Longs and shorts for this market
The month of January is
closing and the market reflects positive action.
I got out after the first
part of the month provided a classic January effect. I moved into cash and sat
on the sidelines just like I said I would and gained close to 7% as round one
draws to a close. We get set for round two and the market expresses a
willingness to let the old cyclical bull stay alive and in control. The
current tape sends a positive message. There are plenty of good charts to dig
into. In this piece I will begin with the best of the choices made that
enabled a gain of 7% last month. Right now I am in cash. I hold no stocks. I
am in no investments and hold a cash position and will begin again for round
two with a blank canvas. I will begin with the best of the last batch and let
some of those instruments take me to the promise land as round two gets set to
open up. The bell rings for round two on Wednesday morning. I will be arriving
a half hour after the market opens in Santa Monica to begin the process of
getting my left coast office in working shape. I will operate out of Santa
Monica 5 to 10 full days a month. I will spend the better part of each summer
and winter cloistered there for the purpose of making a ton of money for my
partners and my self. The way in which that reality comes into existence is by
simply expressing it out loud and clear. My intention is to make between 1.5
and 3% each month. I see each month of the year as a round. I want to end the
fight early with a K.O. each and every month. Right now the DJIA with just two
trading days remaining is up 1.77% this year. The DJIA is a drag on the
current market. The SPX has gained 2.84%, while the NASDAQ COMP is up 4.49%.
Small cap is leading. The DJIA drags. The current market is trading near the
top of its range and must push through those highs made in January to enable
the current bulls to stay in control. The market is having a classic January
effect as we move into the second round. In this piece I will share with you
the instruments that I will focus on getting out of the blocks into the second
sprint of a series of sprints that is simply the flavor of the year. I look at
the market and my involvement in it as a marathon and the marathon as a series
of sprints. The long-term approach consists of 12 round trips a year. Lets get
into the charts that will get me over top as canvas number two gets set to
receive some paint. Let the work begin:
Good Longs
Adobe Systems
(
ADBE |
Quote |
Chart |
News |
PowerRating) 40.08
This is one of
many software stocks that are on the verge of breaking out to new highs. I was
involved last year and will get involved again if it breaks above 41 on a
close. The current advance is solid and a rise above its near high near term
will confirm the favorable odds to higher price points and watch the stock
lift off. ADBE is up 8.4% this year. It is up over 44% in the last 52 weeks.
It trades above all important inflection points. It is up nicely in the last 5
days.
Biogen Idec Inc.
(
BIIB |
Quote |
Chart |
News |
PowerRating) 45.23
It is time to get
back in the saddle and get involved and this instrument gets my juices flowing
and inspired enough to shake a few cobwebs and begin the play. I want to get
involved right now because the stock just moved off its 50 day line and is
heading back to test the near high. It ought to move beyond that and continue
to fill the huge gap made last year after it fell over night in reaction to
terrible news. The news that caused the brutal decline has been neutralized
and there is every reason to expect BIIB to rise back to the old highs made
over a year ago. The stock traded as high as 70 last year. It is currently way
below that level and the current advance is built on a solid base that took
several long months to build.
Comverse Tech.
(
CMVT |
Quote |
Chart |
News |
PowerRating) 27.22
Why should I give
up on this stock? The only reason to give up on a long is if it breaks below
key inflection points in violation of your horizon. I like to look at the
10-day line and the 50-day line to get a line on the next month. This stock is
ready to go if it can negotiate 30. That is the real obstacle that is keeping
CMVT from delivering the necessary goods that will satisfy investors. It has
to rise above 30 and when that happens it will then explode. I will come back
to this stock near term. I will buy it harder if it rises above 28.50 on a
close and get very aggressive on a close above 30.
Conexant Systems
(
CNXT |
Quote |
Chart |
News |
PowerRating) 3.33
Look at he
stunning action displayed by this stock. Pretty decent action and most of it
occurred after I sold it. Just goes to show you how good I really am. Great
pick and just an average trade. But this is round two and the stock is in good
shape to pick at and perhaps I will if it comes in just a tad. That is the way
I want to play CNXT.
Cardiome Pharma
(
CRME |
Quote |
Chart |
News |
PowerRating) 11.81
Now this is a gem
isn’t it? They are all gems. Each one written about in this piece and I
confess that as of this writing I own not a single one. I am angling toward
picking CRME back up. It is in good shape from a technical view and it is a
good idea so stick with it and make money in it. Place the stop at 9.75. The
stock is currently extended so approach it with caution. CRME is in a stunning
advance. So see the action and pick the spot and move in and execute. That is
my intention this week. Better to buy coming in. The stock is already up
16.93% this year.
Elan PLC
(
ELN |
Quote |
Chart |
News |
PowerRating) 14.55
It is related to
BIIB. Buy both as a pair or couple. They are like siblings. Both charts are
similar because the same news over a year ago had a similar effect taking ELN
down in a brutal way. Now it is on its way back in the same fashion as BIIB.
The stock has a chance to climb way higher then the current price point. Check
out the chart and let the pattern of trade tell the tale.
Emcore Corp
(
EMKR |
Quote |
Chart |
News |
PowerRating) 8.43
This was my choice
for the year. If I was a buy and hold investor and had a horizon that spanned
a year then this stock would provide the right touch. Check out the chart and
see the tale of the tape and what you ought to envision is an extended stock
in a solid advance that ought to come in to the 8 zone and enable you to grab
it and make a few bucks in it this year. I will get involved only if it comes
in a tad. Place the stop at 7.24.
Evergreen Solar
(
ESLR |
Quote |
Chart |
News |
PowerRating) 13.97
I began my involvement in this winner a couple of years ago when it traded at
3 a share. Here is where the buy and hold approach would have worked out well
and it is not to late to get involved and take part in the stock as it matures
in its current advance. It may yet get to higher points. That is the bet and
that is the only reason to get involved.
ISHARES MSCI Canada
(
EWC |
Quote |
Chart |
News |
PowerRating) 23.44
Don’t believe me.
Just look at the chart and see the action. EWC is in good technical shape and
the advance is steady. Volume is coming in to the shares. Nice action. A
winner at least for this quarter. It is my intention to trade on a quarterly
basis a basket of ETF’s that are in markets that indicate more favorable odds
to gain. Canada is a good market right now. EWC is up 7% this year easily
beating the SPX.
ISHARES MSCI Hong Kong
(
EWH |
Quote |
Chart |
News |
PowerRating) 13.50
This is a good
instrument and it is on the verge of breaking to a new 52 week high as it
bounced to trade near the top of its current range. A break above 13.65 on a
close will inspire greater confidence and more money to flow into the Hang
Seng and lift EWH to higher price points. That is the only reason to get
involved. Nothing else matters. If EWH rises above 13.65 on a close then I
will, get back into it.
ISHARES MSCI Japan
(
EWJ |
Quote |
Chart |
News |
PowerRating) 14.14
I got long Japan
last August. I will come back to it after a pullback. The NIKKEI 225 will pull
back. I question the ability of the current advance to persist. Will it be
sustained? Japan is extended right now and will likely come in and perhaps it
may be better to seek other chances. For this quarter at least it still pays
to play EWJ but go slow with new money.
ISHARE MSCI Mexico
(
EWW |
Quote |
Chart |
News |
PowerRating) 38.85
Latin America is the hot neighborhood within the scope of this current global
arena. Check the action and see the stunning rise that is happening in Mexico
right now. This instrument is up over 8% this year and close to 60% in the
last year. That is an advance.
ISHARES MSCI [EWZ|EWZ] 40.32
Want to get involved in an area with even more spice then Mexico then try
Brazil on for size. The Brazil market is the best in the world right now. It
is just a rocket ship rise so be somewhat careful. It is the best performer of
the quarter no question about that. It is up over 19% so far this year and
nearly doubled in the last 52 weeks. Yes it is extended so tread with caution,
but manage to get involved.
GoldCorp
(
GG |
Quote |
Chart |
News |
PowerRating) 25.77
Gold is hot. So is
silver. Lets get into GG and examine the probabilities. It is in an advance
but it is currently extended so the best way to play it is to let it come in
and adjust and when it appears less extended then pick it up. It may be had on
a break out if it rises to new highs.
Goldman Sachs Corp.
(
GS |
Quote |
Chart |
News |
PowerRating)) 138.94
I thought I sold this at the top the other day when Santa finally arrived on
the scene. Look at it now. Quite the performer and a real good stock to be
involved in right now.
Harmony Gold
(
HMY |
Quote |
Chart |
News |
PowerRating) 16.93
Look at the action expressed by this gold stock. Look at the stunning move it
made. It is extended right now so the way to play it is to let it come in a
tad. Stick a little toe in just to have it to watch. Then pounce on it when
the market provides the chance. Get involved as it comes in. Metals are in the
midst of a secular bull market that may last a while.
Informatica
(
INFA |
Quote |
Chart |
News |
PowerRating) 15.25
I will own this
again and perhaps sooner rather then later. Let it come in and pounce on it.
It is in a rocket ship rise. It has support in the 13.50 —14 zones. That is
the place to pick the shares up and place the stop at 11.99.
Merrill Lynch
(
MER |
Quote |
Chart |
News |
PowerRating) 74.72
Powerful advance.
Yes. The advance is powerful. No question about that. I picked it months ago
many points below the current level of trade and am still willing to buy it
back at levels closer to 70. The 70 zone would peak my interest and get my
attention and I would stab at it at that time and go for another 5%. The stock
is likely to come in on the next market adjustment and that is the appropriate
time to get involved with a stop at the 50 day line for a swing and the 200
day line for those willing to stay longer and live with some volatility.
Merck
(
MRK |
Quote |
Chart |
News |
PowerRating) 34.70
I got into it last year late in the year and made some money and sold it when
I went to cash earlier in January and now I am seeking to get involved in it
once again. This stock could rise above 40 and challenge the 43 zones before
the current advance concludes. It could all happen this year. It pays over 4%
a year while you get to collect a sizable gain after the stock manages to
cross 40 later this year or early next year. It is good to get on a pullback
into the 32-33 zones.
Marvell Technology Group
(
MRVL |
Quote |
Chart |
News |
PowerRating) 70.64
This was a stock
the same stock that this crazy guy that thought he knew something railed at me
about after I spoke highly of it in a piece I wrote for market watch almost
three years ago. It traded at around 26 a share at that time and the fellow
suggested that I was irresponsible for even mentioning the stock. Now look at
it. Take a peak at the chart and see the extraordinary advance it made since
that article was written. The chart tells the story and the story it tells is
that I was completely right about it. How it was subsequently traded is
another story entirely. The pick was right then and it is still right. It is
just simply right to get involved in MRVL and any other view at this point in
time is just plain wrong. Place the stop at the 10-day line because it is
extended. It is an extended stock that just somehow manages to stay extended
and you don’t have to be a genius to understand the meaning of that.
Inco LTD
(
N |
Quote |
Chart |
News |
PowerRating) 50.40
A fabulous stock
that I should never have sold. But at the time given the nature of my style
and methods it was a necessary move to make. Now I must take it on again
because it is trading in a stunning fashion and rising in a solid advance.
Place the stop at 44.75. Buy it coming in. It is extended so let it come to
you in the vicinity of 47 and change.
NVIDIA Corp
(
NVDA |
Quote |
Chart |
News |
PowerRating) 46.25
I picked this
stock months ago remember? Now look at it. Look at the action in this stock. I
will come back to it and make money being involved in it if it could just come
in a tad. It is extended and I will not chase it. It belongs to me at the
appropriate time. Let the market come in. Let NVDA come in 3 to 5% and then
grab it. Place the stop at 41.69 for the long stretch. Swingers use the 50-day
line and short-term traders place the protective stop at the 10-day line.
PS Water Resource
(
PHO |
Quote |
Chart |
News |
PowerRating) 16.95
This instrument
enthralls me. Just taken aback by it. Knocked for a loop about it. Love it.
Just kidding. I like the concept and as long as it trades in an advancing
stage then I am in it and will stick with it and get hold of it as soon as I
begin trading again next week. Place the stop at 14.99.
Power
Shares Dynamic Oil and Gas
(
PXJ |
Quote |
Chart |
News |
PowerRating) 21.62
How is it possible to avoid involvement in energy? It is an essential
component to any winning portfolio today. That is the current reality and this
index of stocks that make up energy services is a necessary component to any
portfolio today. Didn’t I just say that? Nothing else need be said. Let the
chart tell the tale.
Synopsys
(
SNPS |
Quote |
Chart |
News |
PowerRating) 21.83
Big break out on a
close above 22.10. That happening ought to inspire greater buying power and
higher price points. There is no question that I will get on this stock once
again and make money in it a second time around. In round two a dose of SNPS
will be added to the blend put together. Place the stop under the 200-day
line. Check out the nice steady rise after the brutal decline that happened
early last year. It is rising after establishing a decent base and is a
healthy looking chart today.
Tellabs
(
TLAB |
Quote |
Chart |
News |
PowerRating) 12.55
A solid performer.
Look at the numbers over the last year and this year thus far and what you are
observing when you do that is a clear winner. No matter what happened long
ago, you know that that is water under the bridge. Right now at this time this
stock TLAB is a winner and has a clear angle toward the 20’s. Place the stop
at 9.99. Buy it coming in if it does in fact come in.
Good
Shorts
HCA Inc.
(
HCA |
Quote |
Chart |
News |
PowerRating) 49.25
Sell short if it
closes below 49. It is on the goal line. It is in bearish control. The bulls
are done with this and have thrown in the towel so it is a good timely short.
Place the stop above its 200-day line.
The Hershey Company
(
HSY |
Quote |
Chart |
News |
PowerRating) 51.56
Here is one good
short and those that listened and executed know that it was a solid pick to
sell short and that happened many months ago when the stock traded near 60.
Look at this stock today and see the decline and know that it is currently
oversold and ought to be approached to sell short in a rally upon to the 54 to
55 zone. Place the stop above its 200-day line.
Wm Wrigley Jr. Company
(
WWY |
Quote |
Chart |
News |
PowerRating) 64.41
It is oversold and
ought to be sold short on a bounce. The 66-67 zones is a perfect place to
begin the shorting process in WWY with a stop placed just above the 200-day
line at 69.15.
3M Corp.
(
MMM |
Quote |
Chart |
News |
PowerRating) 72.65
Notice that the
shorts are composed of a couple of DOW stocks. The DJIA is split. There are
dogs of the Dow that are just plain dogs and ought to be sold short and MMM is
one of them. Look at the action in some of the poor Dow performers and begin
to comprehend the reason why the DJIA is a drag on the overall market. It is
the culprit that is keeping the lid on.
Johnson & Johnson
(
JNJ |
Quote |
Chart |
News |
PowerRating) 58.40
Look at the chart
and tell me what you see. Look at a daily chart and tell me about the decline
you notice. JNJ is in decline right now and money could be had shorting it.
Short it on a rise near 60. Place the stop near its 200-day line. The previous
stocks mentioned as good shorts are all low risk tries.
Psychology of the Market
The view is
pessimistic among odd lotters that are selling short in record numbers. The
specialists that control the books on the NYSE are net long and are at
historical low short interest levels. The smart money is net long this market.
That is why there are so many more longs then shorts in this piece. The
current market is short, intermediate and long term bullish and I will get
back into it after returning from Santa Monica California where I am
establishing an office to operate from. Advisors that write market letters are
extremely optimistic right now but that indicator covered by Investor
Intelligence is better at targeting bottoms rather then tops. As long as the
tape is positive and firing on all cylinders it is prudent to give the bulls
the benefit of the doubt and in this mid term election year the month of
January ends on a positive note and small cap growth leads all other major
averages in the U.S. The stocks market is bullish right now and in bullish
control. That is the case till the tape says other wise and it is far better
at this point to get involved and be net long. That is my intention as the
opening bell for round two goes off on Wednesday. Stay tuned.
Jack S. Rothstein
Rothstein Investment Advisory Services, Inc.
3600 Chain
Bridge Road, Suite 200
Fairfax VA 22030
Phone
888-343-4825 — Fax 703-385-7232
www.jrmoney.com
— www.wealthcast.com
Jack Rothstein is the
President of Rothstein Investment Advisory Services, Inc. and is a 20-year
veteran stock trader and a money manager.
Mr. Rothstein also writes Wealthcast, a monthly newsletter about the technical
behavior of the markets. He has been quoted on Bloomberg, CNNFn, the Dick Davis
Digest and the Dow Jones Newswire. Since 1993, Mr. Rothstein also hosted
WealthCast, a radio show in the Washington DC area covering the stock market.