I’m betting for the resistance of 1370

2/29/12 is "the day" of the second LTRO that has let European banks to buy a lot of sovereign debt and exchanged for fresh capital with a good margin.

It's the second and the last operation of this kind and I expect poor auction in Europe in the next weeks. And a poor economic data like today's capital goods orders that has been weak.

Moreover the resistance of 1370 can do its job and put at least a temporal stop in the up-trend. It's an anticipatory trade. I've done with the SDS. The stop is 1380 and the first objective is to fill the gap in the 1340. A risk-reward of 4 times. The EuroUsd is at 1.34. And it's near the up part of the descending channel where it has been since the middle of 2011.

Commodity related stocks I'm watching.

OIL

CVX: Posible Inverted  H&S, with neckline at 110.

XOM:  Broke and  Inverted  H&S, with objective at 94. Resistence at past highs at 88.

CJES: Working on a base with a Resistence at 23.

TLLP: Hot IPO, Broke 34,5 some days ago, may find support at the same level soon?

KOG: Working in a base. Last resistence at 10,40.

Other Commodities

RGLD: Only gold stock graph i liked. Working on a Simetrical triangle top since sumer.  Top or continuation figure?

SID:  Steel. May find support at 10,  where last resistence was broken from huge double bottom back from summer. Daily 200MA also in this point.

CCJ: Metals & Minerals. Strong after breaking with gap in mid-january, and breaking again its last Resistence at 24. Today was the perfect day to be in, but if you missed, you can always wait for a pullback near 24 again

GTAT: Solar, Now trading at 9,5, price resistence at 10, with MA200 at 10,20. Low volume in up way is the main con.

JKS: Show strong price action with growing volume, resistence at 10,20.

MON :Broke huge H&S started at 2009 at 70 during October 2011,  Objective remains far away at 110.

MOS: Bear during all 2011. Huge resistence at 60 (tendency line + 200MA). 60 also breaking point of double bottom drawed since september.

PCL:  Lumber related stock. Long term Ascending triangle. Trigger at 44.

It’s time for the (YCS)?

Last year I've made a trade in the YCS betting that the 80 in the USD/JPY will hold. I lose some money in it. Not too much indeed.

Since then we have seen a lot of month a channel between 76 and 78,5. When would be the time for the yen to lose part of his strength? The BOJ used to do some periodic intervention in the forex market in order to make the yen cheaper and help the Japanese exporters.

I can talk a lot about the reasons for a movement of for another but it's not my intention here.

Graphically if it cans go throw the 78,3 level it can arrive to the 80 in very few sessions. I can make some money on it with the ETF (YCS) which is a double-short. I plan to buy it at 42,5 more or less with an objective of 44,5 at less. The stop as usual has to be very tight.

What about the bonds?

I've been looking for the Treasuries or the Bunds to have sensibility about the market bonds in the last years… but what about invest in them?

They have to much notional for my account so I must look in the ETF spectrum. The two ones more famous and liquids about long term bonds in the US are:

-         (TLT) for the long side

-         (TBT) for the double-short side.

My opinion about that market is that low interest rates for some years is what the market discounts. But there are others topics that can affect hard them:

-         The demand for no-risk assets. That has made possible a negative return for short term Germany notes. If there are a flight to non-risk assets can go on in an up path with shame yields.

-         Where in a deflation environment or in an inflation one??? For me the main forces goes to the deflation side, but the FED and ECB measures can lead to bit of inflation because they let the USA and European governments to spend more than should be ok (no print theories in this blog!!!)

-         What about the growth? If the world can recover the central banks will be able to sell their bond purchases and must raise interest rates. It isn't the most probably scenario for me but keep in mind.

I'm not positioned for now. But for me the bonds can go up if the stock market starts to reflect the poor economy perspectives. I don't think that concerns about debt sustainability can be a main driver for the two principal bond markets. The debt of some European countries will be explained in another post.

¿Is Bolsas y Mercados (BME) near a breakout?

BME is the operator of the stock market in Spain. It's a very rentable and optimized company with a big dividend and a big pay-out. The last short ban has eroded its revenues about a 30%. Now it's rumored that ban could arrive to an end. That can lead to an increase in the 2012 benefits.

However there have been new competitors in the Spanish stock market. There are two new platforms that can get a 10-15% of the transactions.

That's the fundamental view. But looking the graph we can draw a symmetric triangle that lasts tree years. Now it's near the end. A break and a rally are in the cards. We will look to it carefully.

My trading in 2011

-         22 operations (in one operation I aggregate all the trades in the same idea)

-         A profitability on 7,5%

-         50%  win rate. Winning operation are 1,7 times my losing operations.

-         3 best winning trades (with gains of more than 2% of the capital) represents a 13,5% of my capital.

-         3 worst losing trades (with losses of more than 1% of the capital) represents a 5,6% of my capital.

-         Those 3 losing trades are my 3 errors of 2011. One is doubling a losing position. The others two: not to put the stop in the machine.

-         If I had done a good risk management (not to lost more than 1% in any trade) I would gain 10% instead of a 7,5%.

-         In global I have invested 7 times my capital (not a heavy rotation indeed)

-         Worst drawdown was 4%.

-         8 operations in Spain. 14 in USA

-         9 operations with stocks. 13 operations with ETF.

Silver near a crucial point

I've been looking the Silver future for some days. I think the level of 35$ could be crucial for that precious metal.

In one hand is the top of a rectangular pattern that has 28$ as a bottom and 35$ as a top. If my appreciation is confirmed an objective of 42$ is in the cards.

In the other hand is if goes up could make a break up of a descending wedge. This scenario will be added to the other but the difference is that here the objective can be as astonishing 45$ near the maximum of the bubble top (as a lot of the media called it).

As usual if the price respect the level of the 35$ we will go on with that two scenarios and I'll go on out of this market.

As a reminder I can trade this market up with the single short ETF (SLV) and the double leverage (AQL). The short side can be played with the double short (ZSL)

The scenario in the Gold I think I can't do a better job than Peter L. Brandt in one of his latest post: http://peterlbrandt.com/the-two-sides-of-the-gold-coin/

Be awake!

Facebook, how to be in for the small investor?

If you think that you can go to the Facebook IPO you aren't right. You won't be allocate any share. But, Can you earn some money around it? For me the answer is yes.

One is to buy some related shares that can be going up in the windback of that IPO. Some names can be some internet companies like: LNKD, ZNGA, YDNX, GRPN. If you want to be more risky QIHU, RENN. Some related names to cloud computing: RAX, RHT, CRM

For me the best is buy an ETF that invest in companies related to social media like some I've talk in the last paragraph. The ETF is SOCL. It has been listed since first of November and in the last days the volume has surged. I'll look in the next days to jump into that if the market corrects a bit which I expect.

Are there some opportunities in the cotton and sugar markets?

I've been revising the soft and grain commodities for a while. After that, I think a potential trade can emerge from the cotton market (CT). It has been in a descending wedge since summer 2011: from the high of September to high in January, and from the low of July to the low of December. I'll be looking for a breakup. In my opinion there is few information from the COT data. The commercials are short, but they have been since 2009 and the cotton has gone from 50 to nearly 100 that is now.

If I invest in that it'll be with the BAL. The level will be the 61-61,5. The target I can view is 74. It can be a 19% reward trade

 

In the Sugar (SB) we have more or less the same pattern. That commodity has been in a descending wedge since summer of 2011: from the lows in August-September-November to the highs in August, October and January. The COT data can be viewed as bullish. The commercials have the lowest short level since 2008.

If it breaks the wedge and go throw the January highs I'll be in with the (SGG). If it goes throw the high of January at 88, I think the target will be 104. It represents a 29% of potential reward.

 

In the two presented trades, we must consider several things:

-         The descending wedges can be tricky. Usually it isn't a very hard break.

-         The level of the stop will be fixed the day of the operation (usually the low of that day) so the risk-reward will be determined then.

-         A weak dollar can help a lot with that trades because that usually encourage the risk assets and the commodities are looked as that.

 

Two great stocks with great potential

Yesterday a friend of mine talked about two stocks that have great potential because of his kind of business.

The first one is Nuance Communications (NUAN). Is a provider of voice solutions for technology devices like mobile telephones. Its benefits are growing at 15% annually.  Has a PE of 18 times after several years of losing money. It has done a lot of acquisitions in the last year. Today with a capitalization of 9b$, the 75% of its sales come from USA and 40% from health care devices. The mobile and consumer devices are nearly 30% of its revenues and are growing. The insiders have very few shares of the company but there are 743 mutual funds invested there.

If it can stay over the 29$ can go on in its up path.

The second one is Yum Brands (YUM). It is an operator of 37000 franchise quick service restaurants in 110 countries. KFC, Pizza Hut, Taco Bell, Long John Silvers and All-American Food Restaurants are the brand that they operate. It's a mature company but this year will open 1500 restaurant mainly in Asia.

It has a benefit that grows 15% every year and a PE of 22 times. Has a great ROE of 73% and very little debt. It has a capitalization of 29b$ with very few debt.  Pays a dividend that represents a yield of 1,5%. Hasn't significant insiders and 1403 mutual funds are invested there.

After it has gone throw 57$, has been in a solid up with no resistance. When it forms a new base could be a good stock pick.

Rare earths

Like a complement of the post about commodities I've done the last days today I will talk about the rare earth. With this name I call a lot of very special minerals and elements that are uncommon and there very few mining of them around the gold.

They came to the economic news since last year China (the main producer and the main user too) decide to restrict the exports. Some of them are very useful in the last technologies like smart phones.

Although there are no futures of any of them we can invest on them indirectly.

First of all we have an ETF (REMX) that invests in the main companies that are dedicated to the exploration, mining, production, refining, recycling and distribution of them. Note that not all the companies are listed; mainly in china; so are representative. Has a volume of 40000 shares at day. Not bad at all.

 

Second, we can invest in some of the companies directly. I've taken a look at some of them.

TIE – Makes titanium mill products. Has a PE of 26 times but with a growth on benefits of 30% every year. No debt and 2,5 b$ of capitalization. RTI is doing nearly the same but with poor prospect in my opinion.

TC – have mines of molybdenum more a new one constructing of copper/gold. PE of 10 times but with the new mines can have more benefits. We will see.

MCP – Has a big project of molybdenum on developing. The estimates are an 8$ benefit for share in 2013. Has 0,3b$ of debt and 2b$ of capitalization.

 

Graphically the best is TC, which is going up after making a round bottom of 3-4 months. The rest, include the ETF are weak and we must wait for a confirmation figure.

New markets I’m studying in 2012. Precious Metals (III)

In this chapter I'm going to talk of the most famous and some unknown ones. Let's go.

 

Precious Metals

Gold. The more liquids are (GLD) and in the short side we have a double one (DZZ)

Silver. The star of 2011 in the commodities universe. We have (SLV) and a double (AGQ) in the long side and (ZSL) in the short side.

Palladium. Here the most liquid is a Physical ETF (they have the metal in a deposit) (PALL)

Platinum. The best is a physical ETF (PPLT)

 

Base Metals.

Like it happens with some soft commodities I will be able to invest in them thanks to iPath ETFs. Here is the list. Only long side.

Copper (JJC), Nickel (JJN), Aluminium (JJU), Lead (LD), Tin (JJT)