Stocks And Options Guru

The Huge Rally, and My Current Outlook

So over the last couple months, we’ve had an absolutely phenomenal rally in equities.  The SPX index has recovered from its lows around 870 to its current slot at 1007.  So what happens next?  A huge pullback; the typical suckerpunch to the novice investor? A continuation of this historic rally?  Or possibly a small pullback, before the market takes off yet again?  The first thing to consider is the long term trend, as shown by moving averages.

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Market’s Next Move

When guessing what will happen next, you need look no farther then the trend, and the condition of the market.  So what knowledge can be gleaned from the current situation?

This chart shows the SPY, an etf that tracks the S&P 500 index.  Read the rest of this entry »

Top 5 Growth Stocks | Investing for Solid Long Term Gains

We’ve had a huge rally since the march lows, and my current stance is that we should see the collapse of this massive bear market rally any day now.  That being said, prices on some stocks are low enough that given their growth potential, you’d probably do fairly well for yourself even if you bought now, near what is likely the high of this bear market rally.  Of course, you may be able to do better by timing your entry, waiting for a pullback in the major indices before pulling the trigger, but for the more long term investor, now is as good a time as any.

To find these companies, I used a combination of fundamental and technical criteria, searching for the best companies in a decent technical position.  Here are the companies I uncovered. Read the rest of this entry »

Triple Leveraged Arbitrage

This is a long term play you’ve NEVER heard of.  Its not quite arbitrage, but it does have some similarities.  Its similar to an arbitrage strategy in that you have a long position, and a short position on the same underlying.  In other ways its like selling call options dated fairly far out, in that the odds are highly on your side, and it should slowly but relatively safely make money over longer time periods.  Yet the reality is this play is like nothing you’ve ever seen. I call this ETF strategy: Triple Leveraged Arbitrage.

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RIMM vs. AAPL; Another Economic Recovery Play

What’s the better economic-recovery play?

These companies were both major media darlings before the recession, posting strong revenue and earnings growth, and sporting sky-high PE multiples.  Yet with the recession, many stocks got CLOBBERED, and these companies are now both trading at a PE of around 22.  So the market is pricing these companies similarly; is the market right to do so, or is there hidden value in one of these companies?

Looking at their PE ratios of 22ish, there are two ways the companies can go up in value.  They can make more money, driving up the E side of the equation, or sentiment towards the company can improve, driving up the ratio itself.  Since sentiment is also based on earnings, earnings are definitely the most important variable here.  Read the rest of this entry »

Time to short financials?

So lets get straight to the point.  The financial industry has been destroyed during this recession.  Going by the XLF, a ETF that focuses on the financial sector, at the prior bottom, the sector was down 83%. Meaning a recovery to previous levels would be a 488% gain.  Since the March bottom, it rallied 110%, and after a small pullback, has dropped to just 85% higher then the march levels.

So what happens next?  After this rollercoaster ride of a sector, what’s likely to happen next?  There are a couple key ways we can predict that, but keep in mind that the point of technical analysis isn’t to be 100% sure of the direction; the idea is to get a good idea of what is most likely to happen next, and capitalize on the opperunities the market gives you, while keeping your risk in check.  With that said, lets take a look at the technical picture.  Basic technical analysis, step 1 is to identify support and resistance levels.  Key support levels seem to be 11.20, and 9.80.
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Sector Update

I posted an article about using BP indexes a couple days ago.  When the article was posted, a number of sectors were overbought, but it wasn’t a sell signal yet because they hadn’t entered a column of Os yet on the Point and Figure chart.  That situation has changed.  The Financials, Consumer Discretionary, Industrials, and Materials sectors are now all showing sell signals on the P&F charts, so anyone who is long those sectors should lighten exposure, and anyone looking to short them into a reversal has an added indicator to confirm that move.  The overall market, as represented by the S&P 500 isn’t showing a sell signal yet, but with so many sectors switching from overbought to sell signal, there is a strong possibility that this bull market rally is nearing is nearing its climax.

That being said, its important to note that the last time financials gave a BP chart sell signal, it turned out to be a head fake, and people shorting on that signal would have lost money.  Still, this signal is right far more then its wrong, and traders should keep that in mind in the coming weeks.

Stock Trading Strategy: The Bullish Percent Chart

In my previous article on stock trading strategy, I showed you how to use relative performance to decide what sectors you should be buying and selling.  In this article, I’ll show you how to use a little-known tool to call reversals in the major economic sectors.  What is this little known tool?  Its called a Bullish Percent Index, or BP Chart. Read the rest of this entry »

Picking the right sector

The vast majority of your returns are determined not by what stocks you choose to invest in, but what industries you choose to invest in.  With this in mind, one of the key things you should be doing when investing is deciding what sectors you think will do the best.  How do you do this?

Determining what sector should do well is actually a fairly simple task.  It’s all based on the observation that markets trend.  Day to day fluctuations may be fairly random and unpredictable, but the effect of those day to day fluctuations on the stock price over a period of months is generally consistent, weather it be up or down.

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Smashing the market with a Bulk Shipper

So now that the world seems to think this recession is ending, what are the best stocks to make you rich post-recession?  Today I’ve identified another contender, and i think this one has easily the potential to net 500-1000% returns over the next couple years.  That’s a pretty crazy projection; I probably lost half the readers right there, as only very few companies ever experience appreciation like that in a short time span.  Yet the company I’ve identified is likely to pull it off.

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