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The Oxen Picks Report: Where is the Market Headed, What to Buy/Sell

Where is the market headed? That is a really great question. We are very range bound it appears for the near term of the next couple weeks with the market taking profits and investors reinvesting into stocks that have moved down slightly off highs that were seen over the last two weeks. Playing the intraday investments will be tough as we try to gauge where the market will head on a day to day basis.

Some of the bearish indicators I see for today are that futures are still down slightly going into the morning. The Dow is down 13 points, and the NASDAQ has shaved off seven points in pre-market trading. The market is going to be moving on a lot of general market sentiment of whether investors want to take profits because they think the market has gotten too high or want to continue to add liquidity to the market. Investors will be eying the labor productivity, retail company results, and Fed Reserve meetings for some market direction, but there is no pertinent economic data being released today.

The only major earnings we saw were from Dish Network (DISH) and Dynegy (DYN). DISH had mixed results. While the company missed estimates very badly, hitting 0.14 EPS with estimates at 0.67, the company added new subscribers and kept their revenue in line with one year ago. Investors were reacting well to certain aspects of the report, sending the stock up over 8% so far this morning. Dynegy Corp., on the other hand, missed estimates again as the company’s losses continue to grow. They lost $345 million in the quarter or -0.41 EPS. Analysts had been expecting an EPS of -0.04. Here again investors have only dropped the stock 1.5% in pre-market trading.

I know Phil is sort of bearish, but I think that the market has some run left in it off that news data, hopes for more solid economic data/earnings, and decent earnings.

Asia was up huge with Japan increasing 1% and China seeing its Hang Seng gain over 2.7%. Europe, however, was slightly down as investors took a breather with little news coming out from the continent. The dollar continues to show strength, which is lending to weaker oil prices.

My guess is that we bounce off a lower start to green, but it will not be able to be sustained over the day, but neither highs nor lows of the day will be significant.

 

Buy Pick of the Day: Comcast Corp. (CMCSA)

I like Comcast, today, because of two major reasons. One is that Dish Network’s earnings are being taken very well by investors. This should bring some positives to the whole sector. While the company did add subscribers, I think it can be looked at as a bullish sign that people are jumping back into buying some nicer things like cable and satellite television once again. The earnings reiterated some really positive earnings we saw from Comcast.

The second reason I like Comcast are those positive earnings. The company beat expectations on Thursday morning, and it had an earnings increase of 53%. The company jumped up significantly and then sold off Friday on the positive day. The stock, today, will have investors getting back into it as CMCSA is definitely a fundamentally solid company moving forward. This is a trend I have seen with playing stocks on earnings. The company beats and gaps up and trades sideways, gets sold off those highs the next day, and then, investors reenter the stock off those profits.

CMCSA does have a lower than market beta at 0.81, which means it is less volatile. This is another reason why I am good with this stock. With the market showing little sign of direction, it is better to be in something that is more "for sure," in case the market really heads south and follows Europe. However, the stock is not trading up much in pre-market. I think off of these morning levels we can take a 1-2% profit, and even more if the market really revs up.

The stock has room left for more upward momentum to its upper bollinger band.

Entry: I would get involved at the 14.95 – 15.00 prices, which will probably right around where the stock opens.

Exit: Taking 1-2%, puts us around 15.10 – 15.20, maybe even 15.25. I wouldn’t expect to get much more than that on this stock unless the market really rallies. If that is occurring, put a stop loss on 15.20 and look for something around 15.40 for an exit.

Short Sell of the Day: Dynegy Corp.

This stock is a definite short sale for today. The stock is basically a penny stock, so there is a lot of risk here, but I think the risk is really a lot smaller than with others. The company has high beta for a utility but nothing close to some other penny stocks. The earnings for Dynegy were just not good, and things just appear to be getting worse and worse for this company. The company reported that loss of $354 million, which is much worse than its break even one year ago. Further, the company had only a negative EPS of -0.04 last quarter. The company’s forecasting was also worse than expected. Investors have not been pleased and sold it off 3% in pre-market trading.

I think, however, that with this being a penny stock that downward momentum will plummet the stock early in the trading day and then trade it pretty much sideways for the rest of the day, so we want to get in on that downward movement. Buying right into the open will be the best way to play this stock as penny stocks tend to have most of their major movement on developments right away.

The stock is in a perfect position to trend lower, with slow stochastics just breaking out of that 50 range, which signals neither buying nor selling. It is just starting to trend lower, which means the stock has mounting selling pressure. This is the same with RSI. The company’s lower bollinger band is coming in pretty close to where the stock is trading, which is why for the single day I am not sure it will be able to plummet much after an early morning sell off.

Entry: Short sale should be taken right at the beginning of the morning, looking for an entry around 1.86 – 1.88.

Exit: Cover yourself on a nice 2-3% gain at 1.81 – 1.84.

Good Investing,

David Ristau


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  1. David Ristau

    Morning Levels

    CMCSA – We still have not seen CMCSA break out and it is trading at exactly neutral in pre-market trading. This makes for a nice entry point still. However, it does worry me some that the stock has seen absolutely no movement.

    DYN – It has moved back up this morning to 1.92, which is down just 0.5%. This is a perfect entry for a short sale as the stock is way overvalued even at these low levels on this type of earnings report.

    David Ristau

  2. David Ristau

    Hey all,

    Just posted a new blog entry about my thoughts on EBAY and GM teaming up for partnership you may find interesting:

    http://seekingalpha.com/instablog/429248-david-ristau/21911-gm-and-ebay-teaming-up-for-the-construction-of-gm-or-the-destruction-of-the-auto-dealer

    David Ristau

  3. David Ristau

    I have my latest portfolio results published here:

    http://www.philstockworld.com/2009/08/10/oxen-picks-portfolio-results-august-7-2009/

    Thanks,

    David

  4. David Ristau

    Oxen Picks Midday Report

    CMCSA – Well on our 14.95 entry we made the 2%, but if you held hoping for more you are a bit off of your entry price. The market is down to lowest levels in two hours here coming to the mid point of the day. This afternoon will definitely help us all know where this market is headed. If we bounce back, which I hope we do, CMCSA should follow that market sentiment. I wouldn’t, however, hope for much more than a 1% gain on that 14.95 entry.

    DYN – Made the quick entry and exit we were looking for before investors got excited by a company that has lower revenue, lower earnings, missed expectations, missed fiscal year outlook, and is selling off factories, meaning lower revenues moving forward. I don’t understand that, but we got out before this stock rallied.

  5. David Ristau

    Oxen Gamble of the Day: Parexel International Corp. (PRXL)

    Well, the Oxen Gamble is Parexel, which is a company that provides medical research services to companies with consulting, medical communications, clinical research services, and other research services. On my initial thoughts about this sector, I would think this is a sector that I would not want to be involved with right now in this recession as companies try to trim expenses. That is exactly what most analysts were expecting as well. Most estimates have completely undercut this sector and out of the four major players here the first three have all beat estimates.

    The other major players are Covance (CVD), Pharmaceutical Product Development Inc. (PPDI), and Charles River Labs (CRL). All three have had upward earning surprises as estimates have undercut these companies. PRXL I am thinking should follow suit. The company has beat expectations for the past four quarters, but its P/E ratio is still in line with PPDI and below CVD.

    The one worry I do have about PRXL is that it has not had as much downward movement as the other three. Therefore, its current estimates are not quite off what one would expect for normal growth, but they are still lower than one year ago. Further, I am confident based on results seen across the healthcare sector as a whole. Drug manufacturers have done very well, and they are beating expectations across the board. This has translated into a lot of overvalued companies, which is another reason I like PRXL.

    Going into its earnings, the company is 66% off its 52 week high. The stock has seen a major pullback from 16.50 highs last week back into the mid 14s. Investors are not sending the stock soaring (their fault) today, which has provided a good buying opportunity. This pullback means the stock has upward room to move towards and above an upper bollinger band because a beat has not been priced in over the past few days.

    Parexel reports in after hours, so we will know how we are doing right away. If the opportunity to sell in after hours presents itself then take it, otherwise getting out in the morning is the way to play this because we never know how investors will take the stock after 9:30 AM.

    Good Investing,

    David Ristau

  6. dstillwe

    PRXL.   Ok, Dave.   I’m in.  I bought/wrote just to bring down my entry price a bit.   Fingers crossed.  DS

  7. David Ristau

    Dstill- Just cross one…its luckier.

    David

  8. sthompson

    You can certainly see the spike in volume once you put your gamble of the day out there. People were scrambling to get in.

  9. Zuko775

     I see the volume on that as well, but it looks like a sell rally as the price drops signficantly during the spike in volume….  David, do you have enough readers to move volume that way?

  10. David Ristau

    Sthompson and Zuko – I certainly don’t think I have enough readers to spike a volume especially on a high volume stock like Parexel. Not positive but doubtful.

  11. linhong0h

    After hours it was traded @ 13.25 and I’m down 10% currently :( Obviously some people were not happy about the earnings.
    Wondering if I should hold it for a longer term since its fundermental is not that bad.

  12. David Ristau

    Oxen Report Recap

     

    Buy Pick of the Day: Comcast Corp. (CMCSA)

    The Comcast pick did work out well, but it wouldn’t appear that way at a quick glance of the chart. The stock was able to do particularly well because it opened down and quickly benefitted from the bullish Dish earnings news. The stock opened right at my entry price of 14.95. We then wanted to take small profits on what I thought would be a small gain for the stock on a rough day. The stock exit we had estimated was from 15.10 to 15.20. The stock hit a high of 15.15. If you held past that point, you could have held to the end of the day with a small gain at the close near 15.05.

    Entry: 14.95 right at the beginning of the day at 9:30 AM.

    Exit: 15.15 exit at 9:37 AM, with an increase at 1.34%.

    Sell Pick of the Day: Dynegy Corp. (DYN)

    Dynegy was another mystery for me. I did make the entry and exit that we had estimated, but it increased over 15% on the entire day. The company missed its revenue estimates, missed its earnings expectations, missed earnings, sold a bunch of factories, and it increased 15%. What? I don’t understand it all. We got in at the 1.92 entry price, and exited on a 2% gain to get out at 1.88, but the stock moved up 15% from that point. That was even with the down market day.

    Entry: 1.92 right at the 9:30 AM entrance.

    Exit: Exited at 1.88 for 2% a gain at 9:40 AM.

    Agenda for Tomorrow

    Tomorrow’s market will be ruled by economic data. The only company reporting earnings with over 250,000 average volume is GigaMedia Ltd., which is a Chinese software company. So it is not even that it is an American company. Therefore, investors will be turning to economic data pretty much to direct the market. Additionally, the Fed meeting and retail sales will continue to give some market direction, but it comes down to economic data.

    Economic Data Tomorrow: Nonfarm Productivity Data, Unit Labor Costs, IBD/TIPP Economic Optimism, and Wholesale Inventories

    The major economic report will be from the nonfarm productivity data, which is a measure of how productive all private labor was in July. The estimates are for a 5.20% increase from one year ago. Any increase shows a healthy economy, and a decrease shows signs of inflation. So, an increase will be really good for the market. If the estimates miss, an investment in gold and oil would be solid. The estimates come out at 8:30 AM.

    The Unit Labor Costs also will be released. This data measures the average cost of labor. A higher than expected reading is good, whereas, a lower than expected reading is not good for the dollar. The estimates come at 8:30 AM.

    Gamble of the Day: Parexel International Inc. (PRXL)

    So, Parexel is a mystery. The company had accounting charges on an acquisition of a telephone company, which brought down its earnings estimates at 0.11 EPS, but estimates were at 0.27. However, without the charges, the company hit 0.27. The problem was that information is buried in every story, and the stock is down almost 10% in after hours. It is hard to tell how it will do tomorrow, and it could rally similar to the way Dynegy did. I wouldn’t be confident for that gain, but we will have to watch.

    Good Investing,

  13. David Ristau

    linhong0h- here is my reaction:

    So, Parexel is a mystery. The company had accounting charges on an acquisition of a telephone company, which brought down its earnings estimates at 0.11 EPS, but estimates were at 0.27. However, without the charges, the company hit 0.27. The problem was that information is buried in every story, and the stock is down almost 10% in after hours. It is hard to tell how it will do tomorrow, and it could rally similar to the way Dynegy did. I wouldn’t be confident for that gain, but we will have to watch.

  14. spider

    DYN = David, after looking yesterday stock  move and your trade play I should say:  You have the Cristal ball that help you to trade in the way you told? (in 1.92 out 1.88)  I only see one post at 12:21 saying "we got out before this stock rallied".
     
    I can understand if you take a loss, even if you get out at same level, only paying commissions. But the way you posted is in some  way incredible unless you back  your trades with a screenshot of your trade.
     
    Sorry if If it sounds rude, is not my objective. By looking into your picks log i have seen great entry / exit points and this (DYN) is one of the best.  Since many here we are not paper trading I expect  things support reality check.  
     
    DYN going up instead of down is not a problem. We have our expectancy and stops when we trade. I not even traded this one. But if you will add this trade with a 2% profit to your trade log, witch will be seen by many investors better to back your trade.  I’m NOT saying you lie, im just pointing your trade log results is almost impossible to follow, special with trades like DYN
     
    Regards.

  15. David Ristau

    Spider -

    Well my entry price I recommended was 1.92. My exit was 1.88. It opened at 1.92. It hit 1.88. I can’t really not do anything but follow my entry and exit.

    If I had recommended entering at 1.88 and getting out at 1.82, I would have been screwed.

    My job, though, is to be good at picking entry and exit. That is what is crucial to daytrading. So I would say no I am not misleading people because I followed exactly what I wrote in pre-market trading.

    David

  16. spider

    I quote you:
     
    "Entry: Short sale should be taken right at the beginning of the morning, looking for an entry around 1.86 – 1.88.
    Exit: Cover yourself on a nice 2-3% gain at 1.81 – 1.84."
     
    In premarket you updated the entry point to 1.92. its ok. but the exit was not updated. So if 2-3% apply 1.88 will be one exit. But it was exactly day low, and by looking into chart i see that strike was only hit  2 minutes after open and never happen again (not at 9:40). Still it can be possible for you to sold at that proce, maybe was taken by your broker.
     
    Well… I have the right to think the (some) of your trades are hardly to be repeated by folowers and this ones take out credibility on your trade log.  Again, im trying to be critic in a constructive way. The idea of your log is to show people what can do by following your calls. And its not.
     
    Sorry if im to hard. Im trying to use my soft words i can.

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