By Alex Salomon
I am starting to get into a groove with this weekly column, so I think I can cut to the short and sweet parts: review previous trade ideas/positions and preview the week to come. You can follow most of my real-time updates and action on Twitter @Alex__Salomon where I comment on many of the stocks covered in this weekly column.
Before we attack the week ahead, though, let’s review the previous week’s ideas:
1) iShares Semiconductor Sector (SOXX) – Looking for that double-bottom at $48 and a repeat of Nov./Dec. 2011. SOXX hit its first target of $52 (scaled 1/3) and still has outstanding targets of $56 and $60. Currently at $55.28, SOXX is squarely “on.”
2) Apple (AAPL) – The plan unfolded! From last week: “[…] take profits at $621.50 and $640 with a $40 trailing stop. We’re on!” Profits were taken (1/3), the position is solidly positive, and the next stop is either $584 (stop) or $640.
3) Russell 2000 iShares (IWM) – The potential trade was on hold for 2 weeks: “patiently wait for a break above $80, make a failure ($79) your floor and be prepared to take incremental profits, $1.00 level at a time (profits at $81, then $82 and then a $2.00 trailing stop until it is taken out).” The position is “on” as of Friday, just as described!!
4) Teradata Corp (TDC) – The “star” of last week was re-bought at $68, trailing to $66.10 (previous close), targeting a fill of the earnings gap ($71.50)” which got hit (booked profits) and I now have 50% of the position with a $3.00 trailing stop at $72.89 and will keep it on as long as possible (until the trail is stopped). The position is “on” and very rewarding, at about 11% gains.
For the week ahead , I have to agree with Andy Nyquist’s review & plan: nimble is the word!
Here are the stocks I am looking at, ranked by most appealing.
1) Salesforce.com (CRM) is a market “mo-mo” (momentum) stock and sometimes a darling, sometimes loathed to no end. It announces earnings on August 23 and seems to be heating up. I am extremely intrigued by its filled gap from late February, by the confluence of its 30, 50 and 200 day moving averages, by its positive MACD. While it appears to be overbought and extended, momentum stocks can stay overbought a long time. CRM clearly seems to have overtaken the descending trend line that went from $160 to $135.
I am planning to add, ideally on a little bit of weakness ($137.50 would be nice), using $135 and the break of the previous trend line as my stop risk, $150 as my first target, then $160 (highest ever) into the earnings.
I may also add some naked calls at $150 or $155 into the earnings.
2) Natural Gas – After a quick 10 percent pullback, natural gas may be setting up for a trade. Although there are many ways to play natural gas, including the ETF, UNG, I am considering Direxion Daily Nat Gas 3x ETF (GASL). Again, these 3x ETFs are not for early, amateur or inactive investors and they carry tremendous amount of risk for big losses and must be considered only by experienced investors. That said, the recent break above $25 and the near-term descending trend line makes this appealing to me; it also offers clear risk definition for setting stops ($25ish). I also like the solid base built between $22.50 and $25.00.
For GASL, I will look to get in on Monday with a roughly $2 risk ($25 trend level). Once in, I will plan to take profits at $30, raising the stop to my entry price; then again $32.50, allowing the rest to run until stopped out or profits swell.
3) LeapFrog Entreprises Inc. (LF) – after a dismal reaction to earnings, the stock bounced and is exactly, squarely back into its channel. My initial analysis 2 weeks ago was:
“I am considering 2 different risk profiles for MA: on a tight leash, I would hope for a small respite, try to get in at $11.00, use $10.50 as risk (stop) and $11.50 and $12.00 as my bullish targets (then trail the rest $1.50 for as long as possible). On a longer term leash (but a bigger risk, too), I would get in now, use $10.00 as a floor (that is a very risky 12% loss profile so be very careful if you consider it), then use $12 and $13.50 as bullish targets, and then trailing for 15%.”
The stock has bounced back so strongly, so resiliently that I am taking a closer look again and may initiate the “short leash” version of the trade.
I also received a few REVIEW REQUESTS during the week, so let me address them right here:
4) Brookfield Infrastructure Partners (BIP) has all the looks of a Darvas stock, moving onward without stopping to breathe… it’s stunning, it’s mo-mo, and it’s solid. It is also over-extended for now but any re-visit of its basing 30 & 50 day MAs would provide great entry points. In short: a stunning stock that needs to come down a bit to be pounced on.
Might be good to set an alert for at $34.00, watch for some weakness and get in. The 4% dividend is an added bonus!
5) Entreprise Products Partners (EPD) is another strong company with an appealing 4.8% dividend. The pro scenario for investing right now is that it’s basing on its 30-day SMA. The main concern? Last time it rested and tested the 30-day SMA, it rolled over for a March-April correction of 8% and then rolled over some more.
In short, at this juncture, this stock is appealing for longer-term investors willing to buy the stock over set periods of time and dollar-cost-average. But, in my opinion it is not currently setup for swing and momentum investors.
6) Compania Energetica de Minas Gerais (CIG) this Brazilian company offers another solid dividend (3.5%) & momentum company. It could be argued that its “take off” around July 5 is a repeat move from its December to May ascent. If so, a measured move would take it from its current price of $19.86 to $26. The stock’s steady rise has been nice and seems to be hinting at strength. One may consider entering at the current price with a $1.00 trail and keeping it as long as possible, all the way until it breaks the trailing stop.
Thanks for bringing these stocks to my attention and for requesting reviews. BIP and CIG are definitely on my radar screen thanks to your requests!
Have a great week and remember to always trade safe.
Disclosure: At the time of writing I own Apple common stock and calls; I own TNA, a 3x ETF based on IWM as well as SOXL, a 3x ETF based on SOXX — 3x ETFs are riskier vehicles and investors considering them should carefully read the risk disclosures written by each leveraged ETF underwriter; I own TDC calls and common stocks; I am considering adding CRM calls and CRM, GASL, LF, CIG common stocks in the next 3 trading days.
Any opinions expressed herein are solely those of the author and do not in any way represent the views or opinions of his employer or any other person or entity.