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The Oxen Report: Market Set to Rebound After Late Fall Monday, Euro and Greece News Helping

The Euro is rebounding, and Greece has announced that they are privatizing their water and rail systems. It is good enough for investors in America, who are taking futures higher. This is good news for us as yesterday we got settled into a position for Quiksilver Inc. (ZQK) at 4.60, and we are staring at a 4% loss currently. The market’s ability to move upwards would help us with this positition significantly. ZQK is our only current open position

Be sure to check out my latest virtual portfolio update for my $10000 2010 virtual portfolio that is up 18.5% with a 75% success rate. I have listed the trades and given some information at the virtual portfolio in a post yesterday afternoon.

Today, I will be doing today’s morning picks, the second part of my Daily Discourse on the IMF and its role in heavily indebted nations, and I will also be looking for a profitable overnight trade. I have to head out around 2-3 PM today, so I will have to finish all that up before then. I couldn’t pass with the chart to the left. Since I am just three years out of this category, the teenager chart appealed to me. Crazy to see such a drop…not good for Abercrombie and Fitch and movies.

Let’s get to it…

 

Buy Pick of the Day: Hovnanian Enterprises Inc. (HOV)

Analysis: I scrapped my original Buy Pick of the Day because I actually do not have a very great feeling about the market today. Futures are up, but they are up on nothing. Some minimal Euro movement and news of Greece privatization of water and rail. Futures have continued to decline all morning, and it is definitely a questionable market as we start the day. One industry that could definitely move upwards if they get good news at 10 AM and should be able to move upwards throughout the day is residential construction. The pending home sales will be a nice indicator to give the home industry a boost. It is bad, however, Hovnanian Enterprises Inc. (HOV) still presents a nice play on the day.

HOV reports their earnings in after hours. The company last quarter reported a surprise profit that was over a 750% surprise in profits. The company was expected to be at a loss, but they were able to turn a significant profit. Investors should be remembering the huge quarter from the company as they continue to come closer to turning a consistent profit. They should get some definite buyer interest from that news and the fact that they are the market leader in residential construction.

I look for the stock to be able to go upwards to start the day leading into pending home sales. If sales are bad, it may take a dip, but I think it will recover and be able to continue upwards throughout the afternoon before its report on earnings this evening. Pending home sales are forecasted below May reports, but they are still supposed to increase over one year ago, which is good news for the home industry that continues to struggle.

Technically, HOV is oversold, undervalued, and near its bollinger band. It has dropped 25% since the beginning of May, and it has about 20% of room to the upside on its bollinger bands. The company does not have a lot more room to the bottom, so it should be able to represent a fairly neutral play if things do not work out. 

Get involved before pending home sales if you think they could take it up, or for the less risky, wait for the dust to settle after the report before buying. Good luck!

Entry: We are looking to enter between 6.00 – 6.10.

Exit: We are looking for a gain of 2-3%.

Stop Loss: 3% on bottom.

I am going to pass on a Short Sale or another Buy because I do not have a good enough read on what the market is going to do today to feel confident enough recommending something.

 

Good Investing, 

David Ristau

This entry was posted on Wednesday, June 2nd, 2010 at 8:43 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
    June 2nd, 2010 at 9:23 am | PermalinkIgnore this user

    Oxen Alert – Morning Levels/New Post   

    Hey all,

    Our Buy Pick for today is Hovnanian Enterprises Inc. (HOV). We are looking to this homebuilder to make 2-3%. The futures continue to decline throughout the morning, but they have rebounded a bit as of late. I am still set on a 6.00 – 6.10 entry for HOV. If it opens any higher than 6.20 and stays, we will have to reassess our entry position. 

    You can read my analysis, entry, exit, and stop loss here.

  2. David Ristau
    June 2nd, 2010 at 9:33 am | PermalinkIgnore this user

    Oxen Report – Entry/Exit

    HOV – We are into HOV at 6.00 this morning. We are looking to exit at 6.12 – 6.18 for a 2-3% gain on the day. 

    ZQK – Yesterday, we got involved at 4.60, and the stock is nearly back to that price here this morning. No need to worry about it for the time being. Keep holding.

    Good Investing!

  3. David Ristau
    June 2nd, 2010 at 10:05 am | PermalinkIgnore this user

    Market Update

    Pending Home Sales Up 6% vs. Expected 3.50% Increase

    WASHINGTON (MarketWatch) – Buyers rushed to sign sales contracts on previously owned homes in the United States in April, according to a monthly survey released Wednesday by an industry trade group. The pending home sales index rose 6% in April after an upwardly revsed 7.1% increase in March, the National Association of Realtors reported Wednesday. The index covers signed contracts, not final sales, which usually lag by a month or two. The federal government has been subsidizing home sales with tax credits of up to $8,000 for qualified buyers who signed a sales contract by the end of April. The sale must close by June 30 to qualify. The index is up 22% compared with April 2009

    Good news for the market and home industry. GO HOV!

  4. David Ristau
    June 2nd, 2010 at 10:08 am | PermalinkIgnore this user

    I am out of HOV for a 3% gain at 6.18! 

    ZQK is down about 2.5% right now. It is bouncing back up with the market right now.

    INSU was my other pick of the day that I decided not to go with after not being able to get a good enough read on the market. We had been looking for an entry around 19.85, and we made the right choice. This one has declined from the open. 

    So pretty good day thus far. Let me know if you have any questions/comments.

  5. jomptien
    June 2nd, 2010 at 10:40 am | PermalinkIgnore this user

    Go ZQK!

  6. David Ristau
    June 2nd, 2010 at 10:43 am | PermalinkIgnore this user

    The Daily Discourse: The IMF and Its Role in Rising Indebtedness Among the World’s Most Heavily Indebted Poor Nations, Part 2

    Today, in the second part of this four part investigation into the IMF and third world nations, I will discuss more of the problems with the IMF and also take a look at the question of sovereignty and blame attached to third world nations, themselves…

     

     

    Blame is often attached to the authoritative, liberal-backed IMF and World Bank due to their large involvement in the issue. York Bradshaw and Jie Huang, in Intensifying Global Dependency: Foreign Debt, Structural Adjustment, and Third World Underdevelopment, explain the major criticism that the IMF is facing further, stating that the IMF requires:
     
    That indebted countries…implement structural adjustment policies to save money and facilitate exports, thereby increasing debt repayment. (Yet) these policies force devaluation of currency, wage freezes, increased privatization, removal of tariffs and other ‘protectionist’ measures, and reduced government spending and employment…the IMF admits that these measures create temporary hardship, it asserts that the debt crisis warrants such ‘shock treatments.’
     
    Third world nations comment that these SAPs are detrimental to their economic capabilities because they increase inflation often leading to hyperinflation, reduce purchasing power, harm economic development, and reduce government spending on necessary programs, such as, education, government subsidies, and other programs that can help improve quality of life. Interest payments on loans are such a high percentage of GDP that nations put most of their governmental revenue towards interest payments and cannot transfer these funds to needed governmental policies.
     
    Additionally, most of these nations only have income from their exported commodities, since their citizens have little to no money to pay any taxes. One major SAP policy the IMF implements is that these nations focus their economy and attention to driving up commodity exports. Nations complain, however, that this policy greatly reduces the value of these goods, causing their price to fall and income to decline. As Michael Chossudovsky writes in his article, Writing Off Third World Debt, the “IMF supports a policy of increasing third world countries’ main exports, which only serves to over increase supply of commodities and thus weakens the prices of them…making these countries poorer in process.” Chossudovsky is not off the mark.
     
    In 2003, at a WTO meeting, Cuba’s Interior Minister Ricardo Cabrisas stated that the only way that poorer nations would ever be able to develop would be when they could receive fair prices for their products. The Minister cited that Cuba’s main export, non-oil based products, has dropped in price at an annual rate of 1.3% between 1995 and 2002. Whether this price decrease is an exact result of policies of the SAPs that liberalize HIPCs markets is not an simple to determine. Many factors go into the equation, but these nations believe that the correlation is there. As the Group of Twenty-Four sees the IMF SAPs, they comment:
     
    The experience of developing countries that have undertaken Fund support adjustment programs ha(ve) not generally been satisfactory. The Fund approach to adjustment has had severe economic costs for many of these countries in terms of declines in the levels of output and growth rates, reductions in employment and adverse effects on income distribution. A typical Fund program prescribes measures that require excessive compression of domestic demand, cuts in real wages, and reductions in government expenditures; these are frequently accompanied by sharp exchange rate depreciations and import liberalization measures, without due regard to their potentially disruptive effects on domestic economy.
     
    What about these nations themselves? They are responsible for continually taking loans and taking initial loans that have led to this point, are not they? As William Easterly comments in Writing Off Third World Debt, the IMF blame game is not the whole story. Easterly writes, “poor people don’t owe foreign debt – their governments do. Poor nations suffer poverty not because of high debt burdens but because spend thrift governments constantly seek to redistribute the existing economic pie to privileged political elites rather than try to make the pie grow larger through sound economic policies." 
     
    As he continues, the Kenya government, which is a debt-burdened nation with $6.8 billion of external debt, as able to find enough money to fund a lavish international airport, the Eldoret International Airport, in the President’s home region. The practice of “misusing” (building lavish homes and unneeded arms developments when severe unemployment, malnutrition, and food crises exist) what little government revenues there are is something that Easterly and other nation critics argue is too rampant. As one World Bank study uncovered, “only two out of 25 debt relief recipients will have satisfactory capacity to track where government spending goes within a year.”
     
    The malpractices of these nations comes from lack of education about economics, an uneducated and non-knowledgeable population, and poor precedents. This reasoning is why the IMF continued to support the SAPs and “shock treatments” that their policies delivered to nations. Loan money is often funneled into the wrong channels that do not promote economic growth or quality of life improvements. The argument, therefore, for the IMF is that the problem is at the state level and that international organizations are attempting to bring the proper changes to these places to promote growth strategies.
     
    Good Investing,
     
    David Ristau
     
    Tomorrow will be the final look at the IMF’s role in causing a loss of investment in these nations and what to do…
     
  7. jomptien
    June 2nd, 2010 at 10:44 am | PermalinkIgnore this user

    Nice call on HOV

  8. David Ristau
    June 2nd, 2010 at 10:44 am | PermalinkIgnore this user

    Yip -

    You see that ZQK rises at 3x the gains of the market today. Retail just moves with a lot of volatility.

  9. David Ristau
    June 2nd, 2010 at 10:45 am | PermalinkIgnore this user

    Jomptien -

    Thank you for the comments on HOV and Go ZQK!

  10. David Ristau
    June 2nd, 2010 at 10:46 am | PermalinkIgnore this user

    Jomptien -

    Do you get Oxen Alerts? 

  11. David Ristau
    June 2nd, 2010 at 10:50 am | PermalinkIgnore this user

    Update on TSL

    Got to love when the second-most efficient solar company wants more…

     


    Trina Solar will engage SERIS to provide research and development services to develop a high efficiency crystalline solar cell by printing contacts on the cell’s rear to increase front surface exposure to sunlight. The Company targets to realize up to 21.5% production efficiency, and up to 23.5% laboratory test efficiency, with project completion within three years following commencement in June 2010. In exchange for the project’s intellectual property rights, Trina Solar will cover the cost of the research project.

    "We are pleased to collaborate with SERIS, Singapore’s national institute for applied solar energy research, to develop and embark on this innovative cell process technology," said Dr. Huang Qiang, Trina Solar’s Vice President of Technology. "We are confident that the combination of our leading manufacturing capabilities with high-quality research from SERIS, will lead to further increases in the efficiency of our crystalline silicon solar cells, which we plan to integrate into our production lines by 2013."

    "We are excited to have this opportunity to work with Trina Solar in the development phase of this advanced solar cell technology. We expect the technology to be transferred to the production line and ready for commercial production within the next three years," said Prof Armin Aberle, Cluster Director "Silicon Photovoltaics" at SERIS.

    If you aren’t long yet, check out my report from last Friday. Great entry price right now.

  12. yipcarl
    June 2nd, 2010 at 10:54 am | PermalinkIgnore this user

    Yea that’s why I was worried about yesterdays pick..  I was leery of the market..Today with the pump up it was a perfect play…Sometimes it seems more important to determine direction(good luck) then pick a long or short play….

  13. David Ristau
    June 2nd, 2010 at 11:03 am | PermalinkIgnore this user

     Yip -

    That is exactly what I do bud. Determine direction market is headed and then pick stocks that are undervalued or overvalued based on that consensus. Yesterday, I was bullish for the week and picked an undervalued stock I thought could make a move. Problem was the market tanked on me at the end of the day, but it is back on its way up.

  14. yipcarl
    June 2nd, 2010 at 11:08 am | PermalinkIgnore this user

    David.. Smart I love it.  I’ll be back I’ve just been saddled with a bunch of positions….

  15. David Ristau
    June 2nd, 2010 at 11:11 am | PermalinkIgnore this user

    Yip -

    No problem. I will be here awhile.

  16. jomptien
    June 2nd, 2010 at 11:18 am | PermalinkIgnore this user

    No I don’t get the alerts – how do you do that?
    Thanks

  17. David Ristau
    June 2nd, 2010 at 11:25 am | PermalinkIgnore this user

    Jomptien -

    You either have to be a premium member or an Oxen Alert member. The alerts are only like $40 per month, but they are really helpful. Today, I sent out an alert this morning when the post came out with information about changes to entry and exit ranges. This is why they are really helpful. Things change on a dime, and I will send out alerts about changes to my entry/exit range around 9:20 AM because I write my article around 8:30 AM. A lot can happen in 50 minutes. 

    Also, most days, I do either a Long term play, week play, or overnight trade. Many times theses are posted as alerts. While it does cost money, they are really helpful. The overnight trade I am posting today is going out as an alert.

  18. David Ristau
    June 2nd, 2010 at 11:30 am | PermalinkIgnore this user

    Oxen Report Alert – Overnight Trade

    Last week, I made an overnight trade in Exide Technologies that worked out great for us for 4%. The company, however, changed their earnings date to tomorrow morning. Nothing has changed in the industry and no news has been released from Exide (XIDE). The company is actually at nearly the same exact price, and it has had no movement going into earnings today. I like this company once again for the same reasons I did last time.

    Here is the post again:

     

     

    Overnight Trade: Exide Technologies (XIDE)
     
    Analysis: As the earnings season for Q1 is coming to an end, we are on the last strain of the April – May reporting season. Earnings have not been as conducive to successful movements over this quarter due to the European crisis that has overshadowed a very strong reporting season that should not be overlooked. Companies, across the board, are hitting their top lines, beating EPS estimates, and looking bold to the future. For this reason, overnight trades have mostly been avoided. It would take a special company that I thought could really turn the corner to make something special happen.
     
    That company would be Exide Technologies (XIDE). Exide is a leader in lead acid battery production, and it scheduled to report earnings tomorrow morning with an average EPS of 0.11. The company is one of the largest battery makers and is currently coming out of a major restructuring that saw the company lose 66% of its value in the past year and a half. One year ago, the company was in the red with a loss of 0.85 EPS. Last quarter, the company turned its first profit since 2008, but it still missed high estimates and reported that the company had lost Wal-Mart as a major distributor, though the distributor was only 5.5% of its total revenue. This quarter, Wal-Mart is no longer figured into the earnings, the company is completely back on its feet, and it looks to swing to a profit, year-over-year, by a margin of 112%. 
     
    The battery market has been doing rather well in this Q1 of 2010 thus far, which makes me more excited about XIDE. As the market continues to recover it helps XIDE, but at the same time, as less people buy new cars, they are continually trying to make necessary improvements to avoid new cars and hang onto their current cars – replacing batteries. Of Exide’s main competitors, Enersys, Advanced Battery Technologies, and Johnson Controls, all three have reported EPS beats and strong earnings in the quarter. 
     
    Exide appears to be a company that has lost a lot of its value not because it is actually fundamentally weak, but it has simply lost a significant amount as a result of market momentum. The company in the past quarter reduced a lot of negatives, moving closer to having positive cash flow, increased revenue, reduced costs, and finally turned a profit. The company is finally on the right path again, and I am expecting big things from them tomorrow. 
     
    The entire industrial electrical equipment sector has been doing very well with 10/14 of the companies in the industry reporting surprise profits over the past month. While this means nothing directly for Exide, it shows that this is another industry that is doing very well in this reporting season and is not struggling like retail from a lack of consumer spending on clothing. 
     
    Exide, additionally, today has seen a 10%+ in its price taking it back to the levels it dropped to after reporting earnings last quarter. Selling into earnings is worrisome at this level, but it is understandable given the late history of losses anddisappointment. I am confident though that even beating earnings and reporting some reaffirmed or positive outlook would do wonders for this stock tomorrow, which is good news because this stock has a lot of upside.
     
    Looking at the stock’s technicals, it is bumping right along that lower bollinger band with about 75% to the upside to its upper band. Some great earnings could really be huge for Exide. The stock has lost a lot lately, but it is just fallen out of favor. A great quarter could do a lot to get this company back into the upside.
     
    This is definitely more risky, but the market simply is not reacting to just earnings beats. It needs more now. I think we have found much, much more.
     
    Entry: We are looking to get involved with Exide at the 3.55 – 4.05 range.
     
    Exit: We are looking to exit at the beginning of tomorrow’s market within the first few minutes.
     
    Stop Loss: None
     
    Good Investing,
    David Ristau
  19. jomptien
    June 2nd, 2010 at 11:38 am | PermalinkIgnore this user

    Thanks David. Out of ZQK for + .05 at 4.55, thanks for the trade

  20. David Ristau
    June 2nd, 2010 at 11:42 am | PermalinkIgnore this user

    Jomp -

    No problem. Did you see my response on alerts?

  21. jomptien
    June 2nd, 2010 at 11:54 am | PermalinkIgnore this user

    Yes, I did. Looks like I was too quick on the trigger with ZQK.

  22. David Ristau
    June 2nd, 2010 at 12:08 pm | PermalinkIgnore this user

    Jomp -

    Perhaps, if you are happy with 1% then no need to be upset. I had a 4.60 entry with a 4% exit, so I am hoping it gets to about 4.78. You just have to know what kind of gain you are happy with.

  23. jomptien
    June 2nd, 2010 at 12:19 pm | PermalinkIgnore this user

    No complaining and happy with the move today.
    I live in Asia so its bedtime soon for me.

  24. soylentgreen
    June 2nd, 2010 at 12:54 pm | PermalinkIgnore this user

    Hi David
    New member here, reading everything I can get my hands on!  Thanks for the PAY play, that was a great pick.  With XIDE, what earnings or upside do you forsee here?

  25. David Ristau
    June 2nd, 2010 at 1:01 pm | PermalinkIgnore this user

     Soylentgreen -

    Do you receive Oxen Alerts or are you a premium member? Because if you are, you should be able to read my latest post. 

  26. David Ristau
    June 2nd, 2010 at 1:33 pm | PermalinkIgnore this user

    Soy -

    The alert for the Overnight Trade in XIDE explains all about my position on why I like it.

  27. David Ristau
    June 2nd, 2010 at 1:45 pm | PermalinkIgnore this user

    Position Update 

    HOV – We made 3% on the day with HOV. Got involved at 6.00 this morning before the pending home sales, and we exited at 6.18 for a 3% gain. The stock didn’t make it past 6.22, so a pretty good exit for us on this one.

    XIDE – We are involved at 4.00, and we are looking for a 4% exit today or we will hold overnight. So, if it gets to 4.16 by the end of the day I am going to exit, but I originally recommended in my Overnight Alert this one as an overnight trade. Feel free to hold, but I am happy with 4%.

    ZQK – Quiksilver has been tough, but it is up today at 4.61…just a penny above our entry of 4.60. We are neutral heading into tomorrow when ZQK reports earnings, so it is a good position to be in IMO. We will continue to hold.

    Good day! I am heading out for a meeting this afternoon. I will be back on this evening to answer questions, etc. if you have any.

    Good Investing!

  28. fuzz
    June 2nd, 2010 at 3:15 pm | PermalinkIgnore this user

    XIDE – in 4.02 this morning, out 4.25 now
    ZQK – in 4.41 this morning, out 4.69 now
    70% out of both, I will let the remaining 30 ride overnight just for fun.
    Thanks a lot David, really appreciate your work.

  29. jomptien
    June 3rd, 2010 at 1:33 am | PermalinkIgnore this user

    I wasen’t sure of what you ment before but yes, I am a premium menber. great calls this week David. XIDE was negative when I went to sleep (Asia) so did not get in.

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