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The Oxen Report: Market Looking to Rebound on a Show Me What You Got Monday

 

The market looks like it wants to rebound Monday after a pretty horrid week. It was not bad for us playing The Oxen Report. We rounded out a fantastic week on Friday with shorting HOV. We got two short sale positions for a hedged position at 4.15. We made 3% x2 on the stock, therefore, when the stock declined down to 4.03 in the afternoon. That is another 2/2 day, which is our third in a row. We went 4/5 on both our buy picks of the day and short sales of the day for the week. Pretty exciting stuff…but can we keep it up?

What is on the plate for Monday?

Buy Pick of the Day: Ultrashort Proshares Financial ETF

I am not too confident in the markets for the overall day. Yes, we are going to start the day in the green. Futures are in the green, with the Dow up about 40 points as of 8:15 AM. That should not be any reason to get excited. Europe started in the green before dipping over 1%, and Asia started much higher before it too dipped significantly farther into the red. It just does not seem like there is any reason to rally. There is no major economic data. There are no exceptional earnings. Crude prices continue to weaken in Asia and on the NYMEX. Today, it is one of those days where we have to say "show me what you got" a la Jay-Z.

Financials seem to be a great bet because they are still one of the most overvalued sectors overall. SKF is still undervalued, still oversold, and it is not far from its lower bollinger band. However, SKF for the first time in a very long time, is actually turning upwards on stochastics, which means that for the first time it is getting bought up over an extended period of time. This has not happended since we had a major pull back in June.

Today, the market may end up in the green. It would not surprise me if it did, simply on bargain hunting. However, there is no way the market is going to hold where it starts. What we want to know is not where the market starts persay, but where is it going from that starting point. When your top story for the day is Xerox buying a company…it isn’t a major day in the markets. That is why it is best to look towards the inverse ETFs.

TCF Financial did receive a downgrade, which may weigh just slightly on the financials, but that is really the only major data point we have for the financials. Other than that, it is really just a market sentiment that we are going to pullback. There is no fundamental reason to rally, and the world markets should be a clue to how we will fare.

Entry: Buy SKF at 25.75 – 25.85.

Exit: Sell on 2-3% gain.

Stop Loss: Set at 3% on top of price.

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

So, at 9:00 AM, I lost my entire story for the day. Ah the joys of blogging on the web and the back button! My short sale was going to be LDK Solar, but I really do not have the time to explain it. If you want to short it, I liked it because of a downgrade from a major solar chip maker, MEMC Electronics (WFR), which is a pretty big name in the sector. Further, LDK and solars are in the midst of a major sell off that just does not seem to want to reverse. You can get in around 8.75 -8.80 for a pretty solid entry point for a 2-3% cover gain.

Good Luck and Good Investing!

David Ristau


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  1. Oxen Report Morning Levels

    SKF – The ETF is currently trading right at 25.90. I think our set range is good for a slight pullback to start the morning on SKF as the market rallies a bit before being hit downwards. That is why the 25.85 – 25.75 range seems strong, but we will have to see still.

    LDK – Stock is trading at 8.73 in pre-market currently. With a slight rally to 8.75 – 8.80, we can a great premium before this thing goes even further southwards on a market demise that I forsee and some weak news coming out of the solar sector today.

    Happy Investing!


  2. David, it doesnt seem like today is the day for shorts, how do you feel about the week? WOuld you recommend keeping shorts like SKF,FAZ, ect? THx 


  3.  Jromeha – It is really going to depend on a slew of economic data points that are coming out. If they keep missing estimates, these will work great. Short on LDK worked, but the SKF one is not working to our benefit. This rally definitely makes it easier for a sell off to happen on bad data.


  4.  Oxen Report Midday Message

    SKF – We entered SKF at 25.75, looking for an exit at 26.25 – 26.50 for 2-3% gain on the day. The market has not cooperated in the way that I had imagined and took off like a rocket after the Xerox merger and Abbott Labs merger. The stock is currently trading at 25.23, a low for the day. We have a stop loss set at 25.00, but I am hoping that the market will stabilize. There has been literally no sell offs at any point in the day, which means a large gap down should be expected. I would not sell at this point.

    LDK – The solar stock short worked much better for us. We got involved at 8.80 and were looking for an exit at 8.63 – 8.55. We were able to get out at 8.63 for a nice 2% gain. The stock is currently at 8.70, so we are still in the green. If a pullback does occur, this stock is a prime candidate to get hit as it is still in the red significantly on such a rally. If you are holding this, keep it.

    Good Investing!


  5.  Oxen Report Midday Message

    SKF – We entered SKF at 25.75, looking for an exit at 26.25 – 26.50 for 2-3% gain on the day. The market has not cooperated in the way that I had imagined and took off like a rocket after the Xerox merger and Abbott Labs merger. The stock is currently trading at 25.23, a low for the day. We have a stop loss set at 25.00, but I am hoping that the market will stabilize. There has been literally no sell offs at any point in the day, which means a large gap down should be expected. I would not sell at this point.

    LDK – The solar stock short worked much better for us. We got involved at 8.80 and were looking for an exit at 8.63 – 8.55. We were able to get out at 8.63 for a nice 2% gain. The stock is currently at 8.70, so we are still in the green. If a pullback does occur, this stock is a prime candidate to get hit as it is still in the red significantly on such a rally. If you are holding this, keep it.

    Good Investing!


  6. My broker, Schwab, will not let me short LDK. Who do you recommend?


  7.  lmccorm – Best for shorts is ThinkorSwim or Etrade.


  8. No post today.

    I have a conflict today, and I will not be able to post picks for Tuesday, September 28.

    Thanks,

    David 


  9.  No post today.

    I have a conflict today, and I will not be able to post picks for Tuesday, September 28.

    Thanks,

    David