My 5 Penny Picks For The Week
Market
Trend: Up
Market Outlook:
Bullish (Navarro), Bearish (Aloyan)
Sector Watch: Oil services (+),
metals and mining, chips (-)
David’s Pick: Strangle Metris
(MTX)
Peter’s Picks: ISO, IMNY,
PIII, SATC, WMB
Navarro’s Broad Market Outlook: Rotation or Correction
Along the bullish highway, there are always speed
bumps. We’re approaching one now as the market decides
whether it wants a broad correction or just a little pause with some sector
rotation. The problem is that the temptation to take some profits is growing
and either way we are in for a little turbulence.
My own view is that a healthy sector rotation will win out over any broad correction
and possible swoon. The economy and earnings news are just too strong while
there is ZERO pressure on the Fed to raise interest
rates. Moreover, across the pond, the euro ministers may help further reduce
the probability of interest rate hikes with cuts of their own. So on any given
day, we will see some profit taking in sectors like tech and telecom and some
rotation into emerging sectors. But the lure of riches is still too strong to
lure the bear out of hibernation.
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Yes, there are some big
reports coming out this week, including the all-important latest GDP numbers.
Everyone is expecting good news so there is little upside, BUT
a lot of downside if GDP (or durables or consumer confidence/sentiment)
disappoint.
STILL, earnings will dominate the market moves.
Behemoth bellwethers like AMEX, MacDonald’s, Amazon, UPS, and Exxon will
cut a swath across the economy.
^Next^
Sector Watch:
Up: The
Broad Markets — Oil Services sector showing some recent strength.
Down: Metals
& Mining, but watch the recent weakness in the Semiconductor sector.
David’s Pick:
Strangle Metris Companies
(
MXT |
Quote |
Chart |
News |
PowerRating)
This one is for traders only! This stock is coming under heavy legal fire, financial
reporting discrepancies, and another possible insider trading scandal featuring
a former editor-in-chief of MarketWatch.com. The weekly chart below shows that
this stock has been in a basing pattern for over 18 months. On Balance Volume
(OBV), and Stochastics have been trending up, and the MACD is above the zero
line. The big kicker is the heavy short interest which currently equals about
58% of the float. This all combines to make a perfect option strangle play!
The strategy is to buy the
Jan. ’05 $7.50 strike price calls, and the Jan. ’05 $5 puts; the
total debit should be about $2.20 as of Friday’s close. If this stock
starts to break out towards the upside, the short covering could send this stock
to the moon; which equals a huge profit on the “strangle†position.
On the flipside, the downside of any scandal could take this stock below a “buck.â€
Your breakeven point is a stock price of $9.70 on the upside, and $2.80 on the
downside—