Hello all. Hope you all had a great start to the week. Yesterday, we closed out three positions in Wonder Auto (WATG), which was our Overnight Trade from Friday. We gained a little over 1% on this one despite the fact that the company moved or did not actually report their earnings. We got involved at 8.20 and exited at 8.20. Yesterday, my Buy Pick of the Day in Health Net Inc. (HNT) was worth 3%, and our Short Sale in MannKind (MNKD) was also a nice 3% gainer. It was a good start to the week, and I am hoping to continue the movement into today.
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Today, the market is looking quite weak with some mixed earnings, a miss by P&G, and some weak economic data. Therefore, we are expecting a pullback…
Buy Pick of the Day: Ultrashort Proshares Financials (SKF)
Analysis: The market is looking like it is ready to make a pullback for today. Many stocks regained a lot they gave up last week yesterday, and this morning the news was not terrific. Earnings were mixed with P&G missing estimates. Personal spending came out as expected while personal income was at 0%, lower than the 0.1% expectations. Further, at 10 AM we are supposed to receive news that pending home sales dropped another 5%. Last month, pending home sales were expected to drop a couple percentages and instead dropped 30%. I expect a hefty sell into that news, and it would have to be very positive to turn the entire market around.
Therefore, it is one of those days where we want to avoid buying anything and settle on an inverse ETF. One that sticks out to me is SKF. Financials have been rather quiet as of late, and SKF has slipped down pretty far below its MA and 52-week high. The ETF should benefit from the fact that most of its large holdings – Citigroup, JP Morgan, and Morgan Stanley are fairly overvalued. Further, the market’s general pullback is definitely going to be a catalyst.
SKF is not quite as far down as some of the other inverse ETFs, which should be expected, but it also means that it won’t open at such a premium and has lots of room to grow. Technically, SKF is 20% below its upper bollinger band and more than 10% below its 50-day moving average. The stock is undervalued on RSI and heavily oversold. This means that we can expect SKF to make a solid turnaround.
The ETF tried to make a jump yesterday, but it was battered down throughout the day. Today, I think it will make a smaller jump and spend most of its day gaining.
Get in early!
Entry: We are looking to get involved at 19.25 – 19.40.
Exit: We are looking to exit for a 2-3% gain.
Stop Loss: 3% on bottom.
Short Sale of the Day: Cognizant Tech Solutions Inc. (CTSH)
Analysis: Cognizant is a similar short sale to the one we had yesterday in MannKind, but it is an even more exaggerated gainer, which actually makes me more nervous. CTSH has gained over 12% in pre-market earnings this morning after.png)
an exceptional earnings report. The company reported earnings per share at 0.56 vs. the expected 0.52. The company saw its revenue 42, and raised its FY outlook. All good things that are helping to fuel the stock. The company is trading in the mid-62s now.
Its upper band was at 56.50. That is an over movement of just under 10%…
CTSH did have a great report, but the technicals are all pointing to the fact that the stock should be sold to start today. First off, the company was already overvalued moving into the report. They had gained 10% since the beginning of July. Buying into earnings is a good bullish signal, but it usually means when expectations are beat…the stock gets a little rise. CTSH is 12%.
Therefore, we recognize that this is a pop and drop. Especially with the market being weak this morning, I am expecting CTSH to not be able to hold these gains whatsoever. It was nice to see it move, but the company cannot sustain.
I think this one will open…have a slight gain, and then, we will watch it fall.
Entry: We are looking to get involved from 62.70 – 63.30.
Exit: We are looking to exit for a 2-3% gain.
Stop Loss: 3% on bottom.
Good Investing,
David Ristau
