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JC Penney (JCP): A Great Short Opportunity

Sep 28, 2015

Investors are giddy for J.C. Penney (JCP), bidding it higher on a Sterne Agee upgrade from “neutral” to “buy” with a $13 price target… After spending time with the new CEO – Marvin Ellison – the analysts “came away more confident in the company’s turnaround game plan.”

While we’re not ones to argue whether Ellison is a good guy or not, JCP is toast. I don't find many people going out of their way to shop at JCP any more… unless there’s a deep discounted sale. In addition, JCP is running into heavy overhead resistance with overbought reads on RSI, MACD and Money Flow. Consider buying to open the JCP November 2015 10 put up to $1.35.

 

Caterpillar, Inc. (CAT:NYSE): Dead Cat Bounce Candidate

Sep 27, 2015

With continued weakness in markets, Caterpillar lowered its outlook for 2015 sales to $48 billion from $49 billion. The stock was then punished with a gap down from about $72 to less than $65 in no time at all…

While the company is far from being out of the woods, it’s now exceptionally oversold on Money Flow, MACD and RSI. Typically, when the lower end of these pivot points are hit or penetrated we see a near-term, quick pivot higher.

All we want to do here is be in position for that quick move higher… take our money, and move on. That’s it. The market is too much of a mess to buy and hold any more. The real money is being made with quick hits… Consider buying to open a small position in the CAT November 2015 65 call up to $3.

 

Oil Prices: Crude is heading lower…

Sep 24, 2015

Be mindful of potential pullbacks in oil…

The headlines, the talking heads may tell you we’ve hit bottom.

But as many traders have learned in the past, be careful.

They’ve chased hope before and lost big.

After the suckers chased headlines that $334 million was pumped into oil ETFs last year, oil traders thought the bottom was in.

It wasn’t.  Weeks later, oil would fall more than 35%, wiping out any and all hope.

By December last year, investors began buying oil company shares. Traders got excited and chased the news, only to watch oil sell off another 30%.

Then T. Boone Pickens attempted to call the bottom on news of falling rig counts. He was wrong twice, attracting suckers into oil.

Nowadays, oil traders will have you convinced oil has hit bottom. But given time, they’ll learn they’re far too early.

Oil may have rebounded from $38 to $45, but I don’t expect the move higher to last long. We have to remember that demand is very likely to slow in a seasonal pullback. And we must consider estimates that production will exceed demand through late 2016.

Investors have chased hope before in the oil patch… and lost big.

Don't chase oil here. Just remain patient. And short any – and all – rallies.

 

Volkswagen AG (VLKAY): Could it be a Buy here?

Sep 23, 2015

The scent of fear is pungent. 

Shortly after Volkswagen AG admitted cheating on U.S. vehicle emissions tests, the stock gapped from about $37.50 to less than $25 in a heartbeat… The company was smart enough to fire CEO Martin Winterkom, as a result of the scandal.

According to reports, up to 482,000 of its diesel cars are spewing nitrogen oxide at more than 40 times acceptable levels. As a result, The U.S. Environmental Protection Agency says the company could face up to $18 billion in fines because of this.

It’s a real mess… One that was quite avoidable, though.

However, now may be the time to buy… and hold for the long-term. Once this blows over, I expect business as usual. Take very small bets here on oversold technical reads.

Biotech Stocks: Buying the Fear

Sep 21, 2015

Greed kills…

It’s as simple as that.

As much as we want to blame a presidential candidate’s tweet that sent biotech screaming lower today, most of the blame rests with a CEO that decided to screw folks with a 5,400% increase in price per pill.

Folks depend on specific medications, oftentimes so they don’t die.

For a CEO to charge $750 for a single pill that they paid $13.50 for the other day is ridiculous. This is a drug that treats toxoplasmosis caused by a parasite that can be deadly, especially in those with weak immune systems.  That news of the drug price pump was enough to get one candidate to say, “Price gouging like this is specialty drug market is outrageous. Tomorrow I’ll lay out my plan to take it on.”

That was enough to scare the hell out of those in the biotech sector – already deemed over-inflated. The news was also enough to send the NASDAQ Biotech Index (NBI) down more than 150 points on the day.

While the fear of further decay is likely for biotech, immediate term, I still strongly believe – as I have since 2008 – that biotech is one of the safest places to invest… especially over the next 20 years. We’re buying the dips.

 

 

 

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