The Oxen Report – Markets Gearing up for Earnings Season
Hey all! Well, what a nice Friday we had. Let me go over how we went 3/3 on the daily picks and review the fourth long term pick that was an alert sent out for a buy on Friday. Our first Buy Pick of the Day was FAS with a recommended entry point of 68.85,
which we got in the first few minutes of the market opening. From there, we were looking for a 4% gain to 71.60. We reached that gain at 10:20 AM. If you held onto the stock, you could have made upwards of 10%. After FAS, our second Buy Pick of the Day was Advanced Micro Devices Inc. (AMD). The stock was another winner as we called a tech rally on the Apple upgrade. We got into this one at the recommended entry point of 5.10. We were looking for 2-3% increase on this one as well for an exit at 5.25, which we hit at only about 15 minutes later. It was a quick 3%. The third pick was our short sale of the day, which was the inverse Ultrashort Proshares Technology ETF (REW). The ETF had a recommended short sale entry at 30.40 – 30.50. We were able to enter at 30.40 right after the market opened. From there, we were looking for a 2-3% gain for 28.79 – 28.49. We were not able to ride it all the way down for 3%, but we settled for a 2% gain at 28.79. Finally, in the afternoon at 2:45 PM, I recommended entering into Family Dollar Stores Inc. (FDO) for a long pick. My entry point, therefore, is 26.63. We are looking to hold this one through the earnings report on Wednesday evening. 3/3 yeah!
Now, let’s get to the Monday Madness.
Buy Pick of the Day: Mosaic Company (MOS)
Welcome to the Q3 earnings season. This evening starts the earnings season, and it appears that investors are looking positively to the quarter (at least for this morning) as futures are up in pre-market trading. The futures have continued to move consistently higher as we have moved towards the open, showing a sustained buying rally. With two weeks of downward movement from the market, a lot of bargains are presenting themselves for investors, especially as we move into the earnings season. For today, I am getting behind Mosaic, who will be the first major company to release earnings for this season.
Mosaic, who is a producer of potash and phosphate fertilizer, looks to be in a perfect position for a rally. The market opening with this rally may get a small pullback, which will present a perfect opportunity to buy a stock that should see a day long sustained rally as investors get behind the stock going into this afternoon’s report. Last quarter, Mosaic beat earnings by 230%, and while that sort of beat probably is not possible again, investors are going to see such a significant beat and buy this one up. After last quarter’s earnings report, the stock jumped over 10%. With the stock only up a bit over 1% in pre-market trading, this is a definite buy.
To make things even better, the technicals on Mosaic present a buying opportunity in themselves. The stock is currently below its lower bollinger band, which is a perfect buying opportunity. Further, the stock is extremely oversold on stochastics and undervalued on Relative Strength Index. The stock, in the past two weeks, has dropped nearly 15%, but it has hit its bottom. The earnings should rally this stock today, and if the earnings are good, this thing will pop another 5-10% in the coming days. I am only recommending the stock as a day play.
The stock may be able to rally no matter what the market does, but it could see some problems if the ISM Manufacturing Index at 10:00 PM presents any problems and crude prices are very low. On the other side of things, we have about a 4:1 ratio of upgrades to downgrades today. Without much economic data or earnings to pull the market one way or the other, the market should be able to rally behind such discounted prices.
Entry: Let’s look for an entry at 46.60 – 46.70 after a slight pullback. Check back in the morning levels alert in case the stock has really taken a move upwards.
Exit: 2-3% increase from entry price.
Stop Loss: 3% decrease from entry price.
Sell Pick of the Day: Shanda Interactive Inc. (SNDA)
While I do think the market is going to end in the green, it is very likely it will not be a significant gain, and stocks that are up more than 5% in pre-market trading are perfect short sales to start the day. Shanda got an upgrade from hold to buy from Roth Capital, with an upper limit of $60 per share. The stock is currently trading at $50 per share. Longterm it has a lot of upward movement towards that price, but it should definitely move down from the price it is trading at as investors take profits.
Shanda is a great long term stock, but the market up at the levels it is at right now will not be able to sustain this, which will be even more accentuated by the fact that the stock is so overvalued currently. The technicals on the stock are definitely not hindering a pullback as the stock has a lower bollinger band all the way down to $45 per share, which is a 10% decrease from the current price. The stock is slightly undervalued and slow stochastics are moving towards oversold but have not bottomed out just yet.
We need to get into SNDA early in the day to benefit most from a pullback to start the day. With the low beta, this one may not be able to get more than 2%, and we will be lucky for 3%. The low beta, though, is even another great reason to know that this stock will pullback even further.
Entry: Get into this within the first few minutes to get the most premium price.
Exit: 2-3% cover on decrease.
Stop Loss: 3% on top of entry price.
Good luck today and good investing,
David Ristau
In Progress…
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