Tze: 9:33 AM
BAC rocketed 25% on top of 8% yesterday. This would be an over 30% gain if you followed our BAC analysis posted yesterday.
Link: http://www.focalequity.com/2011/08/24/2011-08-24-1216-am-stock-and-etf-model-update-and-commentary/
Tze and Roller Coaster: 12:58 AM
The stock model is updated to reflect today’s market move. You can download the entire model Excel output file here: StockModelFile_20110825 Remember we do welcome individual stock and ETF commentary requests. All you have to do is submit your request or questions in the comments section of this post and we will promptly reply.
For 08/25/2011 trading day, we are going to focus a long position in EMC (EMC Corp) and a short position in RIMM (Research in Motion) Charts are provided by contributor Roller Coaster.
According to our ranking model, EMC’s valuation is cheap at the moment based on our book, PE and PE to Growth related composite value factors. In addition, our contrarian indicator indicates more upside potential for the stock. EMC has a Quintile Ranking of 1 ( 1 – best, 5 – worst). The stock is beginning to move up, and the MACD histogram is ticking upwards. EMC may now fill the gap.
RIMM (Research in Motion) ranks poorly within the FocalEquity Stock Ranking model (a Quintile Ranking of 4 ( 1 – best, 5 – worst)) because of the issues related to its earning composite factors. RIMM’s earnings have been terrible. In addition the stock rallied sharply from its low in early August and its contrarian indicator within the model is no longer attractive. It’s now at the 50 EMA and at the gap, which can serve as resistance. RIMM can continue to make lower lows from here.
ETF Model Update:
You can download the entire ETF model Excel output file here: LeveredETFModelOutFile_20110825
Today we like to highlight ZSL (Proshares Ultrashort Silver). With the huge rally in precious metals in recent trading days, silver is likely going to face another severe round of correction along with gold. ZSL has made a lower low, and the MACD is showing some divergence in the histogram. The histogram appears like it will make a zero line crossover, and the MACD lines appear like they are about to make a crossover.
Using the latest data inputs, the ETF model is giving a mixed signal regarding bull and bear ETFs. The overall tilt is to the bullish side. You should carefully look at each trading signal and ask us questions on our blog if you are uncertain.
ETF Model Image Capture (for trading day 2011-08-25)
Hey Tze! I like this pair trade of long EMC and short RIMM. Would like to see a break of 21.50 on EMC(and it is close now) to go long. I would short RIMM if it gets to the 29.75 – 27.85 level. I see some pretty good resistance there. In the mean time, while everyone was looking to Ben’s speech tomorrow, Warren Buffett makes a huge buy that changes the market to positive.
Yea look at BAC. Our Long call on BAC probably made a fortune for anyone who paid attention
Unbelievable. BAC’s stock was so heavily shorted and the short covering rally is very powerful as it was indicated by the contrarian factor in our model two days ago.
We do favor the EMC/RIMM pair trade here.
Thanks for the comments Brownie. We thank you for your continued support.
In EMC at 21.61. I have a target of 22.47. I will wait to see if RIMM gets to 29.75 to short.
I like the $29.75 level for shorting RIMM. a 10% in EMC is very reasonable. I also wouldn’t be surprised if SPX rallies back up to 1300 or so. I think Wall Street is expecting QE3 from Ben and that is what they are going to get
So RIMM got up to 29.60 this morning, just 15 cents shy of your target.
?
Is Bernanke collaborating with Buffet now to aid Wall Street
I know, just 15 cents away! Just took a day trade on SPY at 117.89. EMC giving anyone who missed the first chance to buy it here again.
We definitely see the chance of EMC rising to the previous support level of $22.30 ish. BAC was the big trade though. I think any huge rallies from here would be dependent on short covering partly. QE3 or equivalent would cause a rally but there will definitely be more pains ahead for the market.
Had my stop on my SPY tied to the dollar at 74.18. It has held up so far. Agreed on BAC and will be watching this close today along with other financials. I can’t help but think there are more shorts waiting to get out of their BAC positions. Do you still see BAC as a buy and if so at what level?
No after a 33% rise from $6. BAC has some fundamental issues with its balance sheets I think so there might still be skeletons in the closet.
Stopped out of SPY trade with a 60 cent loss. EMC slightly under water. However, your EMC/RIMM pair trade is looking good! I just got a little piggish trying to short RIMM at a better price. My bad. Should have listened to you. Great call!
The market seems to think this Berkshire deal shows there is more troubles to come. SPY is at a key support at 116.50. If this doesn’t hold, LOOK OUT BELOW!
Yea look how quickly BAC’s rally faded. This is a dangerous market. Slow reactors won’t keep much of any profit
SPY support level held(no confirming candle), but it looks like it wants to retest. Not a bullish sign if we get there(IMHO). I’ll bet most of those who bought BAC early yesterday got out this AM. Those with inside information continue to make a killing.
Yea that plus the massive short covering this morning. At the moment RIMM and EMC pair trade is going the wrong way
Perhaps RIMM is doing better because of Steve Jobs leaving Apple. I disagree with that line of thinking and will still short RIMM if it gets to my 29.75.
I agree. I was just joking
Gold continues to face selling pressure. Also BAC’s early rally faded quiet a bit. People need to take profit on a name like BAC because once the short covering panic finishes, BAC won’t have much of an upside. It’s a brief rally and nothing more like we pointed out in our 8/24 commentary.
It’s nice to see this blog active again. Slope of Hope posted this article at their site. Based on some comments there, they like RIMM short too.
Yea but we prefer to their folks to talk about their thoughts at the source of that article which is here at FocalEquity.com. The board is active today thanks to Brownie but we need more people. Two people exchanging ideas on a platform like this is not enough
ES showing weakness. Gold up.
Yea this is a bad sign. There is absolutely no conviction in this market. People are really selling into the rallies as oppose to following through.
Market looks weak and volume has slowed. I will watch the last half hour to see if we close at our lows.
The market is actually making a pretty good inverse H&S right now. We could actually close in the green
I hope your right, but I’ll bet ya a beer we close below 117 on the SPY.
I don’t drink
That won’t be a problem if you lose. Seriously, it would be my pleasure to buy you a drink of your choice and dinner if our paths ever cross. Your on the west coast, right?
Thanks Brownie. I am on the East Coast not too far from Craig, who used to manage StockTock.
The net gain/loss on the EMC (Long) /RIMM (Short) pair trade today is loss of 30 bps (0.3%) so far.
Hey Tze, it is looking like a real possibility that the hurricane could do significant damage in a wide area. Think we could get a bump on an infrastructure play? I’m thinking about an ETF like PKB. Any thoughts?
hm.. very thinly traded ETF. Reconstruction play in the U.S is not a good bet in my opinion. Look at New Orleans, you would think it would be a good bet for reconstruction but look what happened. The U.S is broke and it can’t afford to rebuild infrastructures. The stimulus plan failed partly because of this reason. I think a bet that make more sense would be the continued appreciation of food and agriculture. Things like RJA.
I am overthinking this probably. Still, I think we may have a lot of damage and the east coast is not New Orleans. I’m looking at a swing trade here. Looking at call options on HD.
if you happen to land on a big down day, that wouldn’t be good. I would control the risk here by sticking to pair trading. (either options or stocks)
Taking a small position in HD $34 Calls at a buck.
Let’s see what happens tomorrow. I didn’t like the way the market closed. Of course it didn’t rally back up haha
The media is going to start to go crazy over the hurricane, especially since the New York area is involved. I’m playing this as a case of people seeing lines at Home Depot on TV and this giving the stock a boost. I’ll be out of the trade tomorrow up or down. Since I don’t work tomorrow I should be here to post. Let’s get this board a jumping!
That is a great thought both in terms of HD and contributing to this board. As you probably noticed I sent out an email to all the 28 people who at commented once since 4.21, the transition date. I am hoping that the rest of the 27 people can chime in and help as well. I estimated that in order to return our site and board to the previous high point we will need at least 50 people consistently involved in the daily discussions. It might not seem that many but it’s really hard to get 50 dedicated people. Easier said than done.