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The Oxen Report: Slow Wednesday to Be Led By Macy’s Earnings, Dollar, and Overseas News

Hey everyone. Sorry for missing yesterday. I came down with a fit of exhaustion and was not able to make the post. Anyways, I hope all my alert members got the long term plays we started on Monday. I recommended a play on Kohl’s Corp. (KSS) and JCPenney Co. (JCP) for Tuesday as longer week plays. We got into KSS at 56.75 and JCP at 30.75. KSS has moved down about 0.5% while JCP is up about 1%. If you want to read my analysis, check out the alert. We are going to hold KSS through tomorrow and JCP through Thursday. We are hoping for some good Macy’s earnings to help us get out of these for gains before the earnings announcements, however, I am definitely okay with holding them through earnings if we don’t get much out of them before their announcements. I will be giving some feedback throughout the day on these.

Otherwise, let’s get into today’s plays and make up for the past two lackluster performances (yippee!).

 

Buy Pick of the Day: Ultrashort Proshares Oil and Gas ETF (DUG)

The market on Wednesday is looking to be a slow, low volume day, which will tend to push down gains naturally, but I think we have reason to believe that the market might be headed lower this morning, especially the oil market. As of right now, we have Dow futures up above 50 points on relatively little news. The overseas markets are really powering this morning gain as we saw slight gains in Asia and Europe. Additionally, we saw Macy’s report better than expected earnings with an EPS of -0.03 vs. -0.07. This should give the retail some strength, but I am not sure it is in a rallying point. There are some definite bearish signals we can see in the market. For one, the World Bank has commented that the US unemployment rate really should be a worry for the USA. I still do not think that unemployment has been priced into the market. That warning may spark some further concern over a 10% unemployment rate. 

The reason I am looking at commodity prices to come down, as well as DUG, is because of this general market sentiment that I see as moving bearish. Additionally, we saw the American Petroleum Institute showing an increase in crude oil inventories, rising 1.2 million barrels over the 1.0 million expected and the decrease we saw last week. A lot of analysts seem to think this market is going higher, but I just do not see it happening. A lower market will bring down this thing and oil prices. The dollar is definitely a concern, but at some point we need some fundamentals and technicals entering the market.

DUG is definitely in a position to rally, technically. On fast stochastics, the stock is extremely oversold and the momentum downward is waning and looks ready to move back upwards. The stock is fairly undervalued on RSI, and it has plenty of upside on bollinger bands. If the ETF starts to get any momentum whatsoever, a lot of short and bearish players will pile into this one and drive things way up on this low volume day.

I think we can wait for a slight pullback before buying into this one in the morning. Check back in the Morning Levels alert to see if we have adjusted the price down even further.

Entry: We are looking for an entry of 12.15 – 12.25.

Exit: Looking for 2-3% on top.

Stop Loss: 3% on bottom of entry price.

 

Short Sale of the Day: LDK Solar Co. (LDK)

With the market looking to go down from the morning and open area, I think LDK may be a great place to put our money. LDK has jumped nearly 10% in the past week, but today it may be a significant down day for LDK. We got some bad news on solar leader JA Solar, as it got a large downgrade from RBC Capital Markets down to $4. The company downgraded LDK after the earnings report came out, commenting that they believe the company will not be able to compete with NVIDIA and First Solar as well as they have been able to.

Further, Q-Cells announced that they may not be able to deliver money to LDK that is promised to the company….uh….uh oh. Anytime we see any news like this it is not good for either side. LDK is not seeing the type of gains a lot of the other solars are seeing, and it should be a market leader downwards as the pre-market love of nothing wears off.

Technically, LDK is definitely in position for a sharp, fast drop. With the quick movement up in the past week, the stock has moved too fast. Fast stochastics are showing a sharp reversal of buying interest, meaning we should see a lot of selling in the short term. Additionally, the quick move made bollinger bands expand significantly on both sides. We should see these start to narrow down, which means either the stock will continue to rise or fall back down. The latter seem much more approriate. The low volume day won’t help.

Look for a slight pop to start before getting ready to make some money.

Entry: We are looking for an entry of short sale at 5.90 – 6.00.

Exit: Looking to cover on 2-3%.

Stop Buy: 3% on top of entry price.

 

Good Luck and Good Investing,

David Ristau

This entry was posted on Wednesday, November 11th, 2009 at 1:09 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 11th, 2009 at 9:10 am |     PermalinkIgnore this user

    David, when are you looking to exit KSS and JCP? Thx

  2. David Ristau
    November 11th, 2009 at 9:24 am | PermalinkIgnore this user

    Oxen Report Morning Levels

    DUG- We are going to move down our entry to 12.05 – 12.15. The oil market has further decayed this morning, and I think we might see a pullback a little further. With this position we will be better suited to git a bottom.

     

    LDK – For our short sale, we want to get the highest price we think is reasonable to start our short. The levels we have set right now are pretty strong for the day, and we should keep them.

     

    Good Investing!

  3. David Ristau
    November 11th, 2009 at 9:26 am | PermalinkIgnore this user

    Jro-

    KSS is today unless we can’t make anything off of it, in which case, it will be after earnings.

    JCP is tomorrow unless we can’t make enough off of it, in which case, it will be on Friday. 

  4. David Ristau
    November 11th, 2009 at 9:52 am | PermalinkIgnore this user

    Oxen Report Entry/Exit

    DUG – We entered DUG at 12.10 and are looking for an exit of 12.34 – 12.46. The stock is currently at 12.27, and it is moving up as the market starts to come down. 

     

    LDK – We ent.ered our short sale at 6.00. We are looking for an exit of 5.88-5.82 to cover. It has moved below 5.95 at this point.

     

    Good Investing! 

  5. Zuko775
    November 11th, 2009 at 10:27 am | PermalinkIgnore this user

    Does anyone hate SRS as much as I do?

  6. tradansh
    November 11th, 2009 at 10:33 am | PermalinkIgnore this user

    David / Bonds -
    David , This is in reference to your post in Phil’s today’s post. What is your opinion on bonds right now given the runup in the last few months? I have to put some of my 401k money in bonds but have been hesitant that they might drop. Is it a safe time to invest? If yes, what should I invest in? Objective is to minimize risk and get decent returns over a period of time. I can only invest in mutual funds in my 401k. No ETFs or individual bonds.
     
    As previously noted, I do not have an extensive knowledge of options, but I am very in tune with stocks, ETFs, commodities, and bonds…so just let me know.

  7. David Ristau
    November 11th, 2009 at 10:34 am | PermalinkIgnore this user

     Zuko – There are too many solid housing fundamentals out there for SRS to really make a major move.

  8. David Ristau
    November 11th, 2009 at 10:37 am | PermalinkIgnore this user

    Tradansh – I think you are seeing the run up as interest rates dwindle away and inflation appears to be nowhere near. Yet, I would say that the economy is sluggishly in a rut…and I would think that means bonds will stay close to where they are – pretty neutral. I think you might look at the one year t bills for some quick money. Buy them on some down days and turn around and sell on up days. I think in the long run bonds will be down more so because interest rates cannot stay this low. 

  9. ocelli7
    November 11th, 2009 at 11:54 am | PermalinkIgnore this user

    David, you did it again…..congrats…..

  10. jromeha
    November 11th, 2009 at 11:56 am | PermalinkIgnore this user

    Great pix D, on the long picks are you giving up or do you anticipate both with bounce back tomorrow and Friday?

  11. David Ristau
    November 11th, 2009 at 12:05 pm | PermalinkIgnore this user

    Ocelli – Thank you.

    Jro – Thanks. On KSS and JCP we are still holding. There is no reason to sell now. Both were undervalued when we bought them…now if they beat we are going to see an exceptional breakout. If they miss…very little room to move significantly overnight, so we can get out at a relatively similar price. I expect some beats!

  12. David Ristau
    November 11th, 2009 at 12:14 pm | PermalinkIgnore this user

    Oxen Report Midday Message

    DUG – We are out of DUG for a 3% gain. We got into the ETF art 12.10 and exited at 12.46 just recently. Oil coming down as I expected. If you are holding, keep it up. This one has room to grow to upper 12s IMO.

    LDK – Our short sale has been good as well. We got into this one at 6.00 and exited at 5.82 for a solid 3% gain. This one is continuing lower, so if you are holding keep it up.

    KSS – We entered at 56.75, and the stock is all the way down 55.03, which is a decline of about 3%. I would usually want to get out, but I think this one is still okay. My reason for holding is when we bought KSS it was already very undervalued and near a lower bollinger band. People are pricing in a miss it would seem. If we miss, it won’t have much effect and we can get out for a relatively similar price. If we beat, however, this one is going to skyrocket back to where we bought…maybe higher.

    JCP – Similar to KSS. We are only down about 1%, and we are going to continue to hold. If KSS is great, it will benefit both it and JCP. I expect it will.

    Good Investing!

  13. ssdirk
    November 11th, 2009 at 1:48 pm | PermalinkIgnore this user

    Although I didn’t take these positions today good calls.

  14. tradansh
    November 11th, 2009 at 1:50 pm | PermalinkIgnore this user

    Bonds / David – So, if I understand you correctly, you are saying that in short-term (6-12 months?) bonds will stay where they are are and there is opportunity to make some money there. In the long-term (>1 year?), you see bonds going down due to inflation. Correct?
    So, I should look for funds that have bigger allocation to short-term bonds?

  15. David Ristau
    November 11th, 2009 at 3:13 pm | PermalinkIgnore this user

    Tradansh – In the short term, I would say I think they will most likely stay relatively the same…some minor range movement up and down. In the longer term, I do think we are going to see interest rates start to rise as banks start to push them higher and the Fed will eventually increase the borrowing rate. That will push bond prices down. I would agree with your acquisition of short term bonds.

  16. tradansh
    November 11th, 2009 at 4:02 pm | PermalinkIgnore this user

    Thanks David.

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