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The Oxen Report: Opportunities Limited on a Neutral Wednesday

Yesterday was a pretty rough day for us. Both of our picks were pretty weak. The Buy Pick of the Day was the Direxion Oil Bear ETF (ERY). We got involved in the early going at 10.47 and saw it decline throughout the day. I said to sell at 10.22 in an alert towards the end of the day for a 2.4% loss. We could’ve held to the end of the day and only taken a small loss, but either way, it was a loser. Our Short Sale of the Day was about a 1% loser, as well. We got involved in Textron at 21.31, and we saw it bounce around all day, never making more than 1% for  us. It ended the day in the green but in the red for us. We sold at 21.60 for 1.3% loss. 0/2 never makes me happy, but we have made some smart picks today that are cautious and careful. Our entry ranges are very specific, and I think we should be happy. We are dipping back into the oil market because I think it is ready to make a move. It might be the downside, however, it could be going a lot higher. Inventories will tell the tale…

Let’s get into the picks…

 

Buy Pick of the Day: Direxion Oil and Gas Bull/Bear 3x ETF (ERX/ERY)

Analysis: We have had some trouble to start this week with our bearish positions. Yesterday, in the late afternoon, I wrote a bit of a muse talking about how we need the fundamentals to be there to make these positions come true. So, today, I am following that advice. We are going to be extra careful and picky in getting into positions. We are going to the oil market again today, but we are only going to play it if one of two things happens.

At 10:30 AM, we will get the release of the crude oil inventories. This will decide how we will approach our Buy Pick of the Day. Crude inventories came out at 4.1 million. It did not have a major effect on the oil market. Two weeks in a row, though, of big increases, especially with the market as high flying as it has been will have an effect. Therefore, if inventories are above 4.1 million, then we will want to buy ERY right away.

If inventories, however, are between 0 and 4.1 million, then we are going to pass on this play. It means an addition, but the movement in ERY and ERX will be short and not have a major effect on the market. We want a lot of movement and this small addition to inventories will most likely be taken with a grain of salt. 

ERX is overvalued and overbought, but if the fundamentals are there for more movement to the upside on oil, then we can follow it with ERX. ETFs no know boundaries its seems. ERX, however, will only get a major boost if we actually see inventories decline by at least 1 million. Anything less than that and this play is not something we can get excited about today. 

We are being picky, and the play may not work out for us. Yet, I have missed the past two days, and the market is showing no signs of going much of anywhere. I think its a day to try and be a bit more safe and wait for the fundamentals to show us the way to the promise land.

Entry: We will enter ERX or ERY based on the crude oil inventories at 10:30 AM. If inventories are above 4.1 million, then we will want to play ERY, negative ERX. In between, 0 and 4.1, then it is a no play.

Exit: We are looking for 2-3%.

Stop Loss: 3% on bottom of entry.

 

Short Sale of the Day: Harbin Electric Inc. (HRBN)

Analysis: Harbin Electric released some stellar earnings this morning that have catapulted the stock over 13% in pre-market trading. The company reported an EPS of 0.62 vs. the expected 0.47. The stock beat revenue estimates and has a strong outlook moving forward. It was all good news for HRBN, and the company will definitely finish in the green today. 

So, why would we want to short sell or buy put options on this one? We can take advantage of the fact that investors are going to be taking profits on HRBN. A 13% increase means a lot of people that were buyers suddenly become sellers. The stock has low volume, so it will mean that it will probably jump up a bit more before settling down and seeing some declines on gains. 13% is quite a hefty gain, especially on a stock that has already moved around 20% in the past month. Earnings were not priced in over the past couple days, so the 13% is acceptable.

Yet, HRBN was already at that upper bollinger band and overbought, which explains why we are seeing 13% this morning. It also explains why the stock probably will see an influx in short and selling interest this morning. I have adjusted up our range to allow for a bit more explosion in the stock out of the gate. It is a bit higher, allowing the stock to move up to about 15% up on the day. It may be a bit too high, but with how things have been going, I would rather be a bit too high than a bit too low and flat on my face. This range is a solid one I believe.

If you can’t find shares to short look at the HTQ100320P00022500 option.

Entry: We are looking to enter at 25.45 – 25.55.

Exit: We will want to exit on 2-3%.

Stop Buy: 3% on top.

 

Good Investing,

David Ristau 


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  1. jromeha

    Fortunately, I stuck with the original entry – Good pick D! Got a feeling Im gonna make some $$$ on this one :)

  2. David Ristau

    Jro -

    Yeah I got rid of that comment haha. I want people to get involved at the original range. This one continues to creep upwards geez.

  3. David Ristau

    Oxen Report Entry/Exit Alert

    (PREVIEW OF PREMIUM MEMBER AND OXEN ALERT MEMBER ALERT)

    ERX/ERY – We are still waiting.

    HRBN – We got involved a little bit above our range at 25.60. I was going to get involved much lower but luckily before I could this one popped up to about 25.25 then 25.60. We are set here, and we would like to exit at 25.09 – 24.84. 

    Good Investing!

  4. David Ristau

    ERX is probably going to move a lot higher because of the OPEC comments that just came out in association with lower rise in inventories, but the inventories did not meet my range, so I cannot say we should have been involved. No play today on ERX/ERY.

  5. David Ristau

    This is going to move oil, from OPEC -

    Crude had moved up in the aftermath of a revision from the Organization of the Petroleum Exporting Countries in which it raised its forecast for global oil demand. Strong trade data reported by China also helped fuel the higher prices.

  6. philisit

    Any thoughts on GE- Holding a bunch from 26 before I took control of my account and been looking for a good strategy to take advantage of some upswings without being taken out. Can you guide me with any insight? thx!

  7. David Ristau

     Philisit -

    It depends on how long you want to hold. I think the stock is pretty close to a top, in the short term, but in the long run (3-6 months), it could definitely get back to 20. It has been pretty flat for the past six months. 

    I think I could advise better if I knew how long you wanted to hold. Sorry it took me an hour to respond, I was taking a financial analyst test.

  8. David Ristau

    Oxen Report Midday Message

    ERX/ERY – The inventories came in out of our range, so we passed on them this time.

    HRBN – It is stuck at 25.75 area, and we got involved at 25.60. I think we can just hold for now. This one probably will move into tomorrow because there is no way it can hold onto these gains. The stock has moved up way too fast and profits should be taken.

    Good Investing!

  9. David Ristau

    Oxen Alert – Position Update

    (PREVIEW OF ALERT THAT OXEN ALERT MEMBERS GET)

    HRBN – The stock just dipped into our 2% exit range, and we are definitely looking closely at this one. The top of our range is at 25.09. We will definitely want to get out for 2%, but this one has been dropping consistently over the past thirty minutes, so I think it is a downward trend. Let’s not get burned though…

    Good Investing!

  10. jromeha

    Again, good picks today d!

  11. David Ristau

    Oxen Alert – Position Update 

    HRBN – We were able to exit at 24.90 for a solid gain of 2.80% on our Short Sale of the Day.

    We went 1/1 on the day, which is great. I think HRBN is due for more pullbacks through the next couple days, so if you want to increase your risk…hold onto it.

    If you are like me and are happy with 2-3%, then it was time to sell and still is time to sell. 

    We will try to get a winning Buy Pick tomorrow. ERY would have worked if I had not had such stringent entry ranges.

  12. David Ristau

     Oxen Alert – Position Update 

    HRBN – We were able to exit at 24.90 for a solid gain of 2.80% on our Short Sale of the Day.

    We went 1/1 on the day, which is great. I think HRBN is due for more pullbacks through the next couple days, so if you want to increase your risk…hold onto it.

    If you are like me and are happy with 2-3%, then it was time to sell and still is time to sell. 

    We will try to get a winning Buy Pick tomorrow. ERY would have worked if I had not had such stringent entry ranges.

  13. David Ristau

    Oxen Alert – Overnight Trade

    Today, I am going to be doing an Overnight Trade article. It should be coming out around lunchtime to early afternoon. I think the market pullback will present a couple opportunities for us to find a diamond in the rough. 

    See you then!

    I am still available all day. So, if you have any questions you can post them on yesterday’s article, and I will definitely get back to you quickly.

  14. David Ristau

     Oxen Alert – Overnight Trade

    Today, I am going to be doing an Overnight Trade article. It should be coming out around lunchtime to early afternoon. I think the market pullback will present a couple opportunities for us to find a diamond in the rough. 

    See you then!

    I am still available all day. So, if you have any questions you can post them on yesterday’s article, and I will definitely get back to you quickly.

  15. philisit

    RE: GE Holdings- I originally got in when they had a good dividend and insider buying was strong- I’m 10 bucks in the hole per share and as far as your question, how long would I like to hold, I would get out tomorrow if I was close to B/E! I had hoped to make it a core position in my portfolio but since finding this site and following your posts, I am rethinking my strategy (obviously huh?) Thx-

  16. David Ristau

    Philisit

    Well, if you want to make it a core holding that is fine, as long as you have other capital to work with right now. It could take a year at least to get GE back to even for you. The stock is a slow mover with low beta, which means it doesn’t have a ton of volatiltiy. The position won’t worsen too much more, but it will take at least a year for it to get close I would think.

    Now, if you don’t have capital to work with to do some of my plays and Phil’s, then you may just take the losses and try your hand with our stuff. You basically have to do an assessment. What percent will you lose? What percent do you think you can gain with our plays? Does that take you higher or lower than a year from now when GE probably could break ever? Then you have your answer.

    Not that easy I know, but the logic is there.

  17. jromeha

    D, please get the pick out before 2 if u can, got class after 2

  18. David Ristau

    Jro -

    Should be out in 30 minutes

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