Stock Trader Man

As cheap as….

Fundamentals

Liquefied Natural Gas is one of the few growing industries where take-overs and massive capital investments are occurring(Origin, Pure Energy et al, have seen their shares triple in months).On Friday 27th February a Norwegian company called Golar has provided a $500 mln investment in LNG(yes, the company has the same name as it’s industry…great brand naming!) to develop and manufacture liquefied natural gas scheduled for delivery in 2012. The boffins out there who like the chemical analysis and technicals I suggest visit www.asx.com.au, type in LNG under stock code and read their 25 page report posted on the 24th February…I’d rather focus on making money!

Recently Pure Energy(very similar company) is in a 2 way dog fight between BG and Arrow Energy, it’s share price has gone from $1.80 to over $8.00 in 4 months with Arrow energy(another recommendation of mine) sitting on a $200 mln profit having accumulated a 20% stake in Pure Energy.It looks like the UK company BG will win which could then see Arrow Energy adding to it’s current 9% stake in LNG…they may even go the whole hog and launch a take-over.

A Reuters survey of 10 analysts all said they are a buy…not always a good thing!

CHARTS

The share price action  is very positive with a quadruple bottom at 60 cents and has certainly way out performed the stock market index as a whole. The shares closed on the 27th February at 64 cents.(see chart below)

My initial target is the huge resistance level at 80 cents where upon a break therefore and the old highs could be revisited. If you are a conservative trader then buy around Friday’s close of 64 cents with a stop loss at 58 cents, under the major support line of 60 cents. If you are like me, believing in the “Big Picture” then buy and revisit 12 months from now! This is another take-over candidate!

It's a gas man!!!!!!!!!!!!!

Visit my company website at www.trendinvest.com.au  for all the overnight economic news and data.

TRADER’S CORNER.

There are two stocks which are a buy despite this bear market. On the belief that metals are due for another run up I like Platinum Australia (code PLA). It closed at 57 cents and had a recent high of 79 cents on heavy volume. The chart shows strong support at 50 cents and should we break there then I would exit at 49 cents. The price of platinum is holding above $1,000 and metal prices have shown good recent strength;it’s just a question of time before gold retests $1,000 which will drag up platinum. With so much merger and take over activity occurring in this sector it is very possible BHP or the Chinese could make a take over.

CERAMIC FUELS CELL

I highlighted this stock on Monday and firmly believe the story is excellent and see no reason why we can’t rally from the current level of 11 cents to way above Wednesday’s high of 20 cents. It is in the next growth industry(energy conservation) and further details can be found by visiting their website at www.cfcl.com.au My target is 40 cents which on the charts offers major resistance.

Happy trading,

Lou Muddaris

Dow Jones down 100 @ 7365(rallied 100 of its lows on the White House saying they support private banks)

CRB Index down 2.8 @ 144.2

Copper down 2.6 @ $144.2( The PhD in economic forecasting is stuck in a range so telling us nothing…for the moment!)

Gold up $17 @ $994.0 (Hit my target of $1,000 and took profit from longs at $905)

Oil down .15 @ $40.03

SPI up 3

THE HINDSIGHT

On Friday the world’s 3 wisest and most respected men all spoke from the same page.Firstly, George Soros who manages $21 bln said “The world’s financial system has disintegrated and we are facing something more severe than the Great Depression and there is no sign of a bottom.” He blamed”Reaganomics” of the 1980’s for implementing financial deregulation which has now has culminated in the end of  free market capitalism…hey, George, Ronnie was only following what others told him.

Paul Volcker, the most successful Fed Governor ever and now Obama’s chief advisor said the same as Soros regarding the state of the economy. This 6 foot 10 giant also believes in letting companies go belly up regardless of their size, he certainly believes the U.S banks should be allowed to go their own way.To add more weight and despair Ex’ Fed’ Governor Greenspan earlier said we are a long way from any recovery and things can only get worse.

Senate Banking Chairman Chris Dodd also said some U.S banks will “have to be nationalised  for a short time at least”…er, what Chris? a couple of days, months, years, centuries?These comments saw Citibank trade under $2, yep 2 bucks…I almost(almost) feel sorrow for the Saudi’s who 2 years ago were paying around $80 a share.

Despite White House denials and saying “we still believe in the private banking system” the market is practically convinced nationalisation will happen;then throw in the collapsing East European banks and possibly even countries and all those ramifications and it isn’t rocket science to avoid the bank shares.Even Australian banks, particularly NAB who have huge U.K exposure owning Clydesdale Bank(Scotland’s biggest bank) and Yorkshire bank.

President Obama plans to cut the deficit by $533 by the end of his term. The cuts will come from higher taxes, less spending in Iraq(that saves about $400 mln a week) and cutting back on Government programmes.He is obviously trying to tell us he is prudent and aware of the potential problems of a ballooning deficit but to say that right here , right now isn’t going to help.There are just too many mixed signals coming from the Government and markets abhor uncertainty….even as I speak the OZ $ is selling off on this news. I still remain short Oz $ at 64 cents. The open interest on the futures exchange rose from 5,848 contracts to 7,290 over the week indicating the market believes it’s a winning trade.

THE FORESIGHT

On Friday we recommended a company called Ceramic Fuel Cell(code CFU) via our website www.trendinvest.com.au at around 8 cents.The shares closed at 13 cents having hit a high 0f 16.5 cents.I certainly believe there is enormous potential for this over-looked stock in an industry which is the next major growth story; energy preservation and fuel efficiency. CFU is in partnerships with all the major world utility companies and is the world leader on reducing emissions and designing units which save 60% of electricity. Not being a scientist the details are better covered by a visit to their website at www.cfcl.com , it certainly makes for very positive reading and in particular view the CEO’s statement made in January where  he says a  5% market penetration would generate 1 bln Euros per year and that isn’t relying on government contracts. It is a “must have” for any portfolio going into the industry which is seeing universal commitments made by Governments and companies for the need to be more energy efficient.If you’re a “greeny”then so much the better!

Please view our other website at www.trendinvest.com.au for more trading ideas.

Have a great day!

QUOTE OF THE DAY: “We will be paying $3bln in bonuses to retain our broking staff.” Spokesperson for Morgan Stanley…defies belief!

Dow Jones down 89 @ 7,465

Oil up 4.9 @ $39.6 (fall in U.S oil inventories)

Gold down $1.7 2 $976.5 (minor profit taking, still targeting $1,000 and very soon)

CRB Index up 4.5 @ 205.14(measures 19 of the world’s most important commodities)

Copper up 3.5 @$147.1 (stuck in a trading range of $130 to $167)

THE HINDSIGHT

Yesterday I highlighted why we are going lower in stocks where the only buying needs to be so stock specific its almost impossible; shares that are vulnerable to take overs and certain sectors, such as oil and gold are my choices. In fact there is a stock called Ceramic Fuel Cell (CFU) which is going up on nothing! Something must be forthcoming so buying them at 10 cents purely on speculation could be the trade.

There are many great opportunities to make money in this bear market(becoming more grizzlier by the day) as highlighted in yesterday’s report.

Overnight the Dow hit a 6 year low pushed by Hewlett Packard’s(worlds biggest pc maker) profit report making for dire reading. Also the U.S banks hit levels not seen since 1995 as data showed rising credit card defaults….oh, and just for good measure the Fed’ sharply downgraded its GDP growth estimates for 2009 by between down 0.5% to down 1.3%; in October they were 0.2% to 1.1%.

The most alarming new “skip of worms” is the high risk of East European banks going under and possibly taking their governments with them. Italian P.M Berlosconi even admitted the G8 are considering nationalising the banks…and you want to be a bank shareholder!? I appreciate Australian banks are far removed from this doomsday scenario, indeed Westpac was voted the most profitable bank by an independant U.S research body, but their share prices will go lower simply because they have “bank” in their name!

Another disaster is G.M, Ford and Chrysler.These guys are facing bankruptcy within weeks and Obama isn’t exactly being reassuring when he says “they could go bankrupt”. I guess when there are 2 cars for every U.S citizen it does seem like a small case of over supply BUT if they go under then about 1 in 10 U.S jobs will go the same way.As the legendary Paul Volcker (Ex Fed’ Governor) said “some companies are too big to continue, and not too big to let fail”.It’s pure Milton Friedman, Thatcherism and even Darwinism. As Bob sang “The times they are a- changing”

THE FORSIGHT

I repeat my trading ideas from yesterday, this is a traders market and will be for many months. I would sell the major stock index’s not only on the dire economic situation(not to mention the vast majority of “experts” are saying we have seen the lows) but also on the charts which are pointing one way. There are many ways to illustrate this but I think the most compelling one is The S+P 500 breaking 839 which represented the 50% rally from 1982 lows to 2007 highs. As I have frequently said Fibonacci and 50 % levels are key indicators., so now we have screamed through the 50% level look for the next Fibonacci level of 61.8% which means the index will hit 665.

Our market has bounced off the 50% retracement from the highs made in November 2007 of 6,740, hitting recent lows of 3,317. It’s only a question of when, and not if, we hit the 2,800 level  in April 2003 when the market started the bull run.

Please refer to my company website www.trendinvest.com

Have a great weekend!

QUOTE OF THE DAY: ” The Board are truly sorry for the massive losses suffered by our shareholders”  Elizabeth Nosworthy, Chairman of Babcock and Brown.      

Dow Jones up 3 @ 7,555

Gold up 0.7 @ $984.5

Oil down .29 @ $34.67

THE HINDSIGHT

The market is poised for a major move down as now we have digested all the packages and stimuli and yet we still fail to rally. So what good news is on the horizon for us to go higher…Nichts! The worrying thing is that many are already long over the past few weeks certainly at levels over 8,000 in the Dow Jones and until that level is reclaimed then look for old support level of 6,800. The All Ords index will test the old recent lows of 3,200 and will eventually hit 2,800(the start of the bull market in April 2003). It worries me that there are just too many “experts” saying all the bad news is in the price and are accordingly long; we need a capitulation day when they finally throw in the towel and it’s just a question of when.

The East European banks and indeed countries are facing bankruptcy with nobody able to bail them out, their debts dwarf the IMF’s reserves of $200 bln. This is Europe’s sub prime crisis only its worse as its not about “Joe the Plumber” but countries and banks defaulting on a much bigger scale; at least Uncle Sam bailed out the U.S banks but the Europeans are unable and split on this fatal issue.It’s going to get worse, people just don’t know or even want to know how disastrous this is going to be.

So, how to make money in this environment?

Firstly I would like to update on my recent trades(dated 9th Feb’ under the headline of “Obama beats Beckham”..just in case you are a doubting cynic!)

I traded the following:

1. Bought Fortesque Metals @ $2.25, today at $3.20(remain long with stop profit under$3.00)

2.Bought gold @ $905, now at $985 ..target $1,000.( stop loss at $895)

3.Short BHP at $33.80(recent high $33.86) target $ $29.70( stop loss @ $34.15)

4. Sold U.S 10yr bonds at 2.25 % yield , took profit at $3.00 yield.

5. Bought CBA @ $29.70, exit trade  as banks look set for another major leg down.

NEW TRADES 19th February.

1.Buy Sino Gold @ $6.11 , stop loss @ $5.85, target $7.50

2.Buy Woodside Petroleum @ $33.70, target $36.00, stop loss $33.10

3.Buy, yes buy OZL @ 65 cents , target 82 cents, stop loss @ 57 cents

4.Sell OZ $ @$ 64.00 , stop loss at $65.10 target $60.00

5. Sell Euro v $, around current levels of 1.2600, target $1.200, stop loss $1.2770(just above old support line)

The above are better executed via cfd’s and futures.

For a more detailed and somewhat amusing analysis then go to my company www.trendinvest.com.au

Have a great day

Lou Muddaris

1.

Dow Jones up 50 @ 7,939 (need to reclaim the 8,000 level and soon)

CRB Index down 2.14 @ 216.11

Oil down 1.5 @ 36.04 (a break of the support line at $38)

Gold up 25.6 @ 939.8 ($1,000 here we come)

Copper down 1.5 @ $156.1

THE HINDSIGHT

It was finally passed and the market hardly blinked at the $789 bln stimulus package, the market is more concerned with company reports than a much hyped plan which still might not even work. Indeed, the chief stratergist at Bank of America, a Richard Bernstein said yesterdays bank bail out won’t work and advisers clients to flee the banking stocks(does this guy want his job?). Also added that “large” banks should be “shut” and others should merge…er, so we get even more job losses, Dickie?

China reported its biggest fall in exports at down 17.5% which is the biggest drop in 13 years;things just seem to be going from bad to worse over there.

CBA provided a positive reporting a 1st half profit of $2.57 bln but more importantly they maintained the dividend although they did say that might not be maintained in the future.I still like this stock and am long from $29.80 targeting $34.00.

THE FORESIGHT

I’m concerned that the Dow Jones continues to trade under the 8,000 level and is showing no signs of reclaiming it, the longer this continues then we are facing a few more major leg downs possibly to the 7,400 level.

I am short BHP at $33.80 targeting the $29.70 area. Stop loss at $34.20 as any break over the triple top level of $34 and expect a move towards $40.00

I expect a quiet day today on our market after yesterdays very impressive resilience.

Have a great day

Regards,

Lou Muddaris

Dow Jones down 9 @ 8,270

CRB Index down 45 @ 223.9

Oil down 34 @ $39.83

Copper down 2.35 @$160.50

Gold down 16,4 @ $897.9

THE HINDSIGHT

Overnight the Dow flip flopped either side of unchanged in directionless trading. As much as it is becoming boringly repetitive we are waiting the Obama stimulus package. Treasury Secretary Geithner delayed the financial package until Tuesday 11.am Washington time (he was probably still filling out his income tax returns). The market is hearing that an “aggregator bank” will be formed to buy the toxic debts and interestingly will be partly funded by private investors and hedge funds. Now why any savy investor would want to buy these toxic debts is beyond me even accepting that they will be guaranteed by the Treasury. I guess the idea would be when things return to normal then the price of these CDO’s could be actually worth something; personally I would rather put my money on red or black!

General Motors and Chrysler have been ordered to pay back the Treasury their small $17.4 bln loan…I’m sure these guys have that kind of cash lying around, no? No, both CEO’s said that would force them into bankruptcy….only in America!

THE FORESIGHT

The Dow Jones looks more and more positive the longer we stay above the 8,000 level. Indeed there are further signs that the bears aren’t growling as loudly as data released overnight showed the biggest monthly drop in short selling , falling  in January by 28% from it’s peak in July. This isn’t a false dawn; valuations and the charts are certainly pointing to higher prices. The key U.S yield curve is steepening almost daily which points to a stronger economy by year end; just as in 2007 when it was inverted it screamed that we were heading for a recession…it amazes me how so many “talking heads” ignore or don’t understand this ultimate indicator. Further more , many say copper has a PhD in predicting the stock market and that has certainly risen substantially , now some 30% off its lows.

I continue to favour the medium sized miners. I’m very wary of BHP facing massive resistance at $33.80/$34.00 however any decent close above this quadruple top on the charts and then expect a new leg up, towards $40.00. Also CBA is cheap around $29.50 but be wary of their dividend announcement on Wednesday.

Yesterday I recommended Fortescue Metals and we  saw a 25 cent rally to $2.57, would certainly add on any weakness around the $2.25 level with a near term target of $3.00.

Have a great day,

Regards,

Lou Muddaris

Dow Jones up 217 @ 8,280 (this is now looking positive as the 8,000 level is very much in rear view mirror)

CRB Index up 3.0 @ 224.36

Oil down 41.00 @$40.17

Copper up 12.85 @ $162.85 (This is a significant move higher indicating demand is returning)

U.S 10 year yield @ 3.00% ( Take profit on shorts entered at the 2.30 yield level)

Gold down $1.80 @ $912.50 (This will hit $1,000, if it retraces to $870 then add to longs)

THE HINDSIGHT

1.600,000 Americans lost their jobs in January and this will only get worse..it really isn’t viable to trade off these dire numbers as we know the macro picture. The market on Friday was extremly positive as it rallied over 200 points a sure sign we are going higher especially as we pull further away from the critical 8,000 level.

2.ANZ and Nab were dissappointing in their profit statements but it could have been much worse, again a sign much of the bad news is priced in. Well, as for News Corp and an $8bln write down plus a gloomy earnings forecast in an economy where advertising is the 1st casualty …just don’t go there!

3. I refuse to mention the Obama stimulus package…its getting more coverage than David Beckham’s latest haircut.

THE CALENDAR

This week sees very little in the news in the rising death toll with no economic data until Wednesday when the U.S Trade Figures are published(expect a deficit of $36 bln). On Thursday we see retail sales , expected down 0.8% and business inventories expected down also 0.8%. Friday we see the consumer sentiment where 500 families are interviewed about future prospects…er , that will be a no brainer! (expected 61)

THE FORESIGHT

On Wednesday we see the profit figures for CBA. although already flagged to the market last week we still don’t know whether the sacred dividend will be maintained or cut…forget about an increase.I believe a cut of around 20% is factored in so should they maintain the dividend then this stock is as cheap as the proverbial. As I mentioned on CNBC on Friday I think around $29 they are a screaming buy to target the $34 resistance level in the short term.

I also like the small to medium commodity stocks. Beach petroleum is cheap at 70 cents as is the more speculative CBH at 4 cents to target the recent highs of 7 cents. Also Fortesque Metals is showing signs on the charts of a sizeable move up to target the $5.50 level, again the recent rally in copper and other commodities adds to the positive picture;when the charts and the fundamentals point the same way then don’t argue!

On Friday I took profits on RHG at 18 cents having been long from 11 cents. I would take profits on BHP at around $33.80/$34.00 level and look to re-enter around $28.50/75 level. Remember we are still very much in a traders market; hardly an investors buy and hold market!

I strongly recommend you visit my companies “other” research at www.trendinvest.com.au

Have a great day.

QUOTE OF THE DAY: “Never ask a Barber if you need a haircut”

Hi all,

I was a guest on “Trading Matters” on CNBC T.V (Foxtel channel 652) on Friday 6th Feb’ which will be repeated on the Sunday 8th Feb’ at 3 p.m. Brisbane time , 4 p.m. Sydney time and 6.am London time. The broadcast was for 30 minutes but a snap shot is available by clicking on the link below (or cut and paste to your browser).

http://www.cnbc.com/id/15840232?video=1023800832&play=1

Yours in Trading

Lou

Dow Jones down 148 @ 8,000

SPI down 64 @ 3429

Gold up 22.2 @ 927.3

Copper up 1.10 @ 146.85

Oil up 24 @ 41.68

CRB Index up .32 @ 220.3

THE HINDSIGHT

1. GDP 4th Q appeared to be better than expected at down 3.8% against expectations of 5.5% but the build up of unsold inventories wasn’t the reason the market wanted to see!

2.NEC Japan announced 20,000 job cuts worldwide (no that isn’t a typo).The Japanese economy makes the U.S economy look positively healthy.!Procter and Gamble completely missed analyst’s profit expectations along with some 40 % of other U.S companies that have already reported.

3. CNN reported on Saturday that Obama’s financial rescue package will be delayed by another week….markets abhor uncertainty.

4.Chinese Premier Wen Jiaba (sounds Arabic) was in London on Saturday and was very coy when asked whether China will continue to buy U.S Treasury bonds. He replied “that is a very sensitive question and no doubt one which President Obama will ask”. Hardly an endorsement particularly when he added that China will look at the “risk and current needs”. If these guys stop buying then forget everything as the crucial 10 year bond yields will dramatically spike up which will make the U.S consumer default/ cut back even more. Now bareing in mind the consumer represents 70% of the the U.S economy you don’t need a degree in economics to see how catastrophic that would be.To quote the song “You ‘ain’t seen nothing yet”, (BTO). Remember the Chinese already own $2 trillion of U.S debt just ahead of the Japanese and any cessation of buying can be put squarely on Treasury Secretary Geithner’s blooper when saying China is manipulating it’s currency…the same trigger which caused the 1987 crash was Treasury James Baker citing the same thing about Germany.

THE FORESIGHT

1. Forget the economic data as it’s like reading about a constantly increasing death toll. We know it’s a recession;how about be done with it and call it a depression, especially if Obama’s plan doesn’t work. Instead read the company reports and this week sees the heavyweights  BHP on Wednesday and Newscorp on Friday.Next week  the much awaited CBA figures are published with some analysts believing the sacrosanct dividend will be cut. The market will go lower going into these figures.

2. I have been uncommitted on stocks for awhile as I need to see how the critical 8,000 level holds on the Dow Jones..or doesn’t!Interestingly it closed on Friday at this very level. This Fibonacci level is critical as we have tested it on 4 occasions now and rallied (once to 8,900) so any consistent close under then every technician and chartist will be doing one trade only. Readers have asked me how they can make money in falling markets…it’s simple, trade CFD’s.

3. I am still short the U.S 10 year note, just one futures contract has made over $7,000 and will look to sell again on any rally, targeting  a 3%  yield soon then eventually 4.75%-5% yield.

4. I will be appearing on CNBC T.V this Friday talking about the markets and where to invest/trade.

Have a great day

QUOTE OF THE DAY: ” When you go through hell keep going”  Winston Churchill.