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The Oxen Report: Market Looks to Snap Losing Streak, Can It Really Happen

Hey Readers,

The market is looking like it wants to snap its major losing streak that occurred for most of last week, but I am not convinced. The futures on the market have continued to dwindle away as the trading day has begun, and there is one key economic indicator that I am looking at as a reason to definitely be worried.

Let’s get into the picks…

 

Buy Pick of the Day: Direxion Daily Real Estate 3x ETF (DRV)

Analysis: Today’s big story so far is that futures are up. Yet, I am not so convinced we are ready to just run up the market on pretty much no new developments. The market ran itself down on fears over Obama’s banking policy (right or not is up to you) and earnings that were subpar. This morning, we got a mixed bag of earnings from a couple of semi-pros. Halliburton, the biggest name out there, actually reported a 48% drop in earnings. The Asian market was down and the European markets are down even further. Nothing to me looks too bright. This is also why we have seen the futures on the market continue to dwindle away as more players become involved.

The big report for the day is Existing Home Sales at 10 AM. I am not bullish at all about this figure. At the beginning of

 January, we saw that pending home sales were down 16%, when analysts were expecting a 2% decline in December. The decline from November to December was estimated to be about a 1% drop. It was actually a 15% drop. Analysts are nowexpecting nearly a 10% drop in existing home sales. Even if the number is close to the expected 5.95 million that is predicted. That drop is an eye sore, and I am pretty worried about the chances that the number will be met. The housing industry is really not in as good of shape as some think.

With the market not being as strong as some think and the housing report, a real estate ETF like Direxion’s Daily Real Estate 3x (DRV) looks to be a nice play. The ETF is already undervalued in pre-market due to the futures, and it presents a great value trade. While DRV does not look as closely at residential real estate, it does have some connection to it. Further, most investors associate DRV with housing data. 

Technically, DRV is definitely an overvalued stock in the short term, which is part of the trade of which I am not terribly fond. Yet, I do still think the ETF presents a pretty interesting trade. We have adjusted down the entry point in order to help accommodate for the fact that the stock is right at its upper bollinger band. If the ETF does not reach this entry then I am not sure its a great trade. At the same time, the technicals are a bit deceiving. The stock traded in a one dollar range for almost one month after dropping nearly 50% in the two months prior. This had narrowed the bollinger bands, and the stock is breaking out of the narrow band. 

Wait for our entry and good luck.

Entry:  We are looking for an entry of 13.90 – 14.00.

Exit: Looking to gain 2-4%. 

Stop Loss: 3% on bottom of entry.

 

Short Sale of the Day: Privatebancorp Inc. (PVTB)

Analysis: As has been stated before, I am not too keen on this market rallying. One major earnings beat today was from Privatebancorp Inc. The company went -0.30 vs. the expected -0.33. The stock, therefore has shot up 8% in pre-market trading, which is just way too much for this stock. Over the past two months, the stock has not changed any direction. It has been very flat in trading, and it is not a stock that makes 8% moves. That means that we are going to be seeing some MAJOR seller interest.

Investors are going to be looking to unload this bad boy fairly quickly in the market this morning, especially if things go sour. I still think it is a viable trade even if the market trades a bit up or neutral, but it may not have that movement we would like to see. We want to get involved early and get out.

This type of trade is not one that we look at the company’s fundamentals and value. Rather, we are playing on market psychology. If a stock has not moved more than 1-2% in two months, and you were holding PVTB that entire time. You see 8% increase one day, what would you do? Sell! When are we going to get 8% again? With all that selling, the price is going to drop. Who wants to buy a stock that is going to move 2% in two months. Not me! 

Check out the chart to see exactly what I mean.

Entry: We are looking for an entry of 10.85 – 10.95.

Exit: Looking to gain 2-4%.

Stop Buy: 3% on top to cover.

 

Good Investing,

David Ristau

This entry was posted on Monday, January 25th, 2010 at 8:57 am and is filed under Uncategorized. You can leave a response, or trackback from your own site.

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Comments


  1. David Ristau
    January 25th, 2010 at 9:50 am |     PermalinkIgnore this user

    Oxen Report Entry/Exit

    DRV – We got into DRV at 14.00. We are looking for an exit of 14.28 – 14.56. A large range, but I think it gives a chance to make some major money if the market turns sour at 10:00 with existing home sales reports. I am excited to see that report. We are up about 1.5% right now.

    PVTB – It says the range goes down all the way to 10.69, but I did not see it go below 11.00 since the morning started. We never hit our range, thankfully. This one has busted out as the market has done well. I am surprised.

    Good Investing!

  2. David Ristau
    January 25th, 2010 at 9:51 am | PermalinkIgnore this user

    For all non-alert members, here is a preview of one of the alerts you get. It is the Entry/Exit alert:

    Oxen Report Entry/Exit

    DRV – We got into DRV at 14.00. We are looking for an exit of 14.28 – 14.56. A large range, but I think it gives a chance to make some major money if the market turns sour at 10:00 with existing home sales reports. I am excited to see that report. We are up about 1.5% right now.

    PVTB – It says the range goes down all the way to 10.69, but I did not see it go below 11.00 since the morning started. We never hit our range, thankfully. This one has busted out as the market has done well. I am surprised.

    Good Investing!

  3. David Ristau
    January 25th, 2010 at 10:09 am | PermalinkIgnore this user

     Existing Home Sales Report:

    - Plummeted 16.7%

    - Missed expectations. Only 5.45 million homes sold vs. the expected 5.95.

    Here is the story from Marketwatch:

    WASHINGTON (MarketWatch) – Sales of U.S. existing homes plunged 16.7% in December to a seasonally adjusted annual rate of 5.45 million from 6.54 million in November as a popular tax credit was set to expire, a national real estate trade group estimated Monday.

    The 16.7% percentage decline from November to December was the largest on record, dating back to 1968, the National Association of Realtors reported.

    The decline was larger than the 11% drop to 5.80 million that was expected by economists surveyed by MarketWatch.

    Sales in December were up 15% compared with December 2008.

    The median sales price rose to $178,300 in December, up 1.5% compared with a year earlier. It’s the first year-over-year increase in prices since August 2007.

    For all of 2009, sales rose 4.9% to 5.16 million compared with 2008. The median price fell 12.5% in 2009.

    "The market is going through a period of swings driven by the tax credit," said Lawrence Yun, chief economist for the real estate lobbying group. "We’re likely to have another surge in the spring."

    "Job creation is the key to a continued recovery in the second half of the year," Yun said.

    Sales had surged about 40% from June to November in response to the federal tax credit for first-time buyers, which was set to expire on Nov. 30. As it happened, the tax credit was extended until June and expanded to cover repeat buyers.

    But buyers didn’t know the credit would be extended when they were shopping for homes in October. In order to close in December, they would have had to sign a sales contract by early November at the latest. Existing-home sales are recorded at the closing.

    First-time buyers accounted for 43% of sales in December, down from 51% in November.

    Inventories of unsold homes on the market dropped 6.6% to 3.29 million, the lowest since March 2006. The inventory figures are not seasonally adjusted. Inventories usually fall about 8% this time of year.

    The inventory represented a 7.2-month supply at the current sales pace, up from 6.5 months in November.

  4. David Ristau
    January 25th, 2010 at 10:52 am | PermalinkIgnore this user

    Hope you got into DRV.

    We just got out for a 4% gain.

  5. David Ristau
    January 25th, 2010 at 12:05 pm | PermalinkIgnore this user

    Oxen Report Midday Message

    Hello all. I am happy to say, we are having a very nice day.

    DRV – After the report on existing home sales came out, DRV really took off. We got involved at 14.00, and the stock has moved all the way to 15.00 at this point. I got out at 14.56 for a 4% gain, but the stock is up near 8% for us. Hope you were able to get involved.

    PVTB – Again, we have not hit our entry range as of yet. Made a good short at the top, but this one is a no play as of now. If it gets down to 10.85 – 10.95, I am willing to get involved.

    Good Investing!

  6. jere.wood
    January 25th, 2010 at 7:18 pm | PermalinkIgnore this user

    David,
    ISIL announces earnings on January 27th.  What do you think about buying it Tuesday as an overnight?
    Jere

  7. David Ristau
    January 25th, 2010 at 10:25 pm | PermalinkIgnore this user

    Jere -

    Ask me again tomorrow. I am really busy tonight. I will try to remember to come back to it tomorrow, but just in case I forget.

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