It’s a new week and every new week is a new beginning and a new start to filter new stocks, analysis them and make some informed decisions to trade these stocks. With the US markets closing higher in the face of news that the unemployment rate climbed to a25 years high, it will be very interesting to forecast the markets’ direction this week. This week’s key data will be the trade deficit report and the University of Michigan’s report on consumer sentiment on Friday. More important will be the earnings reports which will be dominated by retailers and also reports on construction and technology. With the fundamentals factoring the higher than expected unemployment, massive budget deficits and weaker USD, the market direction should be driven by momentum and participants’ psychology by the earnings reports of the companies selling to the Americans. Let’s take a look at the Cycle Trend chart.
As we can see from the chart, DJIA has an upside potential from both its cycle formation and candle for the coming week. Since I am expecting the week’s earnings reports to be positive and together with the technical, I would expect the market to be volatile and continue its broad range trading and possible upside advancement for the week. Thus my macro strategy of buy at low and sell at target will apply again this week.
The 4 stocks I am looking at this week are Molson Coors Brewing Co (TAP), Mirant Corporation (MIR), Magellan Health Services Inc (MGLN) and National Oilwell (NOV).
National Oilwell Varco, Inc. (NOV) is a provider of equipment and components used in oil and gas drilling and production operations, oilfield services, and supply chain integration services to the upstream oil and gas industry. NOV has a market cap of about $17 billion and has raked in more than $13 billion in sales in the past 12 months. Its fundamentals are good and the company’s last 3 years operating income is positive and growing. Operating cash flows and free cash flows are consistently positive. On the technical, the cycle trend is forecasting an uptrend and a white candlestick were formed, representing normal buying pressure. The bullish harami marks a potential change in trend and a confirmation is required to confirm the stock forecasted advancement. Taking into consideration of the company’s fundamentals, cycle trend forecast and candle, I will be including this stock in my buy list.
Magellan Health Services, Inc. (MGLN) is engaged in the specialty managed healthcare business. Magellan provides services to health plans, insurance companies, corporations, labor unions and various governmental agencies. Its’ earnings report last month beat market’s expectation and the company has raised its FY EPS views. The fundamentals of the company are strong and its past operating income, operating cash flows and free cash flow are positive and consistent. However the cycle trend forecast for the company this week is downward decline and a white candlestick with a long tail shadow was formed representing normal buying pressure and possible retraction, telling me not to bother with further selling or buying until a new signal is formed.
Mirant Corporation (MIR) is an energy company that produces and sells electricity in the United States. The Company owns or leases 10, 1120 megawatt of electric generating capacity located in markets in the Mid-Atlantic and Northeast regions and in California. Mirant also operates an integrated asset management and energy marketing organization based in Atlanta, Georgia. The company post a 97% plunge for their 3rd quarter profit driven mainly by hedging losses. Fundamentally the company is not too bad. Its operating income is consistent if this one time writeoff of hedging loss is excluded and positive and operating cash flow is positive. However I am not comfortable with its free cash flow and the reported large one time hedging losses. This reminds me of the companies in Singapore that had large hedging losses causing the stocks to plunge and these stocks are still recovering from their fall today. The cycle trend is indicating a downtrend but with the candlestick showing a bullish harami cross, I may take a speculative intra day bet for a potential bullish swing when the market opens and set 10% profit target to sell. If KUTE system is fully complied, MIR will be a stock to closely watch and wait for a bullish alert before trading.
Molson Coors Brewing Company (TAP) is a holding company. The Company’s operating subsidiaries include Molson Canada (Molson), operating in Canada; Coors Brewing Company (CBC), operating in the United States prior to the formation of MillerCoors LLC (MillerCoors); Coors Brewers Limited (CBL), operating in the United Kingdom and Ireland, and other corporate entities. The company’s 3rd quarter earnings were up 37% due to higher selling price and cost cuts to beat market expectations. The bottom line earnings were better than estimates but much of it was due to tax benefits. The global beer sales were down by nearly 3% as consumers cut back on spending, causing the stock to closed down 8.5% last Friday. It seems that the conventional wisdom that alcohols were fairly recession proof is being challenged as the sales and revenue of the industry have suffered last year. I am not very comfortable with the declining operating income and operating cash flow. As for the technical, cycle trend chart is forecasting a downward decline and a black candlestick were formed. Most of the analysts are calling for moderate buy for this stock, but I would rather wait and not bother with trading this stock this week.
So what will I trade this week? I will add NOV to my portfolio, bet on MIR and leave MGLN and TAP alone. As for the stock I am still waiting to sell, PTEN, the candlestick is showing a bullish harami cross and with cycle trend indicating neutral, I believe the stock should hit my sell target this week.
By the way, since I am a computer idiot and posting cycle trend chart is quite difficult, I will not post any chart from now onward. If you are keen to see the charts, send me an email and I will be happy to send the charts to you.
Have a great week ahead.
Francies Cheng
BBus MAppliedFinance
No comments:
Post a Comment