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The Oxen Report: Investors Weary of Fed’s FOMC Meeting, Stocks Headed to Red

Good Tuesday to all. It appears that the market is in fact going to turn red today after news and hints that the Fed would not undertake a quantitative easing program that was expected to be talked about or planned at today’s FOMC meeting. There is worry that the Fed in fact is going to keep things pretty much the same. This has set the market to open up lower, and there is not a lot out there in way of data or earnings to give the market much to lift itself.

Therefore, we want to get into something that can allow us to play a downward moving market…

The graph to the left is pretty interesting, and it may be the first sign of another sector where Google is dominating…the internet browser. Those still using IE, you are using the fourth most popular browser.



Buy Pick of the Day: Direxion Daily Energy Bear ETF (ERY)

Analysis: With the market looking to give up some of its recent gains and the recent run up in oil, oil prices look like they are going to take a breather today. News that the FOMC is not as excited about quantitative easing as everyone thought they were has taken a toll on the markets this morning. A Fed official commented that it would create monetary problems, which has single handedly changed most investors perception that the Fed would promote an easing of interest rates to spur lending and up equity trading. 

In addition to the market fundamentals, after a serious run to $83 oil is looking down upon news from OPEC. The organization appears in no hurry to change supply levels to ease or increase prices. OPEC has always wanted oil to be around the $80 level, and they appear very content with this price. The decision, though, will keep supply higher, which it appears will drive down prices.

"OPEC quotas should remain unchanged after the … OPEC meeting and therefore not provide any support from the fundamental side," JBC Energy said.

After running to $83, oil has hit a peak and is trying to set a range. For the longest time, it was a $72 – $78 range. Now, it may have changed to a high 70s, mid 80s range. Oil always trades in a range, and we can sell at the high levels and buy at the low levels. Yet, that range seems to still be a bit unknown. Many analysts think oil could continue down below $80, and the run up was a temporary move. 

Playing Direxion’s Daily Bear Energy ETF (ERY) looks to be a strong move today. It should open around neutral as oil has creeped itself back up to neutral, but from there, I expect it to head back lower. After being down near the low 81s, oil is back up over 82. Yet, the fundamentals have not changed at all. This high should be met with a drop off after the open of the market.

That means we can get ERY at a nice, fair price before the drop begins. Get in at the start, oil should taking a swing down for most of the day. FOMC reaction will not be until the afternoon, so we will have the whole morning to exit this position. Moving into the afternoon, the market may start to catch wind of what will be done and could make a run. Stick to the range and go for 2-3%.

Entry: We are looking to enter ERY in the range of 38.00 – 38.35.

Exit: We are looking to exit after a 2-3% gain.

Stop Loss: 3% on bottom.

 

Good Investing,

David Ristau 


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  1. Oxen Alert – New Position

    Hey all,

    We have one new position for today so far. We are looking at a Buy in Direxion’s Daily Bear Energy ETF (ERY). 

    Check out my analysis and more here!

    Good Investing!


  2. Oxen Alert – ERY Entry


    I am involved in ERY at 38.30. I am looking to exit at 39.00 and higher.

    Good Investing!


  3. Unless it comes back down, this one got away!


  4. Oxen Alert – ERY Exit


    I am out of this one at 39.04 for a close to 2% gain. 

    It was very quick…much quicker than I had anticipated. I’ll take it though.

    Good Investing!


  5. Jr -

    Unless you had market order for open.


  6. David
    Are you looking at the GOOG real-time ticker to see what the price is doing? I only saw 39.00 before it started down. And then do you go for a market order to exit?


  7. Well, that trade went fast. Here is plan for today:

    1. Longterm Ratings Update

    2. $5 List Presentaton…drumroll

    3. Overnight Trade/Midterm Trade

    4. Longterm Rating (time permitting…I will probably start it and publish tomorrow)


  8. Garbon -

    I had set a limit order on Zecco.


  9. Oxen Alert – Longterm Ratings Updates

    PAYX – This one is fifteen cents from entering the Buy range below $27. I will continue to monitor and alert you if it drops below $27. Good Buy there.

    RYL – One dollar above Buy range.

    FSLR – Only needs about 4% more downward movement to enter Buy range.

    No other updates.

    Good Investing!


  10. David:
    what is our sell range on ista?
    thanks,    Will


  11. Interestingly David, my prop system had gone long ERY yesterday and I had a limit exit this morning, which got filled 3 min after open. Otherwise there is no way I would have gotten into this one.
    So you use Zecco huh? Can others also share the names brokerages that they are using?
    I use Interactive brokers and I think their execution is just awesome!


  12. Fidelity – I have nothing to compare it to, so I don’t know what I’m missing, if anything.


  13. Hugs -

    We are looking for 4-6%. With an entry at 4.27, we are looking to exit at 4.43 and higher. Looking very solid right now.

    Etrade -

    Very nice. I use Zecco. They have surprisingly great execution for only $4 commissions Great job on that one. Yeah I market ordered before the open in order to get in at the bell. IB is pretty solid. For daytrading, I think IB, TOS, and Zecco are the three best with price to execution. Etrade has very good execution, but it is way too pricey.

    All -

    We had a request from Etradingsignals to talk about brokerages. Feel free to respond with which one you use, and why you like it. It would be great to see some conversations started amongst followers about what they like about their brokerage firm. Perhaps we can help someone that is using one of the lesser brokers (ehemm…Ameritrade, Schwab, Scottrade).

    Thanks and the $5 List is coming together nicely. Going to be pretty sweet!


  14. Garbon -

    Fidelity has some nice tools. How much do you pay though?


  15. We’ve had 200 free trades starting a year ago because I transferred part of my 401K there from work. Otherwise, I think it depends on your balance, with 7.95 being what we normally would pay.


  16. Garbon -

    Pretty standard pricing. Depending on your trading pie, you may think about a cheaper broker like Zecco or Sogo. The only reason I say this is that I know you use Google for realtime. Additionally, do you do your own research? If you basically use my trades, then the tools are basically the extra $4 per trade. Over time, that $4 can add up. Just something to think about.


  17. david- by this time next week all that will be on CNBC is robosigning and FRAUD! All bank stocks will go down as they cannot report enough earnings at present to stem the tide. At BEST- they will spend billions defending themselves in court and when it is over we will have to bail them out again- just my .02 worth!


  18. Scottrade and TradeStation here.


  19. Jthoma -

    I agree about financials. I am not looking forward to their earnings at all. JPM tonight will probably show the first glimpses. I think shorting SCHW going into their earnings is a solid play. I will wait for JPM though before I make the move. What do you mean by robosigning, and why will it be all over CNBC?


  20. Jr -

    I would recommend switching from Scottrade to Zecco or Sogo. You pay way too much for the limited product per trade.


  21. they signed as many as 7000 mortgage applications in one day- obviously never read them. turned around and packaged them and sold them to the public. In the true sense of the law they committed fraud and even if they never lose a case- they will spend billions defending themselves!


  22. Couldn’t agree more.  Am in the process but didn’t know about either Zecco or Sogo until just mentioned.  Thanks.


  23. Jr

    No problem.

    Jthoma -

    True. I would ask though how this affect share prices and investments. Politics without investing purpose, in my opinion, is a waste of time. C’mon philosophical economist, we don’t make decisions based on anything other than supply and demand haha.


  24. Oxen Alert – The 45 Going For $5 List


    I have finished the $5 List we have been discussing for the past week. It features 45 companies on it. These are all companies that are currently less than $5 that have potential of being bought up if they reach $5, which is typically a buying benchmark for mutual funds, IRAs, and institutions. They do not buy anything under that because of associations with risk. So, we want to take advantage of this and create a watchlist of companies that would be attractive at $5 and above. I will monitor this, and when they break $5, we can enter them as trades.

    The list has several criterions that I used to help limit the number of companies. First off, I wanted companies that were at least $3 in share price. We have a few under $3, but the majority are above that benchmark. Stocks at $3 would still have to increase 66% in order to hit $5. So, stock below that level have a long way to go till $5 and present even greater risk. Additionally, the stocks had to have market cap of at least $100M. Most, though, I wanted above $200M. This is a risk aversion technique that just allows us to deal with companies that are more established in the market. Further, I wanted stocks with at least 300,000 average volume. A couple exceptions were made, but this is the level that I have found that has more legitimacy attached with it and has less large swings in price. 

    I used EditGrid to make the list. This allows the chart to be sortable. You can sort by price and see which stocks are coming up to $5 very soon. You could sort market cap, P/E, average volume, and industry. 

    From this point, I will be doing daily updates and monitor these stocks in the same way I do with Longterm Ratings. I don’t intend to do any detailed financial analysis.

    Finally, if you see any stocks that have ventured into no man’s land below $5 that are not on the list that are of interest to you, and you believe would be of interest to me and others…please let me know.

    Without further ado, here is your $5 List.

    Good Investing!


  25. I def think paying $10/trade on some of these ‘full -service" brokers is a real bad deal. I started out by using Scottrade, then moved to Zecco and now I am finally with Interactive Brokers (IB).
    IB basically charges $1 commision for upto 200 shares. For more than 200 shares, it charges 0.5cents per share. Their option trading prices  ( 0.70 cents /contract) is very good too.  They have live VaR computation and have ability to monitor  various option greeks to control your risk. They also allow a connection to Excel – so if you want to trade with a bunch of rules like – if SPY is up 2% and QQQQ is up only 1.5%, then buy AAPL. The biggest benefit for me with IB is that, it allows me trade on portfolio margin. While the traditional margin allows you to trade only 2x your account size, portfolio margining can potentially allow much bigger trade size depending on how much your account is hedged.
    Now, the negatives about IB – they charge u a monthly live-data fee $9 if you don’t generate $20/month is commisions. (I easily generate that in 10 days – so its not a big factor for me). Their graphing utilities suck. There is very little fundamental data thats available for free.
    Hope this helps.


  26. Etrading -

    Thank you…very helpful review. The fundamental stuff you can get on Morningstar or Yahoo! for free anyways. Sounds like a nice site. I deal with a lot more than 200 shares sometimes, so that would stink.


  27. david- correct- supply and demand- tell me why I or anyone else would want to buy a bank stock right now- all their fees have been taken away by financial reform ( where they used to make the bulk of their money- ie bounced checks etc.) they will not lend money- all they do is take the treasuries free money and buy treasuries- what happens when the 10% price increase of the last 30 days in in commodities turns into interest rate increase and the banks own nothing but treasuries?


  28. Just to elaborate on what I said earlier on commissions – here is an example using yesterdays  trades.  I typically put around $10k/trade. So that meant for FO(with around $55/share) I bought 200 shares, which costed me $1. commission  (200*0.005) , 350 shares of TSL costed me $1.75 and for the ISTA (with around $4.22/share) I bought 2400 shares, which costed me $12 commission.  So the total entry costs were ($12+$1.75+ $1 ) = $14.75  as opposed to $21 I used to pay with scottrade before.
    But the real benefit is their execution. They have something called the SMART order routing system, which uses the same technology as the HF traders. So when u place a order, it checks multiple exchanges before routing the order – so instead of NYSE, u order might get routed to ARCA or NASDAQ or AMEX exachange, if there is a better price. As I was writing this – I realized one of my trades got executed which proves my point. I was short DGW today and I had a limit order to cover the short  at 14.10. The price fell dramatically today – but I got executed at 14.05  – 5 cents better than what I had asked for. This is not untypical with IB.
    Just want to clarify – I don’t work for IB  :-) . I am just independent trader.


  29. Jthoma -

    They will be in trouble; however, I would venture that IR will decline before increasing. The Fed wants to spur that lending. I own no financials, and I do not want to own any. I just wanted to understand the financial aspects of your politics and what it meant in the market.

    Etrade -

    Very cool. You might not work for them, but you are selling me…haha.


  30. David – ALU


  31. david- momentarily maybe they force rates lower- in the long run that just increase the chance for Jimmy carter infaltion as commodities have gone up 10% in the last 30 days- what would you do?


  32. Jthoma -

    No ideas…honestly.

    Edro -

    Thank you…will take a look.


  33. david- don’t feel bad- Ben doesn’t know either- there is no winning solution- when you have lived over your head for 25 years- the piper has to be paid one way or the other!


  34. Oxen Alert – Looking to RVs for Next Trade



    Two Day Trade: Winnebago Industries Inc. (WGO)

    Analysis:

    Nothing says AMERICA like RVS!

    I really wanted to get into this one last week for a Midterm Trade, but it was a bit too far overvalued for my liking. Today, the stock has taken a solid 3.5% dip, and it is attracting me to a nice short one to two day trade with the possibility for the second day being an OT into earnings on Thursday morning. Winnebago has been on a nice run for the past half year as they have returned to profitability as they have been able to shed costs and increase their margins. Further, demand to the RV big-ticket item is showing some return throughout the past half year.

    The company reports their earnings on Thursday morning. They are estimated to report an EPS of 0.05 vs. a loss per share at 0.29 one year ago. The high estimates for the company sit at 0.12 EPS for the quarter, and that number seems much more achievable. 

    For one, RV demand is on the rise. The Recreational Vehicle Industry Association (RVIA) released some staggering numbers that through August of 2010 the number of RVs shipped to dealers was 70% higher than 2009. Demand has been able to return because of better credit capabilities from banks that are lending at higher rates than they were in 2009, and more institutions have returned to automobile financing. Analysts of the industry still remain cautious that "real" demand has returned, but that point is mute when considering a two day trade in Winnebago. If the company has increased its revenue by a similar level, it would put WGO at around a $102 million revenue stream. Estimates are for similar levels.

    In Q3 2010, motor homes rose at a less significant rate than towables – 8-10% vs. 16-18%, respectively. Those figures are quarter-to-quarter. WGO operates almost entirely motor homes, which puts it at less of an advantage. The 8-10% increase is not seen at all in the WGO revenue estimates. Despite the fact that towables are doing better, the RV industry, as a whole, is soaring. Dealers are accepting more shipments to meet a rising demand as consumers slowly creep out to take on new loans. While the towables industry may have seen the more significant increase, WGO is expected to see a drop in EPS to 0.05 in Q4 versus EPS of 0.21 one quarter ago even after an increase in sales.

    The company saw a less than expected revenue estimate, but the company was able to significantly increase its income to sales margin significantly more than was expected. They had a 4.44% profit margin, which was well above the less than 1% profit margin they made in Q2 2010. Current expectations see that profit margin dropping much too significantly. The reason for the drop was that they saw wholesale prices jump significantly in Q3. There is no reason to expect that those prices decline. Current expectations only have a profit margin around 1.5%. Costs have been shaved by this company significantly, and they have benefitted from rising demand.

    With today’s pullback, we should take advantage. The stock was well overvalued moving into today with an RSI at 60.29. That number has dropped to 55.26 today, and it could decline a bit further. The stock has set itself up for a nice rebound tomorrow into Thursday. I think this one can go against the market if it continues down further. Even on this red day, the market has rallied slowly but surely all day. Leading into tomorrow, WGO looks in good shape to pop back upwards for at least 3%.

    Just for a teaser…similar competitor Thor Industries reported earnings at the end of August and beat estimates by 23%. The company proceeded to see its stock jump 14%. Last quarter, WGO jumped 12% after earnings. Moving into earnings, the company has been busting upwards, and today’s backward movement has given us a great chance.

    Get in ASAP!

    Entry: We are looking to get involved at 10.45 – 10.55.

    Exit: We are looking to exit for a 3-5% gain.

    Stop Loss: 4% on bottom.

     

    Good Investing,

    David Ristau

     


  35. Oxen Alert – Position Updates


    WGO – This is our newest position. I am involved at 10.55. We are looking to exit at the minimum of 10.86.

    ISTA – We are looking to exit at a minimum of 4.43. It is getting close. I will most likely sell 1/2 at that level and let the rest ride for a bit of time until we get closer to Friday.

    Be sure to check out the new $5 List…our newest bag of tricks.

    Good Investing!


  36. On WGO, that is supposed to say 10.50. I put in my order at 10.55, but I got filled at 10.50.


  37. I have the $5 list in a spreadsheet (eliminating the M’s and B’s in the numerical data so it’s searchable) if anyone is interested


  38. What I am going to do is also put another of these sheets together for the Ratings with some of the pertinent information needed. I will put that link on here, so you can bookmark it. I will update that as we add new positions. I will have that up before the end of the day. Additionally, I am going to be working on Rating for Sunpower Corp. (SPWRA) that will go up tomorrow.


  39. Bio -

    Thank you…good idea!


  40. david- NO! Just bought a 1 year old newell for .50 on the dollar off ebay with 11000 miles $150,000 below WHOLSALE- they cannot sell anything at present- JT


  41. Jthoma -

    Its not LT. Its a two day trade…most likely out before earnings are released. 


  42. okay


  43.  etradingsignals/IB
    I’m curious about IB and the only negative have had heard is that they charge for every change to an order you make, (which I do alot), is that true?  I trade mostly option spreads following Phil.   Thx


  44. Oxen Alert – Online Spreadsheet for Longterm Ratings


    Hey all,

    Here is the online version of the Longterm Ratings list. I will add to this each time I do a report. 

    Bookmark this link: https://www.editgrid.com/explore/tog/ristadj/Longterm_Ratings

    You can view that from now on when you want to see the ratings ideas.

    Good Investing,

    David Ristau


  45. redlog/IB : Its true. If you place a order and just cancel it, they will charge u a fee for it (about a buck or less). But if u r just changing the limit price and that does get executed, they don’t charge u for it. Essentially they want to discourage HF traders from "quote stuffing", where they are placing and canceling orders with the main intent of slowing the system, so that they can place a counter order through some other exchange and get couple of ticks.
    Although, I do change orders often (couple of times a day), most of the time, when I do change the order its to ensure execution. So I don’t get charged often – and even when I do get charged, net & net when I work out the costs, it still comes out to be lower than other brokers I have tried.
    But I really do wish that there was another broker, that was competitive at these rates with a good execution – who also offers portfolio margining. From my perspective IB has a monopoly in this space and thats never good.


  46. ISTA: Out partially at 4.44 (+4%); David, do you have a new exit target for the remainder?