Stocks I will be buying this week

Hi my friends,

It’s another new week and I am fresh from my holidays. I was glad for the long weekend without any trading activity, especially so when all my positions were closed prior to my rest. I was asked when I was back drinking with my friends at the nice sake bar in Robertson Quay that if I had knew the Dubai’s saga beforehand since I sold all my trading shares on Wednesday. I would love to tell the whole world that I had predicted the event but honestly I didn’t. It is another tail-end event that occurred and I am sure no one in the market has foreseen this happening. The Dubai’s delayed in debt payment reminds me of the Russia’s default many years ago that resulted in the world stock market meltdown. However this is not the same as the Russian default that caused one of the respected funds to collapse. I am very sure the market will bounce back soon. It is good that it happened just after the recent financial turmoil we went through because most economies are fundamentally much stronger now to withstand such unexpected set back. Who can really believe that Dubai will default on its’ debt? I am sure they wouldn’t and I see this as an opportunity for the market to take a breather and for me to buy again.

Most analysts agree that the market will have bumps along its growth path and I totally agree with their views. My strategy is still to buy on low and sell when it achieved the targeted returns. This is the time to test my trading emotion management and stick close to my trading plan. So let’s see how the market will be this coming week;

As you can see from the Cycle Trend chart, DJIA will continue to be trading within range and it is testing the upper Bollinger band resistance. I am expecting the range to be broad and over the week the possibilities of decline is higher. This is confirmed by the candlestick formation where the Doji. Earning season is over but there are still some economic reports for the week and I will be careful with the with the ADP Employment change on Wednesday preceding the key Nonfarm Payrolls figure and Unemployment Rate on Friday. The market should be sensitive to any news and my macro decision remains.

The stocks KUTE selected based on fundamentals this week are: NOV, GIB, FRX and SIM.

CGI Group Inc. (CGI) is an independent provider of end-to-end information technology services (IT services) and business process services (BPS) to clients worldwide. The Company provides a range of services, such as consulting, systems integration and management of IT and business functions (outsourcing). Both the company’s operating income and cash flow are consistent and fundamentally this company should be a good buy. However the cycle trend is indicating a downward decline over the week and candle formation is telling me that the market has more bears than bulls for the weekly data. Based on the indication I will not buy the shares now but will continue monitoring the signals over the week.

Forest Laboratories, Inc. and its subsidiaries develop, manufacture and sell both branded and generic forms of ethical drug products, which require a physician’s prescription. The Company’s products in the United States consist of branded ethical drug specialties marketed directly or detailed to physicians by its Forest Pharmaceuticals, Forest Therapeutics, Forest Healthcare, Forest Ethicare and Forest Specialty Sales. The company has a strong pipeline going forward and is in good shape financially. It is one of the few companies actively buying back stock this year, having repurchased over 10 million shares. At the end of the second quarter, it had over $3 billion in cash and no long-term debt. Its operating profits are healthy and both the operating and free cash flows are positive. The cycle trend is indication a slow upside trend and candlestick indicates a hold and wait for new signals. This will be the stock I will be focusing and buy if it opens below Friday’s close of $30.56.

Grupo Simec, S.A.B. de C.V. (SIM) is a diversified manufacturer, processor and distributor of special bar quality (SBQ) steel and structural steel products with production and commercial operations in the United States, Mexico and Canada. The Company’s SBQ products are used across a range of engineered end-user applications, including axles, hubs and crankshafts for automobiles and light trucks, machine tools and off-highway equipment. The company’s operating income is consistent and cash flows are within my reasonable expectation, though I am a little concern with the increase in inventories. However with the cycle trend indicating an advancement and candlestick formation is high wave bullish harami, this will be the stock that I will buy.

As for NOV, I like this stock’s fundamentals and with the cycle trend indicating a buy signal and the confirmation of bullish homing pigeon candlestick formation, I hope to make more money from this stock.

Have a great trading week ahead.

Regards
Francies Cheng
BBus MAppliedFinance

Thursday! Thanksgiving and thankful for NOV gains!

Good morning,

It’s Thursday and finally I can take my long due break. US markets will be closed for Thanksgiving tonight and I can relax over a few glasses of red wine without having to wake up early tomorrow to write this blog. I am pleasantly surprised that the responses to my advertisement exceeded my expectation, and I am looking forward to the coming session. A gentleman called in response to the advertisement and asked what superior technique he can learn from me. To be honest, the best technique is to keep the strategy simple. It is always simplicity that’s the best policy to trade stocks. There’s this magazine which I subscribe (Knowledge) which is published by BBC and in this month’s issue there’s an article about stock trading. The research compared the returns of a monkey’s portfolio using darts to choose the stocks by throwing the darts at a board with all the listed companies in US against a senior stock analyst’s portfolio with his acclaimed stock selections and timing skills. Who do you think will have the better returns? It’s the monkey! Paying peanuts and getting a monkey? Sometime it’s not too bad after all.

This research reminds me of the lessons I learned in my Master’s that research do show that taking into consideration of trading commission, it is not possible to beat the market over time consistently and if it does, it is because the trader is lucky. You must be questioning me that indeed there are friends of yours that have made good money trading stocks. Well, to understand the research we must understand what “the market” is really. If a trader trades in 5 stocks in NYSE, his market will be the same 5 stocks that he trades in. Obviously if he compares his returns with that of the whole S&P500, he is expected to have higher returns simply because he is taking more risk, and his excess returns are rewards for the risk he took. It is not an easy theory to understand. It really a matter of relativity. Let’s assume a trader trades on Citibank shares at $2 and immediate sold the shares at $2.50.If the share declined to $1.80 at market close, most of us will say that he has “beaten” the market, which is the performance of the Citibank share. Honestly, has he “beaten” the market? Firstly, I can say that he is lucky because no one can really predict the next price movement. Secondly, to beat the market means he has to trade continuously throughout the same time frame, i.e. he should have short the stocks before the price decline. If we take the same time frame from the moment he bought the share to the time he sold, his return was actually the same return of the share, and with the commission for the trade, do you think that he has “beaten” the market?

The biggest lesson I learnt is when trading the stock market, I should not be aiming to beat the market. Rather my focus is to achieve my expected returns for the risk I take. I can never predict correctly all the time how the stock price will move, but with all the timely and right information of the companies of the stocks I am buying, I stand a better chance to achieve my targeted returns over time. Companies with good business strategies and are financially strong should grow over time. Buying the shares of these companies cannot be too wrong and if we can understand the behaviour of the market participants for these companies, we can time to buy at a good price and sell when we are happy with our returns. So since we cannot beat the market, I doubt there are superior complicated techniques out there that can claim they can beat the market. All we need to do is to study and understand the companies we are buying and honestly it is really all that complicating.

Last night was good for me and my forecast for the markets was hit on. US stocks advance was supported by data that pointed to stabilisation in the labour and housing markets. New claims for jobless benefits fell sharply in the latest week and new claims for unemployment fell to a 13-month low, beating economists’ expected claim. Continuing claims, a measure of Americans who have been receiving benefits for a week or more, fell to beat economists expectations. Sales of new US family homes rose in October to their highest level in a year in September, also beating economists estimates. Trading volume was light one day before the Thanksgiving holiday. Gold prices hit record highs last night, in line with my forecast the previous day, lifted by a report that India may consider buying more bullion from IMF and a weaker USD. Crude oil prices advanced on a weaker US dollar and after a government report showed that US fuel demand gained for a second week.

For KUTE’s selection, NOV gained 2% to close at $44.88. My limits were hit and I am really going to enjoy my holidays with the tidy profits I made with this counter this week. MGLN closed 0.48% down at $37.10 and APOG lost 1.68% at $14.06.

Have a great holiday and I will be back on Monday morning for the new stocks trading plan. Adios.

Francies Cheng
BBus MAppliedFinance

Look at my advert in Today's paper today

Good morning,

Today is the day my first advertisement in the Today’s paper for my stock trading seminar for beginners. I am excited but unsure if there will be good response. Why am I so unsure? Well, it’s because my advertisement does not promise that my students can make $10,000 a month from a small capital of $1000, and that I am only charging SDG 388 for the one day program. My friends have advised me to conduct “Free” introductory seminars to sell the program and felt that SDG 388 is too cheap and may be perceived as a “cheap” educational stock program, rather than a success secret formula sharing session. They suggested that I should charge SDG2800 for a 2 day program. They may be right but I do not believe that there is any real secret success formula and if there is, SDG 2800 would be too cheap. I am just interested to teach and share my method of stock selection and my aim is my participants can analysis and trade stocks like the professionals. So I can only hope for the best response.

US markets closed with moderate loss last night as minutes showed Federal Reserve officials are confident the recovery is sustainable. The market had declined earlier on a report that showed the economy grew at a slower than previously estimated pace in the September quarter. U.S. GDP was determined to have expanded at a 2.8% rate in the third quarter. That was in step with expectations, but it marked a considerable downward revision to the 3.5% increase that was posted as part of the advance GDP estimate. Trading was volatile and volume was low on Tuesday, which is likely to continue through the holiday shortened trading week, with markets closed for Thanksgiving Day on Thursday. Stocks also trade in a shortened session on Friday. With such reports, I am expecting the rates to stay low and USD to continue to slide for the near future. I am predicting that Gold price will continue to advance and energy related stock will continue to perform well. Although analysts are estimating that crude supplies have gained amid the slowing economy, I am pricing in the future growth into my expectation of the oil related stocks.

NOV closed 1.08% higher at $44.00 last night and the sole position I have is well in the money. I have placed a buy order at $42.90 but the lowest the stock went last night was $42.91. Missed opportunity but I am learning not to feel too emotional about it. MGLN closed 1.53% higher at $37.28 and APOG was down 1.11% at $14.30. CSH and ABM were both down at 0.31% and 0.83% respectively.

Have a great day today!

Francies Cheng
BBus MAppliedFinance

Good start to the week

Good morning,

US markets started the week higher after the surprising nice report from the National Association of Realtors’ existing home sales surged more than estimates and the statement from a fed reserve officer that they should continue buying mortgaged backed securities past 2010. Market breadth was positive and trading volume was light. On the NYSE, winners beat losers nearly four to one. On the NASDAQ, advancers beat decliners by more than two to one on volume of 1.27B shares. DJIA closed 1.28% higher at 10,450.95 and S & P gained 1.36% to close at 1106.24. By the way, I need to clarify that when I mentioned that US markets will trade sideways this week, I was suggesting that the markets will close within narrow range. However, I believed that the market will continue to be volatile within the week as participants respond to news releases. That is why I suggested buying at dip and selling at targets.

It is always nice to make money on the first trading day of the week. As expected, 3 of my positions in NOV were closed last night with very nice profits when the prices hit my limits. Good thing it did as NOV declined from its high of $44.36 to close at $43.53, up 1.73% higher from Friday’s close. It went as low as $43.36 during the trading session. I have 1 more position left for this counter and I am sure it will be sold by this week with profits. MGLN closed the session at $36.72, 1.35% higher. The other stock selected by KUTE and showed good buying signals, APOG gained 2.99% to close at $14.46.

Have a great day ahead!

Francies Cheng
BBus MAppliedFinance

Short week to trade with the selected stocks

Good morning,

It will be a shorter week for trading this week as the market will be closed on Thursday for Thanksgiving. Since I have not taken a nice break off my work, I intend to either close off all my position on Wednesday or to place limits and take a break on Friday to enjoy a longer weekend. DJIA ended up 0.5% for last week and S&P 500 ended modestly down at 2 points and Nasdaq was down 1% for the week. The declines were modest and it will be interesting to see how this week will be. We will have the National Association of Realtors report for existing home sales on Monday, the S&P/Case-Shiller Index for September on Tuesday which tracks sale prices of existing homes in 20 major markets and the new home sales from the Commerce Department on Wednesday. These 3 reports and the direction of USD the next 3 days can decide whether I can enjoy my long weekend break. Let see how US markets will be for the coming week.

From the Cycle Trend chart, DJIA will be trading side way and the candle formation of a white spinning top seems to confirm the chart. Since it will be a short week, my strategy will continue to buy at dip and sell at target. These are the stocks that meet KUTE’s fundamental requirements; NOV, MGLN, ABM, CSH and APOG. Since I have covered NOV and MGLN, I will only analysis the financials of ABM, CSH and APOG. ABM Industries Incorporated (ABM) is a facility services contractor in the United States. ABM and its subsidiaries provide janitorial, parking, security and engineering services for commercial, industrial, institutional and retail facilities in 100 of cities throughout the United States. The company is fundamentally sound and most analysts have given this stock a neutral to moderate buy recommendations and its operating profits and both the operating and free cash flow are consistently positive for the last few years. However the cycle trend is showing a decline for the week and its candlestick formation of bearish engulfing is telling me to stay away from this stock.

Cash America International, Inc. (CSH) provides pawn loans, short-term cash advances, check cashing services and other specialty financial services to individuals. The Company also sells merchandise in its pawnshops, primarily personal property that has been forfeited in connection with its pawn lending operations. As of December 31, 2008, the Company operated 501 pawnshops in 22 states throughout US. A confluence of trends looks ready to push pawn lenders higher. The declining availability of credit should spur more demand for pawn loans, and rising gold prices should make those loans more profitable. With banks offering consumers less credit, in a pinch more people will be forced to turn to non-banks, such as pawn lenders. Though the company’s financials are consistent and positive, cycle trend is showing a decline and the candle formation of a black candlestick indicates a wait signal.

Apogee Enterprises, Inc. (Apogee Enterprises), through its subsidiaries, is engaged in the design and development of value-added glass products, services and systems. I like the company’s financials and it is fundamentally strong. The cycle trend is showing upside advance but the candle stick formation is a spinning top representing indecision between the bulls and the bears. I will wait for the confirmation of the daily signals before I buy into this company.

As for NOV, the candlestick is telling me to wait but the cycle trend is showing a moderately strong upside advance. MGLN cycle trend upside advance forecast is strong and its candle formation for the week is to hold and wait for the confirmation of a new signal.

Since I am still holding NOV and I am at the limits of my 30-20-50 money management rule, I can only focus on the NOV stock. If I can sell all the positions of this stock I will look into both APOG and MGLN.

Enjoy trading for the week.

Francies Cheng
BBus MAppliedFinance

Mixed results but made money for the week

Good morning,

What a night. 4 bottles of premium sake shared among 3 friends and my head is still pounding. When I turned on my trading screen this morning I realized that I have placed another 2 positions of NOV at $42.87 and $42.72 last night. I am glad that one of the positions is in the money and the other’s loss is marginally, because the buy orders were executed while I was enjoying my sake.

So it’s time to evaluate the performance of KUTE’s selection. It was forecasted that DJIA will trade up amid volatility for the week. Last Friday’s closed was 10,270.47 and last night DJIA closed the week at 10,318.16. During the week the range was from 10,471.28 to 10.226.41. As for the selected stocks, I mentioned that NOV’s cycle chart was indicating upside gain but the candle formation was a black spinning top indicating decision, and my plan was to buy at dip and sell at target. NOV’s last Friday’s closed was $44.17 and the counter closed $42.79. The range for the week was $46.46 to $42.35. I had made a few profitable trades during the week and am currently holding to 4 positions. MGLN last Friday’s close was $35.18 and last night close was $36.23.The range was $36.87 to $35.13.

As for the rest of the stocks that passed through the fundamental selection but not the technical, CVX opened the week at $78.11 and closed the week down at $76.77, MIR opened $14.79 and closed down at $13.94, and ESV opened $46.26 and closed lower at $44.34.

See you next Monday morning for next week’s KUTE’s selection. Have a great weekend!

Francies Cheng
BBus MAppliedFinance

NOV buy order was triggered last night

Good morning,

I have finally decided to launch my KUTE stock training program for new beginners and those that have attended other so-called stock gurus’ programs and have not been making money. It was not an easy decision because I have always question these programs that if they are so good and can make such easy money, why should they be teaching others? However as I spoke to many of those who attended these programs and having checked some of the gurus’ background, I realized that most of the students are paying large sum of money to learn strategies that may not work at all. It is really not worth the thousands to attend such programs. So I thought that since I have been training only my Investment Advisers and share my KUTE methods only to clients, I might as well share it to the public, at a much lower cost. My intention is to educate would be stock traders to understand everything they should know before plunging into the challenging world of making money from analyzing the macro, companies, forecast their future earnings and growth and making a well calculated move to buy the shares. My program does not guarantee one to become a millionaire nor having returns of $10,000 per month from capital less than this after attending my program. Rather participants will make consistent returns over time if they apply what they learn in my course. So do look for the advertisement that will appear next wednesday in Today’s.

Last night Major indexes tumbled about 1 percent, including DJIA, which lost 94 points but ended well off its low after a key economic report raised concerns about the recovery of the US economy. Energy and material stocks logged some of the biggest losses as a jump in the dollar sent commodity prices tumbling. Meanwhile, an analyst's downgrade of the chip industry pulled technology shares sharply lower. The sell-off was broad-based, with all but three of the Dow's 40 stocks turning lower. Financials, Industrials and consumer discretionary stocks were among the hardest hit.

NOV was down below the previous Friday’s close of $44.17 during the early session and I had 2 buy orders triggered and 2 positions were bought at $43.69 and $43.54. The stock closed at $43.83, though down 3.86% from previous day, it is still positive for me. MGLN closed 1.73% at $35.76, MIR down 3.98% at $13.99 and CVX declined 1.58% to close at $77.34. Another trading session to go and I am already looking forward to it and the coming weekend to rest.

Have a great day.

Francies Cheng
BBus MAppliedFinance