I felt it necessary from a patriotic stand point to provide our premiere banker with a free subscription to The Contrarian Trader. I have no grievance with Jamie Diamon but they appear to need som help from a technical stand point. Since JPM wasn’t one of the pathetic bunch that neared collapse in the 2008-2009 correction then it stands to reason tht there are other banks out ther that might be in the same trade as well. As for the Rusell 200 or the IWM they are in correction mode and we are short of this market. How did we know to get short? We use weekly charts and they told us to get out of our long positons the first week of April.
How often do traders put themselves out there and hold themselves accountable to the visitors who were good enough to spend some time watching them? I do! Linked above you will find commentary I sent out to members on 04/01/12 and you can see how we called the top of the trading range.
This was commentary I sent out to members on 04/01/12. I cautioned then that there was churning and sector rotation.
Selling AAPL Short
In this same commentary I went over why we were short of AAPL and sure enough we nailed it. After Gene Munster made his $1000 call on AAPL we added to our AAPL short. Why was Gene so good as to provide such a valuable call on AAPL for free no less? Do you have an account with his firm? My guess is that Gene did some self serving work so that his Wall Street through buddies could rotate out into the one day surge.
Russell 2000 “Roll Over”
In the same video we called for the roll over in the Russell 2000 and sure enough we got it.
The growth in disability rolls has been growing since the 1990′s and not since President Ronald Reagan have we seen a drop in disability rolls. Reading in Monday’s edition of Investors Business Daily since Obama took office Disability Rolls have grown by 5.4 million. As each person joins the disability rolls that is one less person that needs a job. Therefore, no need to count them among the employable in the U.S. How very convenient for an administration who loves central planning. To illustrate just out of whack the growth in disability rolls has become here is the statistic that tells is all. Since 2009 Disability Rolls have grown by 4.7 million while Non Farm Payrolls have grown just 2.3 million. What is the common trait among new receipients? Many have been unemployed for more then 27 weeks and are seeking a new source of income. If President Obama and his merry band of liberal thugs in Congress would simply get out of way of business perhaps these people would find more gratification in being employed. Until then, we the tax payer continue to subsideze them and that is exactly what the Obama administration wants.
European Union Growth by Euro Collapse?
The inevitable solution for both the Euro Zone and the United State will be growth and the only way to realize growth is through the devaluation of the Euro. The U.S. has pursued this policy for a number of years though although it continues we continue to repeat our now ridiculous “strong dollar policy”. The European Union has refused to reduce interest rates for some time but with their economies in a downtrend they’ll soon have no alternative and when they do cut rates it will signal to the market that the devaluation of the Euro has begun. The U.S. stock market will get hammered because the result will be a stronger U.S. Dollar and the Federal Reserve has little to no room left to lower rates here to compete. My conclusion is this, we are only in the 5th inning of the financial crisis. Let’s just hope we don’t end up going into extra innings.
What we saw these past two weeks was in our opinion collusion among the so called Wall Street elite. Pete Najerian was good enough to point out the massive call option activity in the deep out of the money strike price(s) only two weeks ago. He swirled his eyes when asked what strike prices on Apple (AAPL) were most active. The stock then trading in the low $500 caused Pete to use non- verbal communication which I interpreted as being “ the fix is in”. Sure enough, we had our “event” being the “New IPAD” release and a number of brokerage houses tripping over themselves to upgrade AAPL. Coincidence or Collusion? You decide.
The Futures or the Bond Market
The financial media and brokerage house elite want you to watch the futures market so that they can get you excited and buy at the opening of trade. Why? It is because most are long only funds and cannot short stocks. So, to meet their quarterly numbers they must get you the little guy excited so that they can keep the bull market going. While you are buying they are selling.
This week we discuss the importance of the impact of Credit Default Swaps (CDS) which is are financial instruments which Warren Buffet terms as “financial weapons of mass destruction”.
Apple (AAPL) Short
Early last week we took profits in our AAPL short position using the April $495 Put options. We are not building a new position in the same option contracts.
Overbought Stocks
(ASNA) Looking to get short due to an unsustainable uptrend
(MNTG) ) Looking to get short due to an unsustainable uptrend
(BONT) Looking to get long on a pull back for a day trade and then looking to get short due to an unsustainable overbought condition
(ACAT) Overbought and ready to be shorted
Oversold Stocks:
(NURO) I mentioned this stock last week. It looks god for a rally.
(HUSA) We have already traded this once for a profit. Looking to reenter on the long side soon.
Possible Macro Shorts
(TZA) Looking to get short of the Russell 2000 due to it breaking of the lower band of it’s uptrend channel on a weekly basis. Buying TZA puts you 3x’s short of the Russell 2000
Cabot Microelectronics (CCMP)- CCMP has been added to our oversold list of stocks to buy. You need to use caution here. The decline was a result of a $15.00 distribution. What we are hoping for here is that the short sellers will continue to drive the stock down and dividend capture traders exit the stock.
Build A Bear Workshop (BBW)- BBW Is now an oversold stock but to early in the correction to buy. I believe that there is further downside and we will look to buy BBW when we hit a good support level and our indicators give the green light.
Balchem Corp (BCPC)- BCPC is an oversold stock but as with BBW still in the early stages of its correction. The best thing to do is to watch and wait.
Apollo Group (APOL)- APOL and members of this industry continue to suffer in the era of Obama. We are watching the October 2011 lows but will probably get a rally before then. This stock is a secular loser so we’ll want to take profits quickly and move to the sidelines.
Last week’s stock picks- Right, Wrong or Watching?
Almost Family (AFAM)- We were Right on AFAM. We called for a pull back on the stock and we got it.
Rex American Resources Corp (REX)- We were Right on REX. We mentioned this stock as a short and it did correct.
Cown Castle Intl. (CCI)- We called for a pull back on the stock which we did get however the stock did not behave the way we wanted it to . Although we did see a pull back I would feel more comfortable calling this stock a continued Watch as a short.
Dynamics Reseach Corp (DRCO) and Nuerometrix (NURO)- We called for a rally on both of these stocks and we did get an oversold rally but not at the risk to reward entry point that we wanted to these both remain oversold watch stocks.
Regeneron Pharmasuticals (REGN): Indisders dumping shares. Manipulation at hand?
Apparently Regeneron Pharmasutical’s management was advised of my commentary because I now have evidence that they have been frequent visitors on multiple occasions to this this blog. I will never have proof that they moved their earnings date up to create a short squeeze but if you give them the benefit of the doubt you have no business shorting stocks. Don’t get me wrong if I were dumping shares as insiders have been doing and saw huge short interest in the stock I to would make every effort to squeeze the short so I could sell more shares. Add to it the fact that a number of investment banking firms looking for business provided upgrade cover to sellers. Again, pure speculation on my part but I happen to be a successful speculator. Even after the shares were pumped higher we still made a profit.
Overbought / Oversold Stock Review from last week
In my The Week Ahead Commentary to members of The Contrarian Trader I analyzed the charts of the indexes and the major sectors and believe that the potential for a correction is likely.
Last week I mentioned U.S. Home Systems (USHS) of which we are short and have a profit. We’ll be looking to exit this position in the coming week.
Stocks that we discussed last week which remain on our radar screen are:
Companhia de Saneamento (SBS)- This stock consolidated and is a short term buy with but with an eye on getting short on a “key reversal”
Synnex (SNX)- This stock is also a short term buy with a longer term on getting short.
Plains All American Pipe (PAA)- Has also consolidated sideways setting up the opportunity for a brief rally but again, we want to look to get short.
Seagate Technologies (STX)- Remains a short opportunity but the risk to reward is not as favorable as last week. We’ll watch it though.
Marchex (MCHX) – We had been long of this stock but were stopped out with a small loss. However, we like the stock and it’s large short interest so we may just trade it long again.
Hot Stock Picks
Almost Family (AFAM)- Potential short after a strong move above all the major moving averages
Rex American Resources (REX)- This is one of my favorite shorts and will be watching it with great interest.
Crown Castle International (CCI)- Another great short candidate given its extreme overbought condition.
Dynamics Research Corp (DRCO)- DRCO is an oversold stock which is interesting given the fair amount of shorts that can fuel a short term rally.
Neurometrix Inc. (NURO)- This is an oversold penny stock which is interesting given that it trades at a discount to the pricing of a recent offering.
I will be tracking all of these stocks and alerts will be sent to members when we do enter and exit these trades. Take advantage of our 14 Day Free Trail Offer to receive these alerts as well as The Week Ahead Video Commentary which is sent out to members every Sunday.
Last week we reduced our exposure to Replegan Pharmaceuticals (REGN) because the risk to reward of being short
the stock was no longer in our favor. Lesson number one in stock trading is to have a reason why you are trading a stock and if you cannot articulate that strategy you should never have made the trade in the first place. In the case of REGN we entered the stock on the short side because it was at extreme overbought levels. An earnings announcement was weeks away and I had confidence that the stock would have corrected by then and we would be out of the trade. It appears though that management watched the charts and monitors the short interest. How do I know this? On Friday February 10th the stock closed below the lower band of its rising uptrend channel. That was a positive for us until management issued a press release after the close announcing that earnings had been moved up to the following Monday February 13th. I knew that we were about to get screwed. The lesson learned from this trade was to never ever underestimate how devious management can be when their stock is heavily shorted and never forget
how immoral bankers such as Bank of America and Deutche Bank can be by upgrading an extreme overbought stock in the hopes that they will get the dumb money off the bench and buy at the worst possible time for both longs and shorts. The other lesson learned is to never, ever react to a knee jerk reaction by the markets. We never forgot that the reasons why we shorted REGN in the first place were more present than ever and by the end of the week our $15.00 paper loss was reduced to $2.00 because we
had discipline and understood how the game is played.
Contrarian focus stocks
Companhia de saneamento Basico (SBS)- This is an extreme overbought stock which we will be looking to short as a
swing trade.
Synnex Corp (SNX) – This is an extreme overbought stock which we will be looking to short as a swing trade.
US Home Systems Inc. (USHS) – We traded this stock short for a profit a couple of weeks ago and are now looking once
again to short. This is an extreme oversold stock which is very near to us pulling the trigger once again.
EchoStar Holdings (SATS) – I discussed (SATS) last week and like the way it is behaving. We will look to add
as a short in the coming week.
Cobalt International (CIE) – This is another stock that I discussed last week and monitored. I like this as a
trade and should be considered a top pick.
Plains All American Pipe (PAA) – This is new to our screener and looks very good as a swing trade short.
Holly Energy Partners (HEP) – This stock is another top pick as a swing trade to the short side.
Willis Group Holdings (WSH) – This is our only extreme oversold stock and the weekly and monthly charts will help
us determine if this will be a swing trade or a long term investment.
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Ahead” video commentary on all stocks listed above.
We were trading Apple (AAPL) both long and short during the summer after Steve Jobs passed away. I identified a divergence in the Weekly RSI from the stock price which was making historic highs and at an “Extreme Overbought” condition.
Contrarian Trader Watch Stocks
EchoStar Holdings (SATS)- We are looking to short EchoStar due to it’s overbought condition
Regal-Beloit (RBC)- The chart indicates that although the stock is at extreme overbought levels there is a good possibility of the stock continuing it’s rally early this coming week. We will monitor it for topping action.
Cobal International Energy (CIE)- Another chart at extreme overbought levels which gaped higher on Friday. I am reluctant to chase this one down. I would prefer to ope a position on strength and average my basis cost.
Cedar Fair (FUN)- The $27.40 level appears to be resistance. Ideally we will see a rally through that level. If it does we’ll watch our indicators and volume to give us the green light to short this stock.
Apricus Bisciences (APRI)- This is our one stock that appears to be nearing a price point that I find attractive to get long of for a short term trade only.
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Hugoton Realty Trust (HGT): We sold the remainder of our trading position however, I did take some share and held them in our long term account due to the dividend yield and the future of natural gas in the United States. A truly great contrarian trade and congratulations to my members.
Texas Instruments (TXN): This wasn’t a Contrarian Trade but it was a continuation trade of a stock in an uptrend. We too profits on Friday after a very nice profit after 4 days. Swing trades like this TXN trade are some of or favorites.
Watch Stocks:
Dun and Bradstreet (DNB): This is an overbought stock ready to be shorted.
TZA- (TZA) is a leveraged 3x’s short the Russell 200 ETF that is very volatile but our favorite for shorting the entire maket.
Metro Bankcorp (METC)- This is an overbought bank stock which we would like to short.
Real Networks (RNWK)- This is an overbought technology stock that we would like to short
Regeneron Pharmasuticals (REGN)- This is one of our favorite short right now. Heavily shorted by amatuer shorts it’s ripe to fall
Sea Gate Technologies (STX)- This is an extreme overbought stock in the technology sector which we are looking to short
Repuplic Airways Holdings (RJET)- is an onther overbought stock ripe a sell off. We will be looking to short RJET
Tata Motors (TTM)- An Indian car maker ripe to fall for a trade only. This is an overbough stock which won’t be able to stand more upside.
US Airways (LCC)- This airline is simply another transportation stock among the cyclicals in rally mode but ripe to short after being sent to an overbought condition.
Zimmer Holdings (ZMH) This big cap stock is at a very overbought conditon and we will be looking to short it as well.
Hugoton Realty Trust (HGT)- This is a profitable trade. We took one third profits on the trade and will look take further profits at higher levels.
Broadvision (BVSN)- We took profits on this short trade. This is a tough stock to borrow so we took profits quickly once we so how few shares were available.
Michael Kors (KORS)- We took profits on this long trade and may look to get long once again.
Contrarian Watch Stocks
Colvis (CLVS)- Looking to eventually get short but may in fact get long first if we break out above $20.00 using a trading stop loss.
Inergy (NRGY)- This is an extreme oversold stock with more probable downside. We have a price target in mind which I have shared with members. I will send an alert when I begin accumulating.
TZA- TZA puts you 3x’s short of the Russell 2000 (IWM). I am looking to add TZA to the long side if they squeeze the shorts in IWM which won’t last very long. That will be our opportunity to add TZA at a good risk to reward level.
Apline Global Priemiere Properties Fund (AWP)- We are looking to short this fund due to the overbought condition.
Tronox Inc. (TROX)- We are looking to short TROX due to it’s overbought condition.
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We opened a position in Hutoton Royalty Trust (HGT) last week and plan on dobuling that position bringing our basis cost down. The stocks is being dominated by the break down of natural gas prices which appear to have bottomed in the short term anyway. I will sending out an alert to members when we do add to this position and when we take profits.
Watch Stocks:
Sears Holdings (SHLD)- We traded this stock long a couple of weeks ago for a large profit. The stock has continued to rally and appears to be topping out as it hit it’s 50 day moving average.
THQ Inc (THQI)- This is a penny stock which may provide some upside opportunity if it continues to consolidate.
(TZA)- TZA is a leveraged ETF which puts you 3x’s short of the Russell 2000. We are watching this ETF because although the Russell 2000 is in rally mode it is rallying on decling up volume. More details will be going out on my outlook for the markets to members in The Week Ahead Commentary.
Michael Kors (KORS)- This is a recent IPO which we are looking to short but not yet! This will be a short term trade to the downside.
Broad Vision (BVSN)- This is one that I have been watching for two weeks. Dicipline when approaching this short trade is essentail. We are near the point of where it is safe to open a position but not quite yet.
This week I discuss our trade of Sears Holdings (SHLD) which we took profits on last week. This contrarian trade made us a profit of 10% within a few trading days. I also discuss Hutoton Realty (HGT) which we are not trading to the long side. This is an extreme ovesold stock with and RSI in deep oversold territory and a double bottom stochastic.
