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The Oxen Report: Market Looking to Extend Rally, Where to Turn?

Monday was half good, half bad for us. Let’s start with the good. We recommended a great short sale on Ultrashort Proshares Housing and Real Estate ETF (SRS). We set our buy in range, in the Oxen Report Morning Levels alert, at 10.25 – 10.35 since the stock had risen in the morning, and I thought we could get the ETF at a solid premium. With that range, we were able to short sale at 10.34. We were looking for an exit at 10.03 – 10.13, and we got at 10.03 for a solid 3% gain. Our buy pick of the day was Arena Pharmaceuticals. We set our entry range in the Morning Levels Alerts at 3.39 – 3.44 and entered at 3.43. The stock decayed throughout the morning and traded completely flat most of the day. We got stopped out at 3.37, which was the price I adjusted our stop loss to in my Oxen Report Midday Message. We got 1/2, but let’s get 2/2 today.

Into the picks…

 

Buy Pick of the Day: Direxion Daily Energy Bear 3x ETF (ERY)

The market is not looking too strong today. Things are down in the futures after yesterday’s rally. While I think we got some truly great bullish fundamentals yesterday, it appears that this market is not ready for a bull run. What appears to be driving down futures is the lack of market moving news coupled with the fact that everything overseas was not impressed by Monday’s economically backed rally we saw. There were really no terribly major earnings or economic data pieces. The headlines we have are Johnson and Johnson cutting their workforce and Berkshire Hathaway making an acquisition of Burlington Northern. 


Therefore, I think today is a day to turn our attention to the the oil markets. Oil is down this morning at the NYMEX below $78 a barrel on a strong dollar. Analysts are saying that oil is really at the mercy of the dollar. As it goes up, oil will fall.  

"The strength of the dollar is probably the most important factor driving commodities in general and oil in particular," said Commerzbank commodities analyst Eugen Weinberg.
 
"Equity markets are down in Asia and Europe and there is a feeling that recent price increases may have been overdone, that despite the economic recovery, the current oil supply and demand situation probably does not justify the recent rise in prices."
 
As the market, I expect, will follow Europe and Asia by continuing to lose ground throughout the day, the price of oil will continue to fall as well. The merger news from Berkshire has done little to spark the market, and ERY is in a great position for a rally. The ETF has gained, as of late, but there is still some significant room to it upside.
 
The stock is still below its upper bollinger band, with room to grow all the way till 14 on the upside. The stock’s slow stochastics are trending towards overbought, however, the ETF is still in between the two extremes, meaning there are still plenty of investors on the sidelines. Finally, the stock is slightly undervalued on RSI. The technicals show that this puppy has a lot of room to move up still, even past its current rally.
 
My worry, however, now is that the futures have moved up a lot on this in pre-market, past my comfort zone. I do not like to recommend anything that you would have to buy at more than a 3% premium when the market opens. Therefore, I am going to keep the recommendation and a lower entry range. I do not want to be forced into this one at these levels. We may miss a huge rally, but it is a risk I am willing to take.

 

Entry: We are looking to get into this one at 12.75 – 12.85.

Exit: Looking for 2-3% on top of buy in price.

Stop Loss: 3% on bottom of entry.

 

Short Sale of the Day - None for Today

 

Good Luck and Happy Investing,

David Ristau

 

This entry was posted on Tuesday, November 3rd, 2009 at 2:27 am and is filed under Uncategorized. You can leave a response, or trackback from your own site.

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Comments


  1. jromeha
    November 3rd, 2009 at 9:14 am |     PermalinkIgnore this user

    D – Since the stock is well over the buy in price right now are you planning on adjusting the entry price or just waiting till we have a minor pullback into the 12.75-12.85 range….

  2. David Ristau
    November 3rd, 2009 at 9:25 am | PermalinkIgnore this user

    Oxen Report Morning Levels

    (This is typically a morning alert my Oxen Group Alert members receive about where our picks stand going into today’s session. If you would like to receive these alerts, let me know)

     

    ERY – Since the ETF has run up a lot in pre-market, I am waiting for a pullback on this one before I will purchase it, and at these levels, we should expect some quick profit taking to occur. We are going to bring our entry range up to my limit of 3% as a buy in. The new range will be 12.85 – 12.95. If we can get an entry here, we will be getting this stock at a great price, but we may miss this one. I would rather miss it than buy in at such a high price and be stopped out before we can make any money.

  3. David Ristau
    November 3rd, 2009 at 9:26 am | PermalinkIgnore this user

    Jromeha – Think I got you with the Morning Levels alert.

  4. Zuko775
    November 3rd, 2009 at 9:42 am | PermalinkIgnore this user

    In at 12.85….

  5. David Ristau
    November 3rd, 2009 at 10:06 am | PermalinkIgnore this user

    I did not see this happening…

  6. ban2
    November 3rd, 2009 at 10:22 am | PermalinkIgnore this user

     well I’m in at 12.51 due to slow start this am — lucky me I guess
    would you dump out here or could we get  $12.88?
     
    thank you

  7. JRW III
    November 3rd, 2009 at 10:31 am | PermalinkIgnore this user

    David,
    I have faith in your out look for the day and got in late at 12.36; looking for 13+

  8. ssdirk
    November 3rd, 2009 at 11:04 am | PermalinkIgnore this user

    David, I don’t think ARNA reported earnings yesterday.  I think it is 11/9.

  9. David Ristau
    November 3rd, 2009 at 11:58 am | PermalinkIgnore this user

    Ban2 – I think this one is going to move back up through the end of the day, so lucky for you. For the rest of the day, I think this market will not be able to hold onto these gains it has in the short term. Watch for the market to retest lows through the lunch hour. I think you should be willing to accept only 1-2% since it has lost so much.

    JRW – I think that 12.36 is a great buy in. Like I was telling Ban2…I am not sure 13 can be expected anymore, but I do think the market will lose the gains it has seen as of late. I think this one can definitely get you around 2% or more with your buy in price.

    Dirk – Yeah, they must have rescheduled. We got out of ARNA at end of yesterday and took a small 2% loss.

  10. David Ristau
    November 3rd, 2009 at 12:00 pm | PermalinkIgnore this user

    Oxen Report Midday Message

    Well, well, well…today was definitely not a good day for me and the markets. I completely misread my play this morning and actually really went against some of my market risk aversion institutions I have established. I should have abandoned DUG when it was up over 4% in the pre-market. We got stopped out for a 3% loss on our 12.75 buy in. Those of you who got in later for a cheaper price and are still holding, you want to be careful to not expect more than 1 -2%. While I do think the market is going lower today, DUG is not moving like I was thinking it would. I would not hold waiting for this to get back to 13.

    Good Investing!

  11. nikpatel
    November 3rd, 2009 at 12:37 pm | PermalinkIgnore this user

    DUG? Did you mean ERY?

  12. David Ristau
    November 3rd, 2009 at 12:48 pm | PermalinkIgnore this user

     yeah sorry

  13. jere.wood
    November 3rd, 2009 at 2:10 pm | PermalinkIgnore this user

    David,
    I compounded the problem today.  I bought ERY at 12.90, the middle of your buy range.  I did not put a stop loss on because with the volatility I figured it would go down and up, especially with this ETF.  Now I am in a crap hole for sure.  I bought 2,000 shares so you can do the math. 
    Do you still think the market (and oil) will decay from here?  they seem to be on a slow train up.

  14. jere.wood
    November 3rd, 2009 at 3:07 pm | PermalinkIgnore this user

    David,
    I am willing to hold ERY for a while rather than take this huge loss.  Oil generally goes down in November and December.    What do you think of me holding ERY rather than lock in the loss?  It seems to me oil is over priced and should see some reversals in the weeks ahead.

  15. shane
    November 3rd, 2009 at 3:16 pm | PermalinkIgnore this user

    jere.wood…..ERY…ERX ….use the russel 1000…..oil could go down but …..if the stocks go up like fslr or the coal stocks ery goes down…it is an energy index ..I like tradeing erx and ery

  16. jere.wood
    November 3rd, 2009 at 3:31 pm | PermalinkIgnore this user

    shane,
    Thanks.   What about holding it over night or for a few days?

  17. David Ristau
    November 3rd, 2009 at 3:36 pm | PermalinkIgnore this user

    Jere,

    I think we have had this nice run up, and we  can expect the reverse to happen soon enough. Market should be up today and yesterday. I think those inventories will be really important. I f they are bad, this could be back to 13 in a flash.

  18. shane
    November 3rd, 2009 at 5:49 pm | PermalinkIgnore this user

    JERE…..notice the chart above….why ????…..why would any one use a chart for a 3 X etf……eventually all erode …..they reset at the end of the day ….if the market geos up …the dollar down ….ery goes down ….the index has to flash the signals …not the etf…..an easy comparison is the …comp…& QID….playing for 3 % thats tight….

  19. David Ristau
    November 3rd, 2009 at 9:00 pm | PermalinkIgnore this user

    Jere – I disagree with Shane. Oil is a market that moves in swings of ups and downs over 2 week periods. If ERY is headed up, it will be over a 7-9 session. The chart helps to establish that pattern.

  20. shane
    November 3rd, 2009 at 11:59 pm | PermalinkIgnore this user

    David…..ERY and ERX are not oil stocks..??? ….look at the russell chart you are betting against a pull back in oil stocks …nat gas …coal…..if it is buy the pull back……. ERY  moves down …..your chart shows it stalling at an rsi of 50 ..4 times ….ery has already run …you missed it ….look at the chart again ….compare it to ery….it also flashed a doji on the nov 2….look at a 3 month chart ….yes if oil falls it will go up …but if storage numbers are weak and oil pushes for a new high good bye to ery….if the dollar falls …oil up…..these are tough odds to get 3%..one of us will be right one wrong ..I hope you are right and oil falls….get jere into the money

Dashboard

 Sector Performances (Today)

 Thermal Imaging
Computer and Technology0.38 %
 
Aerospace0.20 %
 
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Retail-Wholesale0.13 %
 
Industrial Products0.10 %
 
Auto-Tires-Trucks0.06 %
 
Multi-Sector Conglomerate0.02 %
 
Oils-Energy-0.03 %
 
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