Sunday, March 30, 2014

03/31/14 Weekly Watchist: Investing in 1Q14 Telecomm Growth

Market Overview: Considering the Ukraine/Russia geopolitics and the Feds commitment to completely tapering-off its economic stimulus, the markets (index: SPY) are on edge as investors fear for the worst. This has led to recent run-up in TLT (short-term interest rate index) and persistent spikes in VIX (market volalitity index) as investors buy insurance because they fear for the worst. Despite these bearish market forces, SPY has managed to hold technical support (50day EMA, $183.5) while keeping VIX range-bound, as TLT hits new highs since almost a year. For as long as SPY maintains support above 183.5 and VIX range-bound below 16, we will remain cautiously bullish and possibly hedged with TLT call options.

Telecomms expecting 24% 1Q earnings growth: Telecomms (index: IYZ) have been trading at its highest since the recession and are expecting a market-leading 24% growth in the first quarter 2014 (according to FactSet). VZ (Verizon) is responsible for a large majority of the growth this quarter. However, given that VZ is the IYZ leader (in terms of market cap), this growth will be felt throughout the industry as Telecomm stocks spike off VZ's sympathy. Therefore this weeks watchlist consists of VZ and telecomm sympathy plays.

Note: Although we are bullish Telecomms this week, we are long-term bullish VZ and others listed below that are trading a foward-P/E below 15, which is the forward-P/E of SPY. We expect an additional 10-15% growth throught 2015 for IYZ, once it clears resistance at $30/share.

WATCHLIST

SYMBOL (stock or options?) - foward-P/E

VZ ($47Apr2014 call options)- Verizon is currently trading at foward-P/E of 12.5.
CALL (common stock)- MagicJack VocalTec is currently trading at foward-P/E of 10.1
NTLS (common stock)- NTELOS Holdings Corp. is currently trading at foward-P/E of 14.0
TMUS ($33Apr2014 call options)- T-Mobile is currently trading at foward-P/E of 31.0
TDS (common stock)- Telephone & Data Systems' forwards-P/E is N/A.

Hedge: We are considering hedging our position(s) with $110Apr2014 TLT call options.

Monday, January 6, 2014

01/04/2014 Week Watchlist

Market: $SPY began consolidation into the new year as investors lock in profits at the start of the new year rather than at the end of 2013 to avoid paying taxes. I remain bullish on the market but with great caution because the market is due for a correction and its just a matter of time or the right catalyst to shakeout investors into selling after one of the best performing year in decades. While most of the sectors consolidated last week, the finance sector (index: XLK) remained strong. This is why we are bullish on finance stocks like JPM and FNMA long term because they are very cheap looking forward. If you are still 100% invested in the market, I'd recommend selling a good portion because at this point the risks of a 5-10% downwards market correction are too high. Always lock in profits.

P.S: When the market begins correcting, you can bet overvalued high-flying momentum stocks like NFLX and AMZN will sell-off. For this reason, we are only interested in buying and holding undervalued growth stocks like JPM, FNMA, SPCB and CLNT.


WATCHLIST

Options:

JPM - gapped down a bit after dividends but held up and continued to new highs (since the recession). We have a starter position in $60Mar2014 calls and plan to add more this week into a breakout. Our goal is to sell near 62/65 resistance zone. We have a hard stop under $58.2.

GE - sold off with the overall market/tech sector until we got stopped out for modest gains. We plan to rebuy Mar2014 call options once the tech sector (index: XLK) bottoms out. We still see short term upside to $29/30.

SCTY - The solar sector is awake once again and SCTY is setting up for breakout into new all time highs with tremendous upside to $80 in the medium term. Coincidentally, Monday morning Goldman Sachs upgraded it with an $80 price target. We are prepared to buy Feb2014 call options after it tests res at $63. Be prepared.

NFLX (short/puts) - Netflix has been overvalued for too long. Its got too much competition and faces a growth challenge. The chart is near broken so I expect this stock to correct over the next few weeks/months. We are prepared to buy $300March2014 puts.

Stocks:

SPCB - SuperCom are basically a security software company that acquired a major competitors business thru a very efficient deal that could triple revenue, thus making the stock much cheaper than it already is. I encourage you to read this recent seeking alpha article on Supercom. SPCB is currently trading at P/E 9 while the industry average P/E is 36.  At P/E 20, which is broadly considered fair value, SPCB would be valued over $11/shr. However, if we look forward ahead of the acquisition, SPCB would be valued well over $20/shr. Anything is possible considering that technically there is no historical resistance once SPCB hits new 52wk highs at 6.13. We are long SPCB from avg $4.93 (currently $5.47). Our medium-term target is $8-10/share. Our stop is near 4.85 support.

FNMA- still consolidating under 3.3 as finance sector shows strength. We are prepared to buy the 3.3 breakout with upside short/medium term upside to $7/shr.

CLNT- Chinese stocks are heating up again. Clean Tech is a Chinese growth and value stock trading cheaply with P/E 2.7. This stock is valued somewhere in the $20s-30s (currently $5.80). Short-term upside to 7, medium-term upside to 11-13. Stop-loss is near 5/5.3

VNDA- still waiting for the breakout above neckline at $13.

Monday, December 30, 2013

12/30/2013 New Years Watchlist (6 bullish stocks)

Market: I am still bullish $SPY into 2014. The S&P is currently has forward-P/E of 15.4 which is fair value based on recent history; however the market has traded in the P/E ~25 range back in the late 90s when the tech bubble was brewing. The 20year average P/E is 19 which means, at its currently price $183.8 SPY has 20% more upside, if history repeats. Keep in mind that SPY is due for a correction after this breakout so I expect 190-200 to resist. So for this week as we start the new year, the market is technically bullish and should continue its bullish run. I expect January to be strong because of the January effect which create volatility in this bull market. Given the lite holiday trading volume last week, I expect a dip/consolidation this week which should present dip-buying opportunities because we are still in a buy-and-hold market.

WATCHLIST

OPTIONS:

GE - General Electric started breaking out last week due to positive guidance and appointment of new company officers. We bought (March2014 call options) the breakout when GE was trading at $27.3 (now $27.83); so far we are now up +27% on our options contracts. Our goal is to sell for 100% gain, which could be near resistance at $29. Our stop is near $27.3, which is where we entered the trade.

JPM - The Financials sector (index: XLK) is projected to have the highest earnings growth rate for this 4th quarter, so expect a run-up into 4Q earnings season as investors look forward. JPM leads the finance sector with nearly $220B market cap. We still own a starter position in March2014 call options and plan to buy more contracts once it starts breaking out into new highs. Once it breaks out, we see upside to $62 where there is historical resistance. At $62/share, JPM's P/E is still only 14 (currently 13), which is still cheap. I am only bullish JPM mainly because the whole sector could continue upwards due to its strong 4Q guidance; however I do not plan on holding for JPM's earnings on Jan 14th because the estimates are below companies growth streak. Our stop is near the $27.2/27.5 support zone.

AAPL - Apple gapped-up and spiked to 570s with strong trading volume following announcing the China Mobile (ticker: CHL) deal but faded with low holiday trading volume. I expect AAPL to revisit those 570 highs and breakout towards 600. I will fully engage with $650Mar14 call options once the breakout occurs. Breakout is confirmed when it closes the day above 570.1.

FB - Facebook is a classic growth stock in the hot and volatile tech sector (as evident by TWTR from last week's watchlist). FB is ready to continue its breakout into new all time highs. TWTR and FB will continue race each other as they climb higher. The next FB breakout will take it well into the 60s in the next couple weeks, so we do not want to miss this trade. We are preparing to buy $70Mar14 calls once it breaks out to all time highs.

STOCKS:


VNDA - In November, Vanda Pharmaceuticals had game changing events with FDA approvals as evident by the massive buying volume after the approvals. VNDA spiked from under $7 to over $15 on the news. It faded back down to 9s after the news and has been running towards its highs and could breakout as investors look forward to commercialization of the new drugs which could boost earnings big time. I will be watching for a cup&handle breakout above that neckline at $13 and sell near $15-16. I will be prepared to buy any positive catalysts (news, upgrades, seeking alpha article etc..).

FNMA - Fannie Mae is still consolidating as it approaches to breakout above $3.30 resistance. The breakout is confirmed when it closes the day above 3.30 with strong volume.

Sunday, December 22, 2013

12/23/2013 Week Watchlist (6 stocks)

Market: $SPY has started setting up for the Santa Rally following the Fed's decision to taper its stimulus to $70B/mo from $80B/mo so expect very bullishness in the weeks ahead. However, I think Monday is a good time to hedge your position, as there is always a slim chance that the market could sell-off as people lock in profits on a very strong year in the stock market, which is up well over 20% in 2013.

WATCHLIST

JPM - banks are cheap and JP Morgan Chase Bank leads them. Banks are good sympathy plays off the Fed taper. I bought a starter position in JPM at 57.5 in $60Mar14 call options and expect to at least double up my position this week. Price target is 62 in a few weeks time.

AAPL - Apple Inc. is officially working with China Mobile (CHL) in a deal that will bring iphones to over 700Mil new users in China. That is a big time revenue growth potential for the most valued company in the world. AAPL is headed for $600/share + more. I am very bullish AAPL this week. I am looking at a 552 entry point with a stop hard stop at 544. I do expect a big gap-up on this CHL news.

SYY - Sysco Corp.  is a growth stock that just merged with US Foods (also a growth company) in a deal that makes the merger an efficient one that will save the company money in the future. SYY only paid for US Foods at the equivalent of P/E 10. SYY has P/E 21, so this deal makes the new merged company much cheaper than it was prior to the merger. SYY's P/E is approx. 17 after merger, making SYY atleast 20% cheaper now. Therefore I see SYY valued at $42, which is near the highs it gapped up to on the day it announced the merger. I am looking to buy this bottoming price action. My entry point is 36.6 with stop-loss at 36.2. Upside to 40-42/shares.

GE - General Electric just reported that they expect significant growth in organic industrial sales to help the company sales grow 5% in 2014. GE is a growth stock trading at a fair value currently, but its slightly undervalued looking forward. So I think this is a good time to buy the company ahead of the street pricing in this forward growth. My entry point is above the 52week high at 27.5 with stop-loss under 27. Price target is $29/share.

FNMA - believe it or not this Fannie Mae is recovering from the financial crisis and is currently undervalued looking forward as the entire finance sector continues its recovery.  I am watching carefully for a 3.50 breakout. The stock could rebound with plenty of upside. I've see short-term upside to $4-5/shares and long-term upside to $7/share. I've got a hard stop-loss under 2.90.

TWTR - Twitter is a good play off the tech sector strength lead by AAPL. TWTR has plenty of upside as the bubble continues to brew on this fresh ipo and growth stock. Thanks to the overall market breaking out and the big AAPL/CHL deal carrying the tech sector, TWTR should make big moves this week following four consecutive bullish weeks for the stock.


Thursday, August 1, 2013

Why TTWO could spike 50% into September 2013

Why TTWO could spike 50% into September 2013


Take-Two Interactive (TTWO) is the makers of Grand Theft Auto 5, which is one of the most anticipated games of the year. They are fundamentally strong, recently beating earnings estimates (eps +6% and revenue +15% vs. estimates). Although they have reported a net loss in earnings (-0.54 eps) in 2Q13 they beat estimates and have excellent guidance for next quarter 3Q13 (1.53 eps, 789M revenue estimates) reflecting an expected blowout as compared to last years 3Q12 (0.11 eps, 288M revenue); this is largely due to the highly anticipated Grand Theft Auto 5 (GTA 5, September 17 release date), which as already sold a record 800k pre-orders.

From a technical perspective, TTWO's bullish (on all time trames) and clean chart virtually has no technical resistance above 17.84 (its new 52wk high which it reached just after its recent 3Q13 earnings) until the gap it must fill to 20.5 short term, and resistance at 26 longer term.  TTWO has broken resistance on the daily (just yesterday closing at its highest close in almost 5 years), weekly and montly (as it ended the month of July well above its monthly resistance at 17); TTWO is currently trading at 17.53. What is also interesting about TTWO besides its clean chart pattern, is its high short interest (20% shares short) and not to mention, recently, the company approved a buyback of up to 7.5M shares (which accounts for 8% of the shares outstanding).



Risk/Rewards: The best r/r entry would be near 17.0 which is resistance now turned support from virtually all time frames (dialy, weekly, and monthly charts).

Disclaimer: I am long 2300 shares at 17.5 and have plans to buy $35k worth in call options at market open on 8/1/13.

Whats also interesting I find is that, historically, before the release of any new GTA game, TTWO runs up $3-10 from the month prior to the release date. You can add this to the earnings run-up and can expect much excitement about GTA as we approach the September release date.

Saturday, June 29, 2013

07/01/13 Monday Watchlist (2 hot stocks, 2 worthless stocks)


Market: $SPY is still consolidating from the Fed's sell-off as it tries to correct the overreaction from the Fed/stimulus news. Fundamentally, the market has not changed as the Fed will continue to pump $85 billion/month until the end of the year, which means we should expect more of the same: bear trap. So in this market we can: (1) buy and hold good/profitable stocks (esp earnings winners); and (2) short during market consolidation


LONG Watchlist
AAPL - I can write a chapter on why I think AAPL is due for a bounce about 380/400 support zone which can turn into a rebound/recovery towards 500, 600, etc... But I will keep it brief. Technical analysis 101 says you should dip-buy a stock at EMA's 20, 50 or 200 (as they are the most commonly used indicators) esp when the stock becomes oversold. AAPL is currently oversold on the daily chart and testing EMA 20/50/200 on the  quarterly/monthly/weekly charts, respectively. What this means, from a technical perspective, is that everyone who wants to dip-buy AAPL is doing it here at these 380/400 levels, so expect some heavy volume buying this week. Because AAPL found support at EMA50 to end the month of June, you can expect some shorts to cover and a technical bounce to at least as high as 415 (which is key resistance). AAPL is still one of the most well known companies in the world (formerly the most valued company worldwide), I doubt that it will crash thru 380/400 levels without a strong negative catalyst (perhaps earnings which is not until 7/22/13). As of now, AAPL is still fundamentally solid and has no reason to crash, therefore I firmly believe in the bounce. Because I am so confident in this bounce/potential rebound, I plan to buy more than $10-80k in call options contracts with mixed expiration dates (July13 Aug13 and Sep13). If I am right about the rebound, I plan to sell the contracts when the stock price is near 440 (the next key resistance) for as much as 10 times my money ($100-800k). If I am only right about the bounce to 415, I could still double or triple my money. This will be our biggest play yet, one that could change our lives. 

Risk/Rewards: We can't control the market but we can control our risk and rewards (r/r). The best r/r entry would be to enter the trade near 385, which is AAPL's 52wk low.

TTWO - These guys are the makers of Grand Theft Auto 5, which is one of the most anticipated games of the year. They are fundamentally solid, have nice chart pattern with high short interest (19% shares short). Over the last 3 weeks the stock has been hit hard after announcing its offering of $250mil convertible senior notes (which is essentially like a secondary offering, which are usually followed by a sell-off like we saw), but I believe its an overreaction as the stock still remains fundamentally unchanged. [Read this seeking alpha article and the first few comments for more background on the convertible senior notes]. So, we see this as a dip-buy opportunity esp as it finds support at EMA50/200 on the weekly/daily charts, respectively. This is potentially a long-term play (in anticipation of GTA 5 September release date) but our goal is to buy near 14.25 (which is key support) and sell for $2/share gain. Potential upside to 22 longterm.

Risk/Rewards: The best r/r entry would be near 14.08 which is the low from 4/18/13.

SHORT-sell Watchlist
NOR - This stock is completely worthless for many reasons: (1) its no longer profitable as it recently started losing money; (2) Morgan Stanley downgraded it last week; and (3) the chart is terribly bearish as it trades near its all-time lows of $3.15 (its currently trading at 3.23). There is key resistance near 3.25, which is best entry for solid r/r.

XIDEQ - this former pump has been crashing since forever and could crack big nxt week as it continued to fade into the close of the week near all-time lows as it closes at day low 0.127. Other's in my team nailed a partial short at 0.148 but I missed it because my order did not get filled at the same price. I expect it to drop to test 0.10 but it could keep dropping towards zero as it is likely a worthless stock. Potential short into a morning panic.

Monday, June 10, 2013

06/10/13 Monday Watchlist (8 stocks)

Market SeasonMidrange
Swing StrategyBig dip buy and hold (earnings winners only)
Current Sentiment:
Bullish consolidation. The market seems to have bottomed and slightly bullish. We may be in for more of the same as it tries to continue its breakout.

WATCHLIST

Call Option: These are all recent earnings winners that are set to breakout.
AEGR - is squeezing more shorts as it hangs about 74 for supp and is set to make another move esp if market continues bullishness. This is a potential buy as early as today
WAGE - is bottoming off ema50 and could rebound from here. shoulda bought calls at the ema50 but I will look for the 32 breakout instead.

Long Stock:
EAC - is behaving just as I called it, bottoming at 24 and spiking thru res in the 26s. Now it has no res til 28 then 30. I sold into the big run as i said i would. Still a potential rebuy when it patterns to b/o into new 52wk highs.
HNR - is an earnings winner that i'm watching. The chart is nothing to be excited about but it has 20% shares short which could squeeze into a rebound. I am only interested in a 4.0 b/o but I may scalp on the way.
IMMU - is a recent earnings winner that has been moving on momentum and could spike more in the short and medium term. It's a bit extended so I wouldn't be too quick to buy and hold as it could dip if it fails supp at 4, but there is key supp at 3.9.
RFIL - is a former earnings winner that I've been watching since earnings back in March. It has finally repatterned for another breakout move into all-time highs as early as this week. 7.1/7.2 is key res zone.


Short Stock:
BIOD - Is now down 70cents from my alert when it topped at 4.9. Under 4.3 key res, this has 50cents more potnetial dowside. I'm taking a risky o/n position short at 4.25 (just 400shares) as Monday's are known for PR/news, however without PR/new the rewards are pretty good.
NVTL - this stock is crap and spiking without news or any catalyst besides a slight earnings growth. This is mid-breakout so i wouldnt short too soon. It could spike as high as 5 before topping but is scalpable along the way on both the short and long side.. I am short-biased but will buy any perfect breakouts for scalps.



Abbreviations:
q2q- quarter-to-quarter
res - resistance
supp - support
b/o - breakout
scalp - to enter/exit a trade relatively quickly and for small gains.