Wizard of Wall Street Oct-Nov Edition

Now lets look at this sleepy insurance conglomerate that was featured on Morningstar. Morningstar painted a great picture and it made my mouth water. I would be getting in on the next Berkshire at only $300 and some change, but wait. I've got to look at this chart:

http://stockcharts.com/h-sc/ui?s=Y&p=W&b=1&g=0&id=p47338082646

This company seemed to weather the hurricanes well, but then something happened for it to cross under the blue line. This doesnt make me feel comfortable anymore. Then we see that they are now building the Freedom Tower on the chart. There are some problems here that I dont know about. Some wizard is pulling ropes and pushing buttons. They got Morningstar to pump this. I do like the business model, but this chart I cant stomach to throw my cash at it.

On a side note, Warren Buffet did say that insurance companies were not going to be as profitable from here on.

Well, I do like the company, but I would prefer to wait a few months to see where its going. I want to see a walk-up along the blue line and not building formations on the chart. My opinion is that it will pull back. There will be a better entry point.

Here is the Philly Sox Index.

http://stockcharts.com/h-sc/ui?s=$SOX&p=W&b=1&g=0&id=p47338082646

This should be a clear sign to you that the semi index is the diamonds course for traders. The blue and red lines crossing like its the blue angels doing wild manuevers. Building formations everywhere. The red line gets popped a few times. This is scary.

Seeing that chart of the SOX, makes the following chart make sense:

Marvell MRVL

http://stockcharts.com/h-sc/ui?s=MRVL&p=W&b=1&g=0&id=p47338082646

I can tell from the two charts that Marvell has a great management team. Although the semi-sector has been completely nuts, I do see a walk-up pattern.

However, there is an obvious problem at the end. I have confidence in management though. I think they can pull out of the tailspin. Although, I have not really seen them step up to the plate.

I would prefer to invest in Marvell, though, when some of the problems have cleared up. After next earnings call and analyst review. I will probably miss out on some price appreciation, but its better to be safe.

This might be a better play with the calls where you have limited downside. Your bet is wrong, you lose the cash in the calls. Your bet is right, your still able to make cash.


Now lets move on to the ultimate Wizard of Wall Street, Jim Cramer. Lets see if we can debunk the reasons as to why he recommended the following stocks on his tonight. Remember, I dont see Wizards in a positive light. To me, they are those guys that pull the ropes and push the buttons.

Activision ATVI

http://stockcharts.com/h-sc/ui?s=atvi&p=W&b=1&g=0&id=p47338082646

We see a major incursion over the blue line in October 2005 signifying there was a problem. We had a few bounces and then what looks like a V-bottom and possibly a building formation. Could this be a rough double top?

It was irresponsible for Cramer to send retail investors into this company. The V-bottom was probably created by traders trying to play the Christmas season. I dont believe the problems from 2005 were cleared up.

This is not investment grade and how are retail investors supposed to play this trade? How will they know when to get out?

Conclusion, Wizard Cramer was pumping this stock for reasons we dont know. Maybe to bail out a hedge fund buddy or maybe he was told to do this by the CNBC producers. They all seem to have the same agenda.

What about Electronic Arts?

http://stockcharts.com/h-sc/ui?s=ERTS&p=W&b=1&g=0&id=p47338082646

This is even worse! Can we conclude that the red line will soon cross the blue line and invert? This thing skips across the blue and red like an EKG. This is not investment grade. However, this might be a good stock just to trade.

Again, irresponsible to throw this down on retail investors. Why doesnt he throw up a chart and explain how its transpired over the years? Oh yeah, he doesnt believe in this silly stuff.

He did say not to buy Sony, which was a good call.

http://stockcharts.com/h-sc/ui?s=sne&p=W&b=1&g=0&id=p47338082646

There are many issues on this chart. You might not be able to time the entry and exit points just for trading. I would just move on after seeing this.

Cramer mentioned that he thought RIMM was the better trade then Garmin.

Lets take a look:

http://stockcharts.com/h-sc/ui?s=RIMM&p=W&b=1&g=0&id=p47338082646

This is a hard call. The weakness and intersection of the blue line was caused by the lawsuit. You saw the stock zigging and zagging back and forth. Now we are seeing a tall building being formed which I dont like.

Somehow I feel RIMM will now trade higher above the blue line for a while, but my gutt instinct says it will pull back. 2 years ago it was trading at a P/E of just 24 and now its almost 60. How much higher over 60 could it go? I dont like to deal in these high multiple stocks because when they disappoint then the price line heads back to sub-blue line.

I will have to pass on RIMM. Sorry, RIMM fans.

Garmin

http://stockcharts.com/h-sc/ui?s=GRMN&p=W&b=1&g=0&id=p47338082646

I will be honest here. I like Garmin better then RIMM. I will have to disagree with Jim.

There was a pullback, but it didnt pull back under the blue which suggests that this was just a weak hands selloff. Trades at a P/E of 24, not really that high. Looking at the research I can see that there was a delay in one of their satellite receiver products that probably caused slower sales.

When I drive around NYC, there are many cab drivers and other people who have GPS systems. There is no lack of demand for the product, but there is competition however.

Im willing to bet that this was just a fluke quarter in an unforgiving market.

I like Garmin better then RIMM.

The next segment of the show involved the CEO interview from Aqua America WTR

http://stockcharts.com/h-sc/ui?s=WTR&p=W&b=1&g=0&id=p10932901984

The CEO gave the following response:

"This is a stock that has been around for 100 years, and it hasn't underperformed over the last 20 years," DeBenedictis responded. "I can't tell you what it's going to do quarter to quarter, but long-term holders have done very well with the stock."

"We are going to keep trying to grow earnings and revenues through accumulations of real assets," he continued. "We're up to $3 billion in assets, and it took us 100 years to get there."

"We're going to continue buying companies, putting investments in new water quality and growing organically in areas we're in," DeBenedictis said. "The fundamentals are strong."
**

Mr. DeBenedictis's response was unacceptable. This guy sounded like a nervous, scared kid on the show. My brother was on the show and placed in the same shoes as this guy and my brother sounded a lot more confident. I can tell you that my brother was hiding something as well, but my brother is a player and knows how to talk.

On the other hand, this guy was hiding something. He sounded scared, wimpy and his words were horrible. Its simply unacceptable to sit there on national television and say that you dont know what the stock will do quarter to quarter. Your the CEO, shouldnt you take charge and do something.

If we look at the chart, the price crossed the blue line a long time ago and it appears to be living there. There is a problem that the CEO did not fully explain. I do like the company's history and their DRIP Plan though. I would wait for another conference call and analyst review to fully know the situation. The fact that this guy didnt step up to say what was wrong scares me.
 
At this time, I would like to bring a new stock into the lime light that has been largely missed by the overall market.

That stock is Western Union. I had previously stated to you that I had a stock that I would only mention once I established a position and here it is.

Now that Congress will be in gridlock for the next 2 years, Western Union will greatly benefit. As the Mexicans cross the border, there will be more funds sent out by Western Union. Since Congress will be in gridlock, then we wont see any new legislation on the issue. Good for Western Union.

The conference call was a good one and the analyst review favorable.

I say get in now and ride it up into the 30s. Sell when it reaches 40.

There is some risk to this stock though. If the government controls prove effective, then this is a sub-$20 stock. Now that there will be gridlock and a lame duck President, we can assume that Pedro will be crossing the border once again and sending money home by Western Union.

Strong buy, get in now and buy on weakness. This is going to move.
 
"There was once a young man in Vietnam who had hopped out of a helicopter to walk across a live minefield under fire against the direct orders of the pilot in order to rescue several other Marines that were too scared to walk through the field to the waiting helicopter. This young Marine actually walked through the live field 6 different times while being shot at by enemy forces and carrying other Marines on his shoulder. On two occasions, there were mines that went off in the field during the rescue. "Bouncing betty" type mines that fly up and explode in mid-air sending shrapnel everywhere. Later on when he was asked how he knew where the mines were, he answered that he just took a guess walking through the field and the others followed in his footsteps.

http://www.marines.mil/moh.nsf/0000...aa?OpenDocument

This man is a great man, a hero, do not get me wrong. He saved an entire platoon of Marines in Vietnam. However, his actions demonstrate the concept of studidity. Going against direct orders from a Lt. Col., running through a minefield in which he does not know where the mines lay while under fire and carrying fellow Marines. This was a situation in which if he had failed then he would have been surely either dead or court-martialed. However, since he was a success, he was branded a hero."

I wouldn't expect a wanna be hack like yourself to understand the bonds that develop between soldiers when you put your life in the hands of another, and they in turn put their life in yours. That bond is even more sifnificant when developed under fire. But do use this in support of your stupidity argument is fucking ridiculous.

The fact is when it comes to trading, never have so many made so much for providing and doing so little. When you consider soldiers, the men and women who have served in combat, never have so many paid so much for so little.

But let's go there, and apply a little trading math to the situation.
When you consider the math of the situation, the soldier made the right play. Risking one to save them all, in a situation when all of them would be lost was a smart play. It's similar to a trade where you are riskng one to make 10, what trader wouldn't take that trade?

Finally, when you consider what was the "right" thing to do, the soldier made the correct play.

There is nothing stupid about that!
 
My friend, I was an enlisted man in the United States Army at one time.

I can tell you that the actions of the soldier were not thought out. He made a quick decision and went against the orders of the field grade officer who was in command of the helicopter. If his mission failed, then he would have been court martialed, but if he made it through the mine field he would receive the medal of honor.

You only hear about the soldiers who won the medal of honor, but you never hear about the ones who got court martialed. I can tell you that there are far more soldiers court martialed then the ones who have received the medal of honor.

In the same way, unfortunately, this is how hero traders and investors are formed. If they do something stupid and somehow make the right trade, then they are told they did the right thing. They are promoted to the top positions.

Brian Hunter was indeed a hero and received the trading medal of honor in the same way in 2005 when his bets on natural gas proved right. All of a sudden he was a hero trader. However, luck was not on his side in 2006. In the markets, you have luck and brilliance. Was Brian lucky or brilliant?

You sound like a young man and your perspective will change as you move forward in life. When you are younger, you will feel comfortable in the hands of other people. You may develop strong friendships among your friends and played on teams in high school. You may even place your trust with a woman and get married. These are the soldierly bonds of youth. This is one of the reasons why we have young people in the military.

When you get older, you realize that the only person that can be trusted is yourself and your basically on your own. This is a hard reality that most people simply cant stomach, but its true and you wont realize it until later on in life. That security blanket you thought you had with other people when you were younger was mainly psychological.

When I was 19, I could look back at all of the guys who lined up with me loading up on the C-130. I felt that I was in good hands. Now at an older age, Im not exactly sure if I could trust the same guys. The reality is that the guys who packed those chutes were probably drunk the night before messing around with the women. So were the mechanics of that airplane. At age 19, I gladly threw on that parachute and marched right on the C-130. At this age, Im not going anywhere near that plane and I want to see/know the guy who packs the chute.

You may want to throw all your cash on extreme leverage into one trade this morning and then when you come out having a pot of gold, should I think of you as having made the correct play? Honestly.

The soldier was a courageous man who saved lives, but we have to look at his actions with realism. Was he lucky that he didnt strike any mines? Was he lucky that he didnt get more people killed? What if he detonated a mine that damaged the helicopter and stranded more people in the minefield? Fortunately, he was able to save the men and rightfully he should have been awarded the medal.

Like I said before, my experience in the military is different then your own, that is if you were in the military. There are far more men court martialed for not listening to directions and acting on their own then those who were awarded medals. In much the same way, there are far more people in the market who lose money by taking extreme risks. The ones who lose money we never hear about for some reason. The ones that win on risky bets at the track get promoted and write books.

The point I am trying to make is, that in the markets, dont walk in the same path as other guys who may have just been lucky. This is not supposed to be gambling, but educated decision making accompanied with risk management.

Quote from mschey:

"There was once a young man in Vietnam who had hopped out of a helicopter to walk across a live minefield under fire against the direct orders of the pilot in order to rescue several other Marines that were too scared to walk through the field to the waiting helicopter. This young Marine actually walked through the live field 6 different times while being shot at by enemy forces and carrying other Marines on his shoulder. On two occasions, there were mines that went off in the field during the rescue. "Bouncing betty" type mines that fly up and explode in mid-air sending shrapnel everywhere. Later on when he was asked how he knew where the mines were, he answered that he just took a guess walking through the field and the others followed in his footsteps.

http://www.marines.mil/moh.nsf/0000...aa?OpenDocument

This man is a great man, a hero, do not get me wrong. He saved an entire platoon of Marines in Vietnam. However, his actions demonstrate the concept of studidity. Going against direct orders from a Lt. Col., running through a minefield in which he does not know where the mines lay while under fire and carrying fellow Marines. This was a situation in which if he had failed then he would have been surely either dead or court-martialed. However, since he was a success, he was branded a hero."

I wouldn't expect a wanna be hack like yourself to understand the bonds that develop between soldiers when you put your life in the hands of another, and they in turn put their life in yours. That bond is even more sifnificant when developed under fire. But do use this in support of your stupidity argument is fucking ridiculous.

The fact is when it comes to trading, never have so many made so much for providing and doing so little. When you consider soldiers, the men and women who have served in combat, never have so many paid so much for so little.

But let's go there, and apply a little trading math to the situation.
When you consider the math of the situation, the soldier made the right play. Risking one to save them all, in a situation when all of them would be lost was a smart play. It's similar to a trade where you are riskng one to make 10, what trader wouldn't take that trade?

Finally, when you consider what was the "right" thing to do, the soldier made the correct play.

There is nothing stupid about that!
More...
 
Quote from eagle488:

"... This [trading] is not supposed to be gambling, but educated decision making accompanied with risk management...
More...

THIS should be Chapter One, Page 1, for The Traders Primer.
 
Good stuff all around E.

You ever used Point & Figure?

You might want to check it out at some point. The methodology is not dissimilar to what you are discussing here with stocks, and the trader is able to get a lot more detailed information from just looking over a few (several) charts.

Regards,

JJ
 
I dont have a lot of time this week to reply to posts.

There was an event yesterday that made me find a very unique stock. The event was the AMKOR (AMKR) conference call. Excellent conference call that surprised the analysts. The semi industry is much stronger then people believe. The glut in chips is not as bad as widely thought.

Previously I had written about a simple 50/200 week chart to utilize for screening different stocks. However, this stock's chart appears to be messy. However, Im willing to bet that this will run to 10.5 in the next 3 months.

If you go to a 1 year chart, you can see that this company did a classic head&shoulders over the summer or what I like to call, The Empire State Building.

http://finance.yahoo.com/q/bc?s=AMKR&t=1y&l=on&z=m&q=l&c=

http://biz.yahoo.com/ap/061109/amkor_technology_stock.html?.v=1

Recently, it had just gone through a lot of trouble to include a stock options scandal and other such messes. These troubles have now been cleared.

Now we are at a point where I feel this is a good value play in the semis. This company is not actually a semi stock, but one that is a subcontractor to the semi companies. The semis are coming out of their P/E compression stage of life and are poised to move much higher then their current price fueled by the need for cell phones, etc.

Its difficult to bet on one semi company because their can be certain competitive issues. Broadcomm and Marvell compete highly against each other. Amkor provides the ammo to both sides through subcontracting. If we are going into the next rally in semis, then I feel Amkor AMKR is the best pick for this fight.

On the chart, AMKR is breaking out and most probably next conference call will be like the one yesterday. One where we see a grand slam out of the park.

Bottomline, I dont see this being an 8 dollar stock much longer. I see 9-10 range in one month.
 
Here is the yearly chart for AMKR. You can see the head and shoulders over the summer.

That appears to be behind us now and now the trend is up.
 

Attachments

Here is my update on Western Union. It appears institutions are establishing their positions. Quite a few block trades over the last few days.

We are now at the point where it will consolidate for the next few days and to add if it pulls under 23 dollars. I feel the next step up will be to 25-26 range.

My chart is rough, but you see the overall trend.
 

Attachments

Complete breakdown on Hans. Some of you will hate me for saying this, but the 200 week moving average is right at 11 dollars and the price is right now at 25 dollars.

There will be a small bounce in Hans because value investors believe its now a clear buy. However, my thoughts are a little different. I think the P/E has to come down a little further. Im thinking low 20s-high teens should be Hansens new price. The sudden selling after the conference call is very telling.

Im wondering if the housing market will mimick Hansens. . .As I speak, it just keeps making new lows. I can start seeing the value guys step in now.

I would personally stay away from this stock. The soda bubble is now over.
 
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