Quick Review

I started shorting beginning November because the markets were showing what looked like the beginning of a down or consolidation period, on November 12 the SP500 closed below its ma(10) and on Nov 26 a clear downtrend line was formed suggesting more down prices to come.


Things didn’t work out as planed as the markets broke above the down line beginning December. My shorts didn’t perform so I started covering and opening long positions.


As markets continue going up, this Monday I have 4 profitable longs and one losing short. A quick graphic review of my longs follows:

Roc was bought on November 4 on the strength of the basic materials group. Roc held up great the November downtrend as it stays within an ascending channel. Beginning December Roc started a steeper tighter channel. As of today it is my best performing stock.


I entered CPNO on November 22 and right after I bought it started going down. CPNO held above the down line of the up trending channel. Let’s see where this canal takes the stock. I will start to worry if cpno closes below the low up trend line.


WMS was bought on December 3 as the ma(50) crossed above the ma(150) producing a very positive long term signal. The stock looks a little blown up now after it traded for five days above the upper Bollinger band. The ma(20) should acts as support.

My latest addition is CELL. I got Cell on December 8 as the stock broke above the bullish flag-type consolidation pattern.

If the markets don’t throw us a split finger ball again, those longs have good potential. For adding to my longs I am considering MGI and AKRX on the new strength of financials and the ever interesting health sector respectively.

On fundamentals and technical

“With a common stock, few of us are rich enough to afford impulse buying.”
Philip Fisher

Two companies came to my attention last week after both posted solid earnings and revenue:

Rockwood Holdings, Inc. (ROC) is a global developer, manufacturer and marketer of high value-added specialty chemicals and advanced materials used for industrial and commercial purposes. ROC products consist primarily of inorganic chemicals and solutions and engineered materials. They are often customized to meet the complex needs of customers and to enhance the value of their end products by improving performance, providing essential product attributes, lowering costs and/or making them more environmentally friendly.
On Tuesday October 26, 2010, Rockwood Holdings, Inc. reported earnings per share from continuing operations of $0.52 for the third quarter of 2010 as compared to $0.14 for the same period in the prior year. Rockwood’s adjusted earnings per share from continuing operations increased to $0.55 in the third quarter of 2010 from $0.19 for the same period in the prior year. In addition, Rockwood reported Adjusted EBITDA of $169.1 million for the third quarter of 2010 as compared to $151.1 million for the same period in the prior year.

DIGI INTERNATIONAL INC. (DGII) operates as a device networking company that develops products and technologies to connect and manage local or remote electronic devices over a network, via the Internet or via satellite.
On Thursday October 28, 2010, Digi International Inc. reported revenue of $47.3 million for the fourth quarter of fiscal 2010 compared to $40.0 million in revenue for the fourth quarter of fiscal 2009, an increase of $7.3 million, or 18.1%. Revenue for the year-ended September 30, 2010 (fiscal 2010) was $182.5 million compared to $165.9 million for the year-ended September 30, 2009 (fiscal 2009), an increase of $16.6 million, or 10.0%.

The following table shows fundamental data for both companies and their related industry:

DGII P/E indicates an overvalued company vs its peers, however analyst estimates a forward P/E of 18 for the company, in line with the industry. DGII has very favorable price to cash flow compared with the sector and the industry. ROE for this year suffered because of revenue decrease primarily due to weakened economic conditions and changes in product mix. From 2005 to 2008 the company incremented sales in a 48% but from 2008 to 2009 sales decreased 10%. It can be expected that profit margin and ROE improve going forward along with the economy.
Low points: High P/E, low ROE, low profit margin.
High points: No debt, High cash flow generating.

With a 15 forward P/E, ROC looks undervalued. The company shows high ROE and a fair P/Book. The price to cash flow is very positive and the profit margin is in line with its peers
Low points: High debt, earnings growth estimate below industry.
High points: Good P/E, High ROE and lots of cash.

And for the fun part of this analysis we’ll go through the market, sectors and individual stocks.






The Nasdaq continues its ascent started in the first days of September.





Looking at the 10 days momentum chart I see a decelerating rate of ascent. Despite the fact that a positive reading means the uptrend is still in effect, I would like to see the momentum breaks above the downtrending line.


The index 10-30 days moving average histogram continues on positive territory with a pause recorded around mid October. As long as this oscillator continues with a positive reading the uptrend should stay.





The basic materials and technology sectors represented by the iShares Dow Jones US Basic Materials (IYM) and the Technology Select Sector SPDR (XLK) ETFs, continue going up in line with the general market, they are both at a four month high.




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Rockwood managed to close above 36 last Friday and is now in a new four month high. The moving average oscillator stopped the descent that started around mid October and looks ready to begin going up again. A positive market next week should result in rapid gains for ROC.




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DGII has yet to make a new four month high, the stock paused from 10/20 to 11/2 and then started going up possibly fueled by good earnings news. The 10-30 indicator looks neutral, a positive reading next week will indicate a good entry point.

On Relative Strength, shorts and others

“Buy that which is showing strength - sell that which is showing weakness. The public continues to buy when prices have fallen. The professional buys because prices have rallied. This difference may not sound logical, but buying strength works. The rule of survival is not to "buy low, sell high", but to "buy higher and sell higher". Furthermore, when comparing various stocks within a group, buy only the strongest and sell the weakest.”
From Richard Rhodes' Trading Rules

I interpret this rule in regard of the relative strength of the different sectors of the market. Investor sentiment shift over time, and the sectors that 15 days or one month ago were hot could be lagging the market now, you have to be constantly probing the sectors to get ready to adjust your investment or trades.

15 days ago and for the last three months to that date, industrials were leading the markets and the tech sector was behind, then a change of sentiment started to move money out of industrials and into technology. I set out to find some stocks in the tech sector to buy and at the same time to look for some industrial stock to short. Screening with various criteria I found the following companies that picked my interest.

Thermo Fisher Scientific, Inc. (TMO), is a technological company that provides analytical instruments, equipment, reagents and consumables, software, and services for research, manufacture, analysis, discovery, and diagnostics. Thermo Fisher serves pharmaceutical and biotechnology companies, hospitals and clinical diagnostic labs, universities, research institutions, government agencies, and environmental and industrial process control settings primarily in the United States, Germany, and England. It has a collaboration agreement with Proteomics Researcher. The company was founded in 1956 and is based in Waltham, Massachusetts.

Arrow Electronics, Inc. (ARW) The company operates in two segments, Global Components and Global Enterprise Computing Solutions. The Global Components segment offers semiconductor products and related services. It provides passive, electromechanical, and interconnect products comprising capacitors, resistors, potentiometers, power supplies, relays, switches, and connectors, as well as computing, memory, and other products. The Global Enterprise Computing Solutions segment offers enterprise and midrange computing products, services, and solutions to value-added resellers. It also offers access infrastructure, security, and virtualization software solutions, as well as midrange servers, storage, and software solutions.

AboveNet, Inc. (ABVT), together with its subsidiaries, provides high-bandwidth connectivity solutions to corporate enterprise clients and communication carriers primarily in the United States and the United Kingdom. The company provides communications infrastructure and global Internet protocol (IP) network to various companies, such as commercial banks, brokerage houses, insurance companies, investment banks, media companies, social networking companies, Web-centric companies, law firms, and medical and health care institutions.


IDEX Corporation (IEX) engages in the manufacture and sale of an array of pumps, flow meters, other fluidics systems and components, and engineered products worldwide. Its Fluid & Metering Technologies segment designs, produces, and distributes displacement pumps and flow meters, injectors, and other fluid-handling pump modules and systems; and provides flow monitoring and other services for water and wastewater.

I am going to evaluate the different tech companies and the industrial one to see if there is some merit in buying or shorting.

Relative strength
For the past 15 days the tech sector is showing strong relative strength against the market, the industrial sector is lagging the SP500, our three tech stocks have a positive RS vs their group. Of course a favorable RS does not mean your stock is going up, it only means that the stock or group is favorable among the complete stock universe.

Insider Transactions
In the last 12 months insiders sold 294,169 shares of IEX, more or less a 24% of shares in insider’s hands. ABVT insiders sold 961,532 shares in the last 12 months, a worrying 16% of their net holdings approximately. TMO insiders bought 70,898 shares in the last 12 months increasing their holdings in a 7% approximately, and ARW insider’s net transactions in the last year of 241,709 shares, incremented their holdings in an 8%.


Short Interest
ARW and IEX have more or less the same short level with 3% of the float shorted, I don’t want to short a heavily shorted stock but also I don’t want to buy it. I prefer low short interest either to buy or short. ABVT has a 8 days cover ratio, to me it means that short sellers (very sophisticated and well research traders) have a down sentiment on the stock.


Market Cap


Put Call Ratio
When the market is very bullish, the volume of call options will be much larger than the volume of put options because traders are optimistic about future price movements. ARW and ABVT have put/call ratio of 0.2 and 0.3 respectively.
The volume of call options will be smaller than the volume of put options, when the market is very bearish because traders are pessimistic about future price movements. TMO and IEX exhibit a ratio of 1.88 and 1.47.

Last 4 weeks closing prices
All the tech stocks in our study closed this week at the highest level in four weeks; IEX Friday’s close is the lower of the 4 previous Fridays.


There is no divergence in the prices of ARW and IEX with their RS, the analysis call for buying ARW and some interest in shorting IEX.

Yesterday Action

The 1.7% advance of the dollar yesterday may signal a shift in the direction of the market at least in the short term. The strong volume of traders buying dollars (the highest in three months) could be the beginning of money going out of stocks and into cash.


Long term the market looks strong with the Dow Jones trading cleanly above the 10 and 30 weeks moving average, however a one or two weeks correction can take you out of your hard earned profits. Since I trade with a short to medium term in mind, I sold all my positions yesterday with a small profit. I am convinced that making money in the stock market is a long race with the preservation of capital being the most important consideration.

Now it is probably a time to reassess, The Dow lost 1.48% yesterday the SP and the Nasdaq dropped in excess of 1.5% and the volume was significant. I will be waiting for a signal of the markets to start trading again. A simple bullish signal would be for the markets to overcome Monday’s high which is also the same as last week high level.

Start looking for medium term shorts if the market closes below yesterday close or below last week low.


For shorts you may consider looking at AKAM and JNPR.

Rex Energy Corp

On August 31, Rex Energy Corporation (REXX) announced the following:

“Rex Energy will sell and transfer interests in its Marcellus Shale assets located in the Commonwealth of Pennsylvania, in a transaction valued at approximately $140.4 million. Under the transaction, Sumitomo will pay approximately $88.4 million in cash upon closing and an additional $52.0 million in the form of a drilling carry. “

REXX also presented us with the announcement that its present value of future cash flows before income taxes and asset retirement obligations (PV-10) grew approximately 87% to $357.2 million,.from the December 31, 2009, estimated of $190.5 million.

The market liked the transaction and announcement to the tune of a 10.2% increase in the stock price; also the volume that day was six times REXX average daily volume.

REXX share price kept climbing closing at 13.01 last Friday, which is an additional 15% rise since the August 31 close. In 29 trading days REXX climbed from 10.26 to 13.01, a 27% increase. That makes us wonder if REXX price appreciation is done for now, or if the high volume and price climbing is just the ignition to future gains.


REXX on balance volume climbed above the 50 day ma after August 31.

Since July 19 the SP500 has gained an 8.77%, in the same period energy stocks represented by the XLE Etf climbed 12.62% making energy one of the leading sectors of the market. REXX appreciated 25% since July 19.

What is not to like about REXX ?

The Nasdaq website reports almost 6 million REXX short shares, with a 11 days to cover ratio and a 18% of the float shorted, Big short sellers are very refined, informed and researched people, could they be wrong?

From Feb 2 to Aug 30 REXX short interest went from 3,018,696 to 4,385,470, an increase of more than 1,300,000 shares. In the same lapse the average price of REXX declined from 14 to 10 giving the short sellers great benefits.

But an interesting situation is developing since August 30, REXX short interest continued increasing to a Nasdaq-reported 5,985,076 short interest at Sep 15. At the same time the average price for REXX had gone from 10.90 to 12.70, more than 1 million short sales are losing money as of last Friday.


We will soon know the September 30 short interest, REXX is set to report on November 3, we have until then to speculate.

Israel Stocks - Cellcom ( CEL )

On late May 2010, MSCI a leading provider of investment tools for investors globally, including asset managers, banks, hedge funds and pension funds, announced the reclassification of its MSCI Israel Index to the MSCI World Index, coming from the Emerging Markets Index.

With that classification is expected that Israel Stocks attract more institutional investor since the MSCI International Equity Indices are the most widely used global benchmarks in the industry and a number of funds and ETF include MSCI indexes in their investing.

The process at MSCI to reclassify the Israel Stocks started in July 2008, with MSCI analyzing and verifying that Israel complied with the following among other criteria:

The country Gross national Income per capita is 25% above the World Bank high income threshold for three consecutive years.
High securities liquidity of 20% or more than the calculated annualized traded value ratio.
Market accessibility criteria rated very high in the following:
Openness to foreign ownership
Ease of capital inflows / outflows
Efficiency of the operational framework
Stability of institutional framework


It is no surprise then that Israel stocks are outperforming the market as you can see in this graph showing the relative strength of the Israel market represented by the iShares MSCI Israel Cap Invest Mkt Index (EIS), measured against the benchmark S&P 500.

I started to look for dual traded Israelis Stocks and decided on Cellcom Israel Ltd. (CEL), a matured more or less monopoly with a 10% plus dividend yield.

Cellcom shows strong relative strength against the EIS Benchmark, meaning that EIS is set to outperform the markets and CEL is in line to do better than the EIS index.


CEL is not far from its ideal entry point around 28, target is at 32 for a quick 10% gain, consider closing your position below 27.75 for a 5% loss, that is a 2:1 risk / reward ratio.

Some Insider Interest and good looking charts.

First I would like the SP500 to cross over 1125 with good volume, along with that happening I would very much interested in trading long these two stocks.


CODI (Compass Holdings)
The Nasdaq site reports 140,252 net insiders shares bought in the last 3 months, also the site reports net institutional buying of 3,742,222 shares.

There is some resistance at 15.30, if the stock gets to break above that level with a more or less high volume there is a pretty chance of a significantly upside. Above that level there is no resistance in the last 3 years, meaning that everybody that holds the stock has a profit, so no one is in a rush to sell.


COT (Cott Corporation)

Nasdaq reports that insiders bought 647,500 shares in the last 3 months, the net institutional activity is 1,510,180 shares bought at this time. COT broke above 6.5 with remarkable volume and is trading above the weekly ema(30) that should act as support.

OVTI

I shorted OVTI yesterday basing my decision solely on technical reasons.

It will be very difficult for OVTI to overcome the 3 months distribution level.

Also I will be publishing a trade journal. OVTI shorted at 20.51 is the first trade.

For Next Week

Here are the closing prices of the indexes on August 31 and on September 3 and the percent increases in three days of trading.

Index, Closing Price 8/31, Closing Price 9/3, Percent Increase

Nasdaq, 2114.03 - 2233.75 - 5.66%
Russell, 2000 602.06 - 643.36 - 6.86%
Dow Jones, 10014.72 - 10447.93 - 4.33%
Nyse, 6704.15 - 7055.03 - 5.23%

S&P 500, 1049.33 - 1104.51 - 5.26%
Are these impressive gains the startup of a new uptrend in the markets or are they just a dead cat bounce on a market (S&P) that in a four month period (4/23 – 8/24) lost 13.6%.
Let’s look at the support and resistance level in the S&P 500 trying to get some insight on the market.

For the longs:The 1100 level should stand its ground next week, a close above 1110 would be most desirable. Trading between 1100 and 1070 is meaningless, in fact a minor pullback is expected after a 3 day 5+% gain. We’d like the SP to open above 1110 (less than half percent point over Friday close) and stay above 1110 for the day. Next important resistance is at 1130.

For the shorts:
1070 is an immediate support level for the index, an opening below Friday close and a closing below 1070 would be great. There is some minor resistance at 1040 but below that it may be a free fall.

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Other way to look at the indexes are the simple moving averages which have the inconvenience of being lagging indicators, but after they are aligned in the downside, it is very hard and it needs a lot of buying for a stock or index to reverse direction.

The major indexes are still under the wicked dark cross, this signal occurs when the 50-day moving average crosses below the 200-day moving average. For some traders this is the uber-bearish signal. The SP came to be under the cross on July 5 when it closed at 1022.58, since that day the SP had gain over 8%. Maybe that cross isn’t so evil after all.

Previous to the July 5 cross, the ma(50) crossed below the ma(200) on Dec/21/2007, closing the day at 1484.46. After that the SP went to a loss of more than 50% until March 2009 when it started recovering. The dark cross is a signal to be reckoned with.


It is possible to make money buying long on a general down market, also the markets sooner or later are going to recover, meanwhile be very careful with your longs.

One profitable trading set up is the alignment of the 10, 20 and 50 simple moving averages either up or down. This set up on 7/30 failed when it could not drive the index higher; it looks ready to try again.


For long take a look at TOWN and CSR.
For short UHAL looks interesting.

On Worth and Cramer

I read two articles on august 10 about the markets, and I would like to share some excerpts.

This one is from Bloomberg:
“Aug. 10 (Bloomberg) -- Stocks could go either way and anyone who claims to know their future is lying, according to Carter Worth, the third-ranked technical analyst in last year’s Institutional Investor survey.
A monthlong gain in the Standard & Poor’s 500 Index has left bulls and bears at a “a perfect standoff,” Oppenheimer & Co.’s Worth wrote in a note yesterday. It’s a “coin toss” as to whether the index will increase or retreat, he said.

Worth’s ambivalence highlights the challenge for investors as earnings rise at the fastest rate in 22 years even amid signs the economy is faltering. The S&P 500 rallied as much as 9.2 percent from its Dec. 31 close this year and dropped as much as 8.3 percent. It climbed 0.6 percent yesterday to 1,127.79, up 1.1 percent for 2010.

“This is the elegant, exquisite moment that you’ll see a handful of in your lifetime,” Worth said in an interview. “Anyone who says to you, ‘I know where it’s going,’ they’re lying to themselves and they’re lying to their clients.””

And the other article is from CNBC:
“ Cramer: ‘Fed Said Good Things-Buy’
cnbc.com | August 10, 2010 | 03:26 PM EDT
What’s the takeaway from Tuesday’s announcement from the Federal Reserve?

“They are not in the way.” Cramer said during Stop Trading!, meaning the central bank is doing whatever it can to promote an economic recovery.
The “Fed said good things,” Cramer said. “Buy””


Cramer and Worth are both outstanding personalities in the financial world, and both are in a way right, I more or less concur with Worth about the non-directional market, but after yesterday drop is coming close to become a bearish one.

This is my last post until after august 25 and I want to leave you with two trading ideas based on the ancient craft of point and figure chart interpretation.

Cymer Inc. (CYMI) and JDA software group Inc. (JDAS) are two companies in the technology sector and different industries, JDAS is a software company and CYMI is in the Semi-Conductor group.

On July 27 JDAS posted weaker-than-expected adjusted quarterly profit as operating expenses jumped 60 percent, but reported revenue that beat expectations.

The company earned 48 cents a share, excluding items, while total revenue rose 59 percent to $158.4 million.
Analysts on average were expecting earnings of 52 cents a share, excluding items, on revenue of $153.5 million, according to Thomson Reuters I/B/E/S.

At 12:25 PM EDT today JDAS is trading at 23 with a P/e of 90.20, it’s latest quarter figures set the following yearly results: Profit Margin 3.72%, return on assets 4.91%, return on equity 3.66% and current ratio 1.75.
Analysts estimate a 9.00% yearly growth for the following 5 years.

JDAS started a bearish formation when it traded at 24, breaking below a triple bottom formed at 25 with descending tops. Jdas stopped the down move at 22 reversing up to 25. Some traders like to short a bearish formation on the reversal move; others wait for a new breakdown. Price projections set the objective at 14.



On July 22, CYMI reported a 16% increase in revenue from the previous quarter, making this the sixth consecutive quarterly sales increase; also net income and EPS have been growing in the last 6 quarters. At 2:48 PM EDT today, CYMI is trading at 31.36 with a P/e of 15.75. With a 13.85% profit margin, ROA of 8.62% and ROE of 11.19%, some analyst would say that CYMI is a value stock.

With an estimate of 0.63 EPS for the next quarter, the forward P/e at today price is 13.81, combine that with analysts projections of an annualized growth of 19.73% for the next 5 years and you have a stock with a 0.70 PEG. Also adding to the good numbers, insiders lately have been buying the stock.

CYMI started a bullish formation when it traded at 34, almost immediately the stock reversed. Support is at 29, price objective is set at 48.


Good luck and remember short term is all about the market move, long term is about value.

Axcelis Technologies Inc. (ACLS), and the symmetrical triangle

It’s said that chartist are guilty of seeing continuation or reversal patterns in almost any chart. A formed pattern isn’t reason enough for trading a stock but it can give you a perspective of the future move of the stock.

ACLS went from 0.80 on November 4/09 to 2.50 on April 26/10 for an impressive triple in six months. Of course that uptrend wasn’t sustainable forever and the stock gave back part of its gains trading lower until the 1.40 level reached on July 6.

Since then ACLS started trending higher forming what may be a bullish symmetrical triangle, which most of the times is a continuation pattern. The symmetrical triangle constitutes a pause of the original trend after which the prior trend is resumed.
A valid triangle needs at least four reversal points, meaning each converging line must be touched two times minimum.


If ACLS closes decisively over the upper converging line (blue) the bullish continuation pattern is confirmed, that line will be support for that moment on. The target would be the height of the triangle plus the price at breakout.

This triangle is coming to and end in one or two weeks, if the bullish pattern is going to work the price must close over in the following days, if not, there is a high possibility that prices will continue to drift out to the apex and beyond or start a new downtrend.

Nucor and the price channels

Sometimes stock prices trend between two parallel lines forming what is known as a price channel.
When a channel is recognized it can be use for trading into the channel or you can wait for the breakout over the upper channel line in a downtrend to buy the stock.

On April 16 NUE ended an uptrend closing significantly below the lower channel line, the stock zigzag for a couple of weeks, and then started a downtrend between two well defined channel lines.

On July 20, Nucor closed at 39.82, 3.56% higher over the previous close and also broke over the down trending upper line. Measuring techniques put the price target an equal distance to the width of the channel, in this case 3.5 over the breakout price of 39. That results on a target of 42.50.

At yesterday closing price of 40.30, the target price of 42.5 gives us a 5.25% profit.

Or you could buy NUE September 40 calls at around 1.6, that would give you a profit over 50% if the stock reaches the 42.5 target before September 17.

Long and short ideas

Yo considero que el mercado actual es un mercado sin movimiento direccional, y la mejor acción en estos casos es no hacer nada hasta esperar señales de dirección, pero si tienes la necesidad de negociar aquí presento dos ideas.

I consider this market to be a non-directional movement market, most of the times on this market the best course of action is doing nothing until the market shows direction, but if you need to trade here I present two ideas.

Vamos a analizar dos stocks utilizando diferentes formas de estudio de gráficos con diferentes indicadores.

Let’s look at two stocks using various technical indicators and chart interpretation.

Primero: El caso Long para CXPO (Crimson Exploration Inc.)

First: Long case for CXPO
El “principio abanico” es una forma interesantísima de utilizar las líneas de tendencia, básicamente este principio indica que al romper 3 líneas de tendencia a la baja, una stock revertirá su tendencia y empezará a subir. Es llamado así pues las líneas de tendencia toman la forma de un abanico de manos. Por lo general las líneas descendentes se convierten en puntos de soporte. CXPO rompió sobre su tercera línea descendente el jueves 29, y el viernes continuó ascendiendo. De verificarse el cambio de dirección, el soporte estará por debajo de la tercera línea mas o menos a 2.90

The fan principle is an interesting use of the trend line, it indicates that a stock must break over 3 down trend lines before reversing tendency. It is called fan principle because the lines resemble a fan. Previously broken resistance lines usually became support. CXPO broke over its third down trend line on July 29 and keep up next day. If the new up trend continues, support will be below the third line at 2.90.



En el siguiente gráfico vemos como CXPO experimentó una fuerte resistencia en los 2.90, tocando ese nivel desde abajo durante todo un mes, luego a principios de Julio el precio subió sobre 2.90 durante 2 días para luego volver a caer bajo este nivel.
Nuevamente la stock se encuentra sobre 2.90, aparte desde principios de Julio, CXPO ha iniciado un modesto uptrend con los precios bajos en ascenso.

El OBV continúa una alza que inició desde principios de Junio, antes que el precio empezara a subir, lo que indica que el volumen mas grande se da en los altos.

Next graph shows strong resistance at 2.90, the stock was tapping that level from behind for more than a month. First days of July the stock closed over 2.90 for two days before going below that level again. Now CXPO is over 2.90 again but more important, since the start of July the stock initiated an uptrend with higher lows.

The on balance volume keeps going up since June, indicating the heavier volume is taking place on the upside.

CXPO está en la industria del petróleo y gas, anunciará resultados el próximo 12 de agosto.

CXPO is in the oil and gas industry, it is set to announce results on august 12.


Second: Short case for Cemex
Segundo: Vender short Cemex

My short idea is based in one of the oldest chart interpretation techniques. The point and figure charting have a starting date in 1886.
The Point and figure chart is a study of price movement, time is not taken on consideration while charting the price action.

The X represents rising prices and the O shows declining prices.

On July 27 Cemex announced more or less mediocre results, consolidated net sales decreased 3% in the second quarter of 2010 to approximately US$3.8 billion versus the comparable period in 2009 and operating income decreased 23% during the quarter compared with the same period last year.

CX chart shows a triple bottom at 9.5, the tops or X columns are making lower tops, suggesting that demand is drying up. If the stock touches the 9 level it means that the bottom has been violated, signaling a short sell.

Mi idea short está basada en uno de los mas viejos métodos de análisis técnico, el “point and figure charting” que posiblemente se inició en 1886.

Los gráficos “point and figure” solo estudian el movimiento del precio, las X representan precios a la alza y las O precios en baja.

Cemex declaró beneficios en Julio 27 que no fueron muy halagadores, sus ventas decrecieron en un 3% con relación al mismo cuarto un año atrás, también los ingresos operativos decrecieron un 23% con la misma comparación.

El gráfico de Cemex nos muestra la formación de un triple fondo en 9.5, aparte los altos han ido bajando desde 12 hasta 11 formando un tope descendente, lo que significa que la presión de compra es cada vez menor. El cierre de la stock a 9 o bajo 9 significa una señal de que el fondo ha sido violado y sería un indicativo para vender short la stock.

Steel Dynamics, STLD

Steel Dynamics Reported Second Quarter 2010 Results On Monday July 19, 2010, 5:19 pm EDT, which were below the expectations. Also the company provided a cautious near term guidance.

In spite of the not so good results and guidance, next day STLD shares closed 1.93% higher, even though the stock opened the day 1.86% lower. The volume traded that day was the bigger in more than a month.


Now this looks like good news, when a company reports and its price goes up is a positive sign but we know that a stock price movement is more than 60% group and market related. Let’s take a look at the steel group that day.


Steel closed 4.91% higher on July 20. STLD 1.93% gain don’t look so hot, in fact the stock lagged the group, also the market closed the day with a 1.14% gain.


However there’s still hope for Steel Dynamics

If the strength of the market and steel keeps on, we certainly will see up movement on STLD.

It is said that things come in threes in the stock market; STLD broke over its third downtrend line on Friday, signaling the possible beginning of an uptrend.


STLD is trading above the 10,20 and 50 days moving average, also the ma(20) looks ready to cross over the ma(50), a move that will align the stock and the averages in an uptrend.


Professionals buy strength and sell weakness, next week a couple of steel companies are set to report earnings, if the results are good, the group up movement will carry STLD.

Do you want to speculate?

Buy STLD if the stock closes over the upper 4 week channel, 15.10 looks like a good limit, allow a limit 5% down movement two or three days after the trade, then if the stock moves up set your sell stop below the ma(20).