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Cummins (CMI): Is the Dividend Enough?

Jul 17, 2015

What do you do when your stock valuation has fallen off radar… and on one seems to really care any more?

You raise your dividend 25% to 97.5 cents from 78 cents.

That’s payable on September 1, 2015 to shareholders of record on August 21, 2015, by the way.

But will it be enough in such a weak economy? There’s hope, as the stock catches support just under $130 a share with reversing RSI, MACD and MFI indications.

Nothing is ever a guarantee in this market though. We all know that from painful experience. But I’m willing to bet on near-term bounce in the name. Consider buying just the underlying stock here up to $130 with a -10% stop.

 

Greek Debt Crisis: How to Trade it Now

Jul 15, 2015

And here we go again…

After testing 200-day support, the S&P 500 rallied to 2108 this week on potential deal with Greece and its European creditors.

But what many don’t understand – again – is that the deal could easily fall apart. Even if the Greek parliament approves the new plan, it could still be rejected because no one is really happy with the deal in the first place.

We have to consider the new plan was reached under extreme duress. The people of Greece aren’t too happy about this deal whatsoever. So it’ll be interesting to see what happens…

We also have to consider that even if the deal makes its way through parliament, it’s a tough pill to swallow. We can only hope Greece will actually be able to do what’ll be required here. A 50 billion euro “privatization fund” doesn’t seem likely because it would take up to 100 years to reach a 50 billion euro goal.

For a moment, though, let’s assume a deal is possible.

The IMF can still destroy it already arguing that targets set by Greece cannot be met. And in order for the IMF to participate in the bailout deal, the IMF must believe Greek debt is sustainable.

It’s not.

Other than Greece, we also have to contend with Puerto Rico’s potential default.

We have to remember that it is days away from an imminent historic default on $72 billion. Attempts to cut expenditures and restructure debt have failed.

While the U.S. Treasury Department has been providing guidance to the island, there’s no word on bailout plans.  That news, coupled with Greece could have terrifying realities for financial markets and unprepared U.S. investors.

The problem is that Puerto Rico debt problems aren’t just confined to the island.  Some of the biggest U.S. mutual funds have significant wagers on Puerto Rico’s municipal bonds, too. Funds run by Oppenheimer and Franklin Resources have big exposure to this debt.  They hold about $4.5 billion and $2.3 billion of the debt, respectively.

Standard & Poor’s just lowered its rating on the region to “imminent default,” as well.

But as with everything, it’s a wait-and-see, as usual.

We have the same market concerns we had when the S&P failed at its last double top. The bulls are forcing the market higher on nothing more than hope… again.

But when the garbage hits the fan, it’ll be a disaster.

One of the easiest ways to profit from a potential pullback on global realities is with the Pro Shares Ultra Short S&P 500 (SDS) ETF. This will allow us to profit from pullbacks on the S&P 500 when – and if – things hit the fan.

 

Micron Technology (MU): Get a Piece of the Buyout Premium

Jul 14, 2015

Like a bat out of hell, Micron rocketed more than 11% on the day…

Just weeks after our technical pivots marked bottom, the very undervalued stock jumped on news that Chin’s state-owned Tsinghau Unigroup plans to submit a $23 billion – or $21 a share – buyout offer for the company.

If the deal goes through, notes CNBC, this would be the biggest Chinese takeover of a U.S. company. The $23 billion offer would be a 19% premium to Monday close.

Instead of buying a call option on the news, consider just buying the stock here today under $20…

 

Opko Health Inc. (OPK): The Anticipatory Momentum Trade

Jul 09, 2015

After running from $8 to $19, OPKO pulled back, consolidating just under $16 since May 2015.  As we near its PDUFA date of September 5, 2015, I believe we could see a break back to $19 as momentum begins to pick back up.  One of my technical indicators – MACD – is sitting on the floor, an indication of an oversold situation overdue for correction to the upside.

OPKO’s Rolapitant is up for review, as a supportive care product for chemotherapy-induced nausea and vomiting.  If you’ve known any one that’s undergone chemo, you know this can be severe, greatly uncomfortable, and sad.  The last thing any one should have to deal with is a cancer.  I wouldn’t wish it on my worst enemy.

If approved, there’s a potential $1.25 billion opportunity.

There are two ways to trade this opportunity.  One, you can buy just the stock up to $17.  And, or consider buying to open the OPKO September 2015 17 call up to $1.45.

 

Restoration Hardware Holdings, Inc. (RH)

Jun 29, 2015

We just learned BB&T upgraded Restoration Hardware (RH) to a buy rating with a $120 price target, implying 25% upside potential.

Apparently, the analyst is encouraged by the “introduction of Restoration Hardware Modern, which management describes as a carefully curated collection that combines the clean lines and minimalist aesthetic of modernism with the comfort and quality that defines the Restoration Hardware brand.”

But let’s be real here… I can probably buy this “Modern” stuff at half the cost over at IKEA.

The excitement is over. There’s nothing to see here, in my opinion.

While there may be further strength down the line on potential revenue boost “if” there’s success, technical pivot points are pointing to a near-term sell-off. Not only is the stock challenging its upper Bollinger Band (2,20), it’s become a bit over-extended on RSI, MACD and Money Flow.

Betting on a near-term pullback to the 50-day moving average, consider buying to open the RH November 100 put up to $8.

 

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