Tuesday, October 31, 2006

Even if oil didn't bottom today HAL is running.

Did oil bottom today, on this last day in october? It did make a new low, but reversed and actually closed higher for the day. The chart above includes many striking features. I'll point out a few that you might find interesting. The 50 ema has never crossed below the 200 ema on any oil chart going back 3yrs until recently. Similarly, the RSI hasn't gone below 20 and the MACD hasn't seen as low as -3 on any chart I can find. These events occured in mid september right about the time USO made a new volume high above 3M shares traded and closed at the low of that day. Here we are today with a new low and a new volume high of almost 4M shares, but this time we had an up day. Both the RSI and MACD have bottomed and suggest that oil should be almost through. Today may be the capitulation needed. Take a look at HAL compared with the oil etf USO. It broke out last week as expected, then formed a bull flag and is now headed straight for that 200 dma just under 35. Note the price action relative to it's 200 ema (green line) compared with its 200 dma (red line). Also, fibonacci analysis of this move suggests a target near 35. Happy Halloween everyone!
This is what HAL looked like on my screen intraday when it broke out last tuesday, it was easy money from this point on. Happy Halloween everyone!

Sunday, October 22, 2006

HAL Should Have a Great Week

Halliburton, the oil service company released earnings this Sunday that beat wall street expectations in both revenue and EPS(earnings per share). HAL said third quarter earnings were .58c per share on 5.8B in revenue while wall street expected .54c on 5.52B. This represents EPS growth of 22% and revenue growth of a 19%. Now there has been alot of talk lately about a rotation into more conservative large cap stocks out of smaller caps and commodity related companies. Well this 30B market cap has a PE of about 12 on 20% growth, a 1% divdend and a 2B$ stock buyback program. In other words I expect there to be some major fund buying in HAL next week after it has been neglected for months. Lets take a look at the chart:
As you can see, there is some pretty serious resistance just above HAL's closing price last friday. I would expect HAL to gap above this resistance around 30 and run all week heading for that 200 dma before a pullback.

For comparison, here is how HAL behaved last year on a similar earnings beat with around .40c in EPS. As you can see the opening price would have been a great place to go long even after a sizeable gap. The key is for HAL to gap close to or above and hold $30.30. I would consider the nov 30$ or 32.50$ calls, maybe the dec 35$'s depending on your time horizon.

Analyst Info

Sunday, October 15, 2006

Looking for the Energy Bottom

With a so much credit for this bull market due to a major pullback in energy prices it will be important to keep an eye on crude in the coming weeks. A further decline in crude prices should fuel, no pun intended, further stength in the dow (DIA) and S&P 500 (SPY) while a reversal would have the opposite effect. Currently light sweet crude is in a decending broadening wedge. This weekend I found a very useful site run by Bulkowski based in his books, check it out. Watch for that upper trendline to break, thats when i would look at longing some beaten up oil stocks like ADM or the OIH, not they have already begun to moke back up.

There is no denying the magnitude of the bull market in stocks we have right now. Here are a few awesome looking breakouts in stocks that surprised me:

At some point patient traders will make a killing shorting this buying frenzy. One stock that is looking a little top heavy is Energizer (ENR). If you spot a confirmed reversal I think it could give back much if not all of this recent parabolic move:

Sunday, October 08, 2006

Time to load up on Gold?

So, it looks like North Korea may now be among the nuclear weapons club. While it has yet to be confirmed, this is still going to be all over the news tomorrow and I expect we will see "official statements" about it all day long. Its hard to estimate exactly how serious this news will be for the markets but we did have clear signals from China, Japan and North Korea last week that a nuclear test would be "untolerable." Yes, China. While I wouldn't expect this news to plunge Asia into a war it certainly does increase the instability in the region and worldwide. Now I am no commodity expert but I can see the obvious connection between global instability and gold. In general gold is considered a very safe place to put money, especially instead of say South Korean currency in the event of a war. So my money hungry mind pulled up this 1 year gold chart (etf):
Gold is currently in a downtrend being below it's 50 dma, 200 dma and declining trendline. However, gold did find strong support last week and apears poised to at least test that trendine. The technical picture coinciding with the North Korea news may bode very well for gold. I wasn't surprised to see gold up very strongly overnight in Hong Kong and Sydney exchanges. To play this on a US exchange you can either trade the gold etf GLD or I would recomend considering a beaten up gold procucer like Goldcorp GG. If gold begins a new uptrend GG should move up fast. Recent aquisition issues have made GG cheap, AUY is also good if you preffer.
Is it time to load up gold, in my opinion: YES!

Sunday, October 01, 2006


Last week was great for the fad shoe company CROX. Not only did they get pumped by cramer multiple times but they were added to the S&P SmallCap 600. This action has taken CROX almost up to the previous high that was made on a very sharp reversal day when they last raised guidance. I suspect many have been buying in anticipation of a similar raise in guidence this quarter by the ugly shoe company. And then what? Last time they did that CROX gave up all the gains and then some followed by a sharp decline. I think most would agree this compnay is going to be a fantastic short but the problem is in deciding when to enter. The stock is already heavily shorted and it nearly at the highs. Short squeeze aside I think now is the time to enter CROX shorts. Set a tight stop loss at 35 and ride this one down to at least 30 in the short term.

CREE is a stock that I have follwed for a while and shyed away from after the company repeatedly disappointed me. I was always excited about the short squeeze that never happened and I eventually realized they were right all along. I know a fair amount about the company and their technology so let me know if you want more background. I bring CREE up becuase it is at a pivot point. Most people would probably look at this chart and say you should long it for a gap fill, but keep in mind that gaps also provide support/resistance. The recent run is encouraging for longs but in the context of a broader rally in semiconductor stocks it has actually underperformed. From here at the upper end of it's range I think you could get at least a few points out of a short perhaps more if the support at 18 fails and it has twice recently. Set your stop just above entry and be mindful of the possibility for a quick gap fill up to 22 (an even better place to enter or add).

And another double top in SHLD. Ride it down to at least the upsloping trendline and set your stop around 165.
By the way, what I am calling double tops could quickly become double top breakouts. If these stocks start making new highs on above average volume be sure to cut your losses short. At these pivot points you have a low risk entry. Also, GS has not been able to move higher since last week but has not reversed either. It takes courage but I think it is going to be a great short when the wind comes out of the financial sector's sails. NVDA has confirmed the top on volume and has started moving back down. If you went short last week you are making money.

disclosure: I have CROX Oct 30 puts