DJIM #19 2008

It is what it is!   Some market participants have chosen to cash out going into the summer.  You can blame AIG for the pressure on Friday, but what you really felt is that things will start to get slower from this point with volume marking one of the years lowest days.   In other words, we're not really worried about the market's performance/ declines last week, we think this is all the normal course after a significant breakout.   For those of us that love the market action more than any other gig, we are going to stick around low volume summer or not.    Simply put, this is where we belong!

Now that the earning season is over for big caps, what do we expect going forward?   Of course, we'll have quite a few small to mid cap companies reporting and we'll definitely keep an eye on any new opportunities.    Last week, we had some good reports from ANR, SNHY, MVL, PCLN, all should continue to provide nice tradable opportunities going forward.    As well, you can add ENER, MR to the DJIM shadowlist to go with the ANR SNHY MVL new entries.  As far as the big picture is concerned,  we are continuing to stick to the same theme.     This might sound boring that every week if not every day we have basically been talking about the same theme.    However, until the day this theme no longer works, this is the way it's going to be.    Right now, these commodity plays are just invincible.    Despite the fact that many of these commodity plays have ran up so much, there still seems to be more to come.

Coal, not only are most companies we follow are beating the current quarter handily, they all have indicated in one form or another that the demand for coal is only going to increase substantially for the next couple of years.   Some of the companies have already increased the pricing for their product and the pricing pressure is only going to get better.   If you compare this sector to other commodity sector, coal plays have ran up the least so we think this is the group with the safest upside potential.

Oil, nowadays, the talk is not if we will get to $150 Oi, l but when we'll get there.    You can't help thinking that if we have really entered a new inflationary era due to the ever increasing commodity prices.    Generally, consumers are wealthier now than 5, 10 years ago and this is especially true for those developing countries.    The demand for oil is definitely off balance these days because most of the crude was consumed by industrial countries a few years ago.    Nowadays, even the developing nations are fighting hard to secure new oil source.   We simply have to accept this as a fact and deal with it.   We like some of the oil plays especially when they were being sold off on minor pullback.  An exploration  play like BZP is in a perfect position and we'd expect in the weeks ahead for it to increase its reserves numbers which will push the stock higher.

Steel, have you noticed that despite the so so earning reports of some steel companies, they continue to make new highs on a weekly basis?    This is almost as if every commodity sector is tied together.   Raw material prices are going higher thanks to the recent years of global economic boom.    For those who have never been to the China or India or Dubai.. you'd have no idea how fast things change over there.   Steel companies have pricing power, period.    Again, same as the oil plays, a lot of the steel plays are prune to quick pullbacks and we'd love to do dip buying in this area.

Shippers, we believe it's entirely possible that these plays can eventually try for last year's high.   TBSI kicked off with a very good report and it was rewarded with some good reaction.    We feel the difference between trading the shippers this year compared to last year is that we are not afraid to buy on pullbacks this time around.

Solars, it is hard to believe,  but some of the solar plays have made new highs recently.    Not all solar plays are equal though, plays like SOL, CSIQ, FSLR, ENER are getting more momentum than others.    In the coming week, we have CSIQ and SOL reporting, so we'd keep an eye on these two's reaction.

Bottom line, besides the obvious commodity plays, this market still rewards those companies that achieve great earnings.    We have a handful of companies to work with on our watchlist and we have quite a few choices to work with on a daily basis.   If this market is going to behave the way we think it's going to behave this summer, this might just become one hot summer for all of us. 

A Defiant Market....

Even as bulls, we sometimes can't help but be amazed by the resilience of this market lately.     Just when you think the market is showing weakness and a potential rollover is in the works, you get this incredible support that simply pushes away any further declines.    The final score for the plays on our watchlist has been eerily similar the last little while.    No matter how volatile they trade intraday, the majority of them seem to turn green before the day is up.   Is this getting old?   We hope not!

We had a couple of reports which really set the tone today.    FLR, which was alerted last night, gave a total of 24 points, of which 17 or 18 points can be had if you bought some in AH last night.  Buying at the open would not have hurt either.   Keep in mind, FLR isn't exactly a small cap so by getting this kind of gain on a day is very noticeable.     On the small cap side wise, we have CSIQ , which had a very good report and stock is instantly rewarded with a gap up and strong intraday gain.    This is the one we noted to watch for earnings along with SOL (reports tomorrow AM).   Remember, SOL guided recently and that's why we played in the first place.  Will they raise '08 again?  Technically, CSIQ is probably the best solar stock out there among the smaller ones.    Even though today's finish isn't exactly grand, we still think there's definitely more to come from this one.    ENER, the recent solar addition had another great day.    At this point, we aren't sure at what price level this one is willing to settle and so letting it ride may be the best strategy.   To top off the solar sector, the big brother FSLR had a new closing high above $300.    This move is about as stealthy as it gets because most solar traders were probably dealing with CSIQ, SOL or ENER all day.

As far as commodity plays go, coal sector had a group move and many of our favourite notched new highs today,  ANR continues to blossom.  In terms of other plays, we bought some V toward the end for a rebound play here.    There's good odds that the low from two days ago will be held before we see a rebound.     MR also looks like it's ready to move higher after three days of consolidation from its initial earning pop.   So be ready to get this early DJIM gem back in your book.    If you recall, many of these earning plays don't finish after their initial pop.      Just about every earning play we encountered the last while moved significantly higher after the initial move so we are inclined to buy on dips right after the initial pop.    It worked great with V, SOHU, FSLR.. and pretty much every commodity play out there recently.

Bottom line, it is ok that the indices don't make weekly highs because as long as the sectors on your watchlist are in play, that's all we can ask for

CPI at 830am. 

Big 15..

Today's the kind of day which you can just sit back and relax.   Ok, maybe it's just a little wishful thinking here as traders hardly ever relax.   The truth is, there is not a lot of news headline today and market behaved with very low volatility.    We like this!   Why?  We just can't help but noticing that whenever market is low on volatility, our playlist is almost always high on greens.  Just check out the "BIG 15" from yesterday making new highs off our Shadowlist.   Go to Shadowlist link and change signal box to new high.

With the turmoil in financial stocks and this being a supposedly "tough" trading year, how often do you get asked by friends/relatives that if you are doing well with your portfolio?    Instead of a straight answer, we simply tell them that we've been trading the commodity stocks, which is the same reply a month ago, two months ago, and three months ago and the lead into 2008.

As you can see, this game still rewards the mentality of "it's better late than never"!    However, if you are stubborn enough to refuse to accept this fact, then a lot is being missed out on the table.     Sure, playing some commodity now definitely does NOT give you the same kind of risk/reward ratio compared to a months or two ago.    It just doesn't mean it won't give you any reward.    In fact, we like to trade stuff with the greatest visibility.     If a stock has great earning report, it gives us good visibility that it may do so again in next quarter.   This view/strategy is shared by so many and that's the reason why we have had so much success with the earnings winners in the past.     For this year, the visibility isn't with earnings plays because a lot of uncertainty within our economy is bringing a very murky picture on what lies ahead.     What is clear though is that commodity prices are increasing and at a pace we've never dealt with before.    This is just the beauty of trading world.    If we can all foresee the high energy prices a year ago, we all should be billionaires by now.    Nope, it doesn't work that way.     We have to constantly evaluate the situation and be prepared for surprises and the "unthinkable"!

Many commodity plays on our shadowlist are slowly grinding higher.    Some of you may already got uncomfortable playing some prices knowing that you were playing these at a much lower level just few weeks ago.    We say, don't ever let that mentality get into your head because that'll hurt you from making good trading judgements down the road.     Basically, trading POT at $230 is no different than trading POT at $150, as long as you are aware what the trend is and you are trading WITH the trend.    Sure, you may not want to commit the same size when the stock moves higher and that's just fine.  Maybe PCX and ANR seemed expensive in the $50's just weeks ago after introduction here, hopefully this finally confirms quality is better than the quantity of shares in $5-10 stocks.    We haven't done any major updates to our shadowlist and it may be "boring" to look at the same plays every day if your not participating.   The point is, you have to absolutely stick with what's working currently. Anyways, the most recent plays we introduced are doing great.   The Shale Gas plays and IPHS come to mind.   Even as a lousy trader, you just can't lose over a period of time with the right kind of plays.  In some cases, a DJIM investor with a longer term perspective may be doing better than a DJIM trader so far in 2008.     The past couple of years, the reason why our plays changed so quickly is the fact many if not most of those plays are "small caps earning winners" based and we know how fast flavour was changing from one to another.     This year, we are going through an unprecedented run-up in commodity prices and we simply don't want to be anywhere else, focus and/ or money wise.

"Shale Plays" got a kick start this week as the news from GDP/CHK just spread across the zone.   Also, ECA has stuck their behemoth hand into Haynesville with a boatload of acreage.  The potential for the smaller caps names noted here, is of course the better trade as far as potential percentage gains than huge ECA.  There is only about 60mln float between GMXR, PVA, GDP.   We are in a few of these Shale plays and we'd intend to add on weakness.   

Agri. plays are still working and our little IPHS has gone from $28 alert to notch another nch and the action has simply been spectacular.    There's a possibility that the IPHS is in imminent need of a pullback and we'd get on the bids aggressively when it comes.    

Coals, what more can be said?    NCH's all over the joint.

A couple of beaten down groups (Ships and Solars) also made a little advance today and we are looking at some solar plays for potential intraday action tomorrow.    ENER, a name we switched to in mid- May as far as Solars were concerned, is basically trading in the world of its own and it's on pace to become the baby FSLR.   We highlighted this a while ago as one of our favourite Solar plays and it's apparent that this one is emerging to be the "real deal"!   We are hoping to catch it again on a break , well any break really.

Bottom line, GS is reporting tomorrow and lets hope it's another none event.   Seriously, enough damage has been done in the financial sector and lets cross our fingers for some good news from this sector.  

..dirty 4 letter word..

You gotta like it when CNBC is highlighting DJIM stuff months later as "coal is cool" this morning.   As for yesterday's action, it was really no surprise that coal had a pullback.   It was inevitable after this recent kick up.   The dirty 4 letter word CNBC is using this morning is coal and it ain't going away as long as crude is on the mind this year.    Didn't we just say if you really want to get down and dirty have some coal?.   Actually, it was around these parts months earlier as you know.   Considering, we profiled coal as possibly the next big trading thing in early February, we welcome any pullback after seeing many introduced here double and triple since.   We've been selective in choosing a few, JRCC has gone from $14 to 50's, FDG, MEE have run nicely and we discovered PCX and ANR in the $50's.    Again, don't fret the action Thursday, just get ready to saddle back up one day soon, but don't do it guessing a bottom unless you are a full-time trader and can move around intraday.   We noted yesterday at 10am with $CRX at 976 a stall may occur for profit taking.   Well, it did as the $CRX fell to 961 by close.   Watch 955 as an level of interest noted yesterday to either bounce or exit.   Remember, we can't say sell or buy for that matter for obvious reasons..we can only lead and say what is on mind.    If you're trading these day by day, you may have used the alert to exit a few names in the commodity area and go clean into the weekend.   But,  if you've been holding a few for weeks it's no really big deal as you've generated nice gains.  

Anyways, a lot of noise this morning in the markets and it's time to start the weekend.   We noted a few stocks we're in yesterday. ENER and SCHN because steels held ground yesterday

We will do an in depth write up on the Haynesville Shale play we introduced recently this weekend.   There are more than a few plays and you'll have to decipher which fills your needs best as there ones to trade and some you may want to just tuck under your pillow.   As with coal this play ain't going away and in months they'll be saying Shale is dirty 5 letter word.    

Have a good weekend.... Anybody watching and enjoying Euro Cup soccer?....it's so much better than watching the market take its kicks!

DJIM #25, 2008

Summer has just officially begun in North America and things are seemingly heating up for the next few months.    For some reason, we have this feeling that this is not going to be a relaxing summer for many traders.    Of course, there's always two sides to every coin and it all depends on your trading strategy, you can be either be stressed or relieved as we go forward.     Market as a whole, is not doing too good lately as we all can see.   Oil and Financials continue to rule the market on a daily basis.   Nasdaq is in danger of breaching it's recent lows while Dow is headed for primary support at 11750.    SPX, is also much closer to its year low than the year high with it's primary support at about 1270.    We are literally at a point where many market participants have to ask themselves, "what are we really fighting for?"

Much of the market turmoil is being blamed on the financial sector and its credit squeeze and this is perhaps the most troubling side of this market.    If our capital market fails, nothing else really matters.    Well, what's happening out there is not the case that the system is failing, it's just the fact people do no have any faith in the recovery of the financial sectors.    Right now, no one can  intelligently give a reasonable time frame of how much longer the financial sector will suffer.   P/E and valuation is currently useless when the confidence level is so low towards these financial companies.    In hindsight,  some of these financial will probably make a great investment in the long term.    However, at the present time, you'd be thrown out of your office if your investors find out you are still holding/buying these troubling stocks as a money manager.     To DJIM, the process of gaining faith and confidence in the financial market takes time and unfortunately we do no have the insight knowledge nor time and capital to wait it out.   So, we pretty much leave everything and anything that have to do with the financial market alone.

For some of us who have started trading in the 90s, we really haven't dealt with an inflationary induced stock market.    Also, the world isn't the same now compared to the 70s or 80s.     You can draw parallels only to a certain extent between different periods and the rest is new and unfamiliar to us.     The energy crisis now is definitely different from the energy crisis in the 70s.    The inflation worry now is also different from the inflationary period in the late 80s.    The major difference, in our opinion, is that the crisis we are going through now is more of a world problem, as opposed to the problem for the western countries.     China and India and many other developing countries didn't  matter in the world economy 20 or 30 years ago.    Nowadays, they are probably the very reason we are entering a high energy price era.      Demand and supply of crude or any other commodity is no longer just a North American or G7 issue.     The point is, commodity issue is a global issue and it takes a long time to balance things out.

For DJIM, we got crude and inflation plays covered and we leave financial stuff alone, what else do we have to worry about at the moment?   Nothing really!    We fight the good fight and we leave the risky stuff to others.  That's the difference between being stressed out as we come back to March lows or being relieved by playing the commodity stocks.  In a few weeks, another round of earning reports will start and we'll have a much better picture this time to gauge how much oil and other commodities are affecting our economy.   In the coming week, our focus will continue to be on our fave groups, including the Shale plays ( in depth look in tomorrows Journal) and other ones with good technicals, such as those making new highs eg. X, ENER.   MON will report on Wednesday and this one will be interesting to watch and we have a feeling it'll crush the number and investors will give it another rosy reaction.    Also, some M & A activity starts the week off for this group.