Yesterday, we had one successful trade and one that we decided to continue to hold through today because there was no point in selling for such a huge loss close to 3%. Our Buy Pick of the Day, for yesterday, was Ultrashort Proshares Real Estate (SRS). We liked the stock due to what I thought was going to be a down day in the markets, but it turned out to be a great sector specific call. We got into SRS at 7.95, which was adjusted in our Morning Levels alert. We were looking for a 2-4% gain on the day with a range of 8.11 – 8.27. We were able to get all the way up to 8.27 for a 4% increase. On the Short Sale side, we liked Advanced Micro Devices Inc. because the stock appeared to be significantly overvalued and presented a great shorting opportunity. When the market did not tank, AMD was strongheaded. We got into it at 8.35, and we are still holding hoping to get out today.
Let’s get to today’s market…
Buy Pick of the Day: Ultrashort Proshares Financials ETF (SKF)
I don’t see how the market is going to rally today, but I do think it probably will get some movement upwards this morning because futures are drastically low, down 85 points on the Dow as of 8:50 AM. The markets, across the globe, were all down on the Bernanke commentary. The comments have led to a continued stronger dollar, which hurts the marketplace. Especially since I did not see much pricing in of these comments yesterday, I am in full belief that it has to happen at some point. On the rest of the market’s front, there is not much good news either. FedEx said it will top its previous guidance, but in the same breath, McDonald’s saw its November same-store sales drop from one year ago and 3M affirmed its guidance below estimates. Kroger missed on earnings, which is a sort of bellweather stock. Overall, the market is just not looking too spectacular this morning.
For this reason, I like Ultrashort Proshares Financials ETF (SKF). The ETF is a solid play today in much the same way SRS was yesterday. We have what appears to be a down market, and it will be hard to find stocks that can really rally much in this market today. Therefore, we want to look towards safer plays in a more for sure inverse ETF. By taking one that has a sector
off the radar, we can expect it to follow the market and play more off of market fundamentals. For example, SRS was just wayyy too oversold and undervalued to continue down that path, which I think lended a huge hand to it in an any sign of weakness in the market. There is not a lot out on the financial markets today, but they will not benefit from a down day.
We do have Wells Fargo and Citi talking about paying back more TARP, which is positive. There were no major upgrades/downgrades or earnings for this sector. Overall, it has been quiet, and its pre-market levels are just under 1.5%, reflecting this sort of quietness. We want to buy this ETF because it is definitely in a position to rally. The charts on this one are showing SKF is actually ready for a breakout to the upside. The stochastics show the ETF as neither overbought nor oversold, yet they are showing a stready move towards the upside and a lot of buyer interest. RSI is sitting at neutral, as well. The stock is sitting somewhat close to its upper band, but I think it may actually break out of that upside today with the way the market is presenting itself.
We want to get into this one after I think we see some rallying because it will not be able to last, and we can get a discounted price for the day. Look to buy in not right away but early this morning.
Entry: I like an entry of 25.05 – 25.15 for this one.
Exit: Looking for a gain of 2-3%.
Stop Loss: 3% on top.
For our Short Sale, we will continue our position in AMD. We are looking for an exit of 8.18 – 8.10.
Good Luck and Good Investing,
David Ristau
