Hey all,
Hope you had a great weekend. Friday was not exactly the big winner day for us. We choose to buy Ultrashort Proshares Oil and Gas ETF at 13.05. The ETF came pretty close to be worth 2% for us as the market tanked early before it rallied back and DUG never made another move. We got out at the end of the day at 13.05 again to break even, which is better than losing. On AXA, however, our Short Sale of the Day, we were major losers. I thought it would have been a good pick, since I was bearish on the market, and we were seeing some really awful news coming out of AIG. AXA just did not follow suit and rallied heaviy with the market, making our short sale look foolish. We lost 3%.
We are looking to do better today. We need some help from the ISM Manufacturing Index.
Buy Pick of the Day: Direxion Daily Real Estate ETF (DRN)
Analysis: I don’t have a ton of confidence in the markets today, thus far… We have seen most of the European indexes start high and move lower on fears over Greece continuing to struggle. The supposed bailout package gave the European markets a pop to open, and they have all fallen since. The American markets are looking to start the day in the green, according to the futures, but I think this will be short lived. The rise is on what? Personal spending being higher than personal income? Dillards beating estimates?
.png)
The market is going to be a winner or loser today based on the ISM Manufacturing Index at 10 AM. It will determine whether we are going to keep a rally going or see a loss on the market’s open. I am in the prior camp. Here is why. The ISM index has been estimated at 58 vs. last month’s 58.40. This estimate is way undervalued. Throughout February, every manufacturing index report we saw (Philly, New York, Richmond, Chicago) all beat estimates, which were undervalued because of misses coming the month prior. These indexes were beating often by exceptional margins. I am expecting a nice beat coming from the ISM index at 10 AM. That will continue to help give a boost to the market. Without it, I think we would fall on our faces.
So, why DRN then? We want a volatile play for our trades of the day, and there is not much more volatile than the Direxion ETFs. For the most part, these are interchangeable, and they follow market trends. I like DRN because it is not too overvalued going into the market, up only 0.70%. The ETF also should be getting some from the fact that it holds Public Storage (PSA), who delivered some pretty outstanding earnings this morning, beating EPS esimates with a 1.27 vs. the expected 1.13.
We want to get into this one as soon as the market opens. I expect a slow rise and then hopefully a nice pop after the ISM report. Good luck!
Entry: We are looking to enter the ETF in the 138.60 – 138.70 range.
Exit: We will want to gain 2-3% on top of our entry price.
Stop Loss: 3% on bottom of entry.
Short Sale of the Day: Dillards Inc. (DDS)
Analysis: I am going to make this one quick. We are looking at a perfect short sale in DDS. The stock is up much too
great in the pre-market trading for its own good. This is a mostly technical trade on fundamentals of the market. The stock has had about 4% of movement in the past month total, so it has been relatively stagnant. It is slowly been getting overbought and has remained that way for the past couple of weeks. This means there are too many buyers involved, which means when we see that the stock is up 4% in pre-market trading. It may be a great selling opportunity, in the short term.
The stock will most likely pop a bit to start before seeing some heavy selling pressure as holders take their profits. We want to position ourselves to get in at the top of the pop, which I have set at the upper bollinger band on DDS. The band runs right at 17.75, and the stock should get some heavy pressure at that point. I do think the market, overall, may have a somewhat healthy day, so this may be a tougher trade. Yet, it has the makings of a great short sale.
Sorry to be brief.
Entry: We are looking to enter our short sale at 17.70 – 17.80.
Exit: We want to get out on a 2-3% decrease for cover.
Stop Buy: 3% on top of entry.
Good Investing,
David Ristau
