfolio that started back in May with $3000. Our Short Sale Virtual Portfolio, started back in August, is now over 7% and is starting to pick up. In the past month, we went 11/12 in our Short Sale picks. You can read all the details about the month and Friday here.
For now, let’s get back to today’s market, which looks to be a pretty slow one.
Buy Pick of the Day: Direxion Daily Technology Bear 3x ETF (TYP)
Today’s market is looking to me very overvalued going into the open. Futures as of 8:30 AM were up around 80 points for the Dow on what I saw as a light morning of news and have only increased from there to around 90 up as of 8:45 AM. The market is rallying on some good news from the G-20, which commented that all existing members would keep stimulus packages in place still. The world markets were doing well on the news, which has helped increase the prospects for the American markets. Yet, I am worried that the markets are getting a bit ahead of themselves this morning. 90 points on a G-20 announcement? On Friday, the market could not rally much due to issues with the job reports. Further, this morning we got some very weak earnings from Dish Network, who saw profits fall 12% and missed analyst estimates with an EPS of 0.18 vs. the expected 0.44. Further, this week is retailer earnings, and I think investors will and should take a cautious approach to the retail earnings. I just don’t think there is enough out there this morning to justigy a 90 point open. We should see a quick drop to neutral day.
Therefore, we want to take advantage of the drop by playing an inverse ETF. The one I am excited about today is TYP. Since I think the market is going to come down this morning from its open, many of the inverse ETFs would be strong plays. Yet, TYP may possess a slight advantage over the others. For one, DISH Network would be most associated with the technology and service sector, which TYP represents. Further, we saw a downgrade on Research in Motion (RIMM) this morning from Susquehanna Financial. The TYP is an inverse on the Russell Tech Index, and all of its holdings, which include AAPL, CSCO, HPQ, MSFT, ORCL etc. were pretty quiet this morning. TYP is down over 3% this morning, and there is simply no justification for that decline. There may even be some slight hangover from the weak Sun Microsystems earnings they annouced on CSCO, which will raise TYP.
I think getting TYP at these levels will be a great discount for a volatile ETF that should rise on a reverse market trend. While the technicals do not work nearly as well on ETFs, they still do show us the trend tech has been in recently. The ETF is pretty neutral currently to slightly undervalued and oversold. We have buyers on the sideline, and the ETFs lower band is set at just under $11. This ETF will see significant resistance at the $11 level, which is right where its at today. I am expecting a solid bounce off the bottom for TYP.
Entry: We are looking for an entry of 11.00 – 11.10
Exit: We are looking for an exit on a 2-4% gain.
Stop Loss: 3% on bottom of entry price.
Short Sale of the Day: The DIRECTV Group Inc. (DTV)
Dish Network’s stock is up over 6% this morning on its news of missing earnings, missing profits, and missing revenue estimates. Oh, it increased its subscribers by 2%…that’s a reason to rally. Nope! The current place DTV is at in pre-market is 
a telling sign, as well. The stock is just under breaking even in pre-market trading, even though futures are up over 90 points on the Dow. What does that tell us about DTV? It is facing some heavy resistance, and it will most likely see some downward movement this morning.
The stock has been on the fly over the past two weeks moving up over 10% into and out of the company’s strong earnings. The stock, though, has risen too great, too fast. The stock, on Friday, moved outside its upper bollinger band, which is a red alarm for a quick short sale for nearly any occasion. The stock is highly overvalued and overbought, meaning we should expect to see some profit taking occurring.
Since the market is going to come down, that weakness in the market will compound with a stock already showing weakness today, and we can ride that wave down. The Dish Network earnings are pretty weak, and I think as that stock starts to come down, as well, it will help push DTV down even further. I think we might see some slight upwards movement on this one before the short sale, so I have adjusted my entry accordingly.
Entry: We looking to start our short sale at 28.55 – 28.65.
Exit: We are looking for an exit of 2-3%
Stop Buy: 3% on top of buy in price.
Good Investing and Good Luck,
David Ristau
