My Retail Naughty & Nice Lists

Of late, I've had a very bearish view on the markets.  For the most part, I still do.  However, in the near term, I think the post-holiday earnings season will have some upside surprises as well as some well-deserved precipitous falls.  After reviewing some conference call transcripts, earnings reports, trends within those, and some personal observations, I think the wheat and the chaff will get distinctly separated in the next round.

Among retail, I think the following companies (by no means a complete list) will surprise to the upside in their next quarterly earnings reports (in no particular order):

Kohl's (KSS)
Macy's (M)
Target (TGT)
Walmart (WMT)
JC Penney (JCP)
Best Buy (BBY)

The following is my Naughty List.  These are companies late to the on-line migration game and poorly managed such that they are, in my opinion, in a free-fall.

Nordstrom (JWN)
Sears (SHLD)

I know there are lots of reports of Walmart and Target having lack-luster crowds, but the Target stores in West Michigan that I saw had full parking lots when I passed them.  Walmart seemed eerily quiet, but their online shopping site was so burdened with traffic that they had problems keeping it working properly.  That likely means that traffic merely shifted to on-line.  Given the history of Walmart on Black Fridays Past, I certainly understand the sentiment - great deals, but unruly crowds.  JC Penney is reporting better than average e-sales, and their stores in West Michigan appear plenty busy.  They's been turning their operations around for some time now and it's showing.  Even their on-line presence is easy to navigate and they offer the brands my family likes to buy.

I was actually shocked at how full the Macy's (M) parking lots were.  They were getting slammed at 10:00 Saturday morning, and Best Buy was almost equally busy.  Nordstrom Rack had an anemic showing at that same time with an all-but-baron parking lot.  The only parking lot more empty was our local Chipotle (CMG) who I don't think was open for business yet, but I typically find that Chipotle low on traffic (in all fairness - location is likely the issue there).  Nordstrom Rack near my home is typically a ghost town, and it seemed even lighter on "Small Business Saturday."  Ouch!

As for Nordstrom proper, nearly everything they offer is either cheaper elsewhere.  They didn't even discount the Fitbit (FIT) Surge that is $199.95 everywhere else on the net (WMT, TGT, KSS, AMZN, etc.).  It's full price ($249.95) at Nordstrom (JWN).  Their management says they've noticed a slowdown in sales and foresee a continuation in these trends.  As for what's working and what's not, they've, "got nothing to point to.  It's just foot traffic."  As to what led to the foot traffic slowdown, They admitted to not knowing why.

I have a few ideas.  They are bested by the likes of Macy's, JC Penney, L Brands, Hudson's Bay, and others.  For goodness sake, herroom.com is better equipped on line.  Listen to the Q&A session.

Sears has been on a downward slide for some time now.  A look at their online trend data compared to others, it's apparent that they're just not functioning toward an ongoing future.

While Kohl's is getting its footing in the e-commerce arena, they are VERY well managed.  I've noticed a general drop in foot-traffic over the years, but in looking at their financial data I can see that their management has done a great job at managing costs while still managing a competitive retail environment.

So those are my lists, naughty and nice.

Disclaimer:  I trade stocks and options so I may at any time have positions, long or short or equivalent, in any of the companies mentioned in this piece.

I've Had It With All The Bull. I'm Turning Bear!

That's it.  My identity crisis is over.  I'm officially a BEAR.  I've made higher gains in 2 weeks of trading PUT options than all the years I've had trying to buy and sell stocks as a Bull.  If you ask me, it's all a BUNCH OF BULL.  It's all hype.  It's all smoke and mirrors until you get a look under the hood and learn to see what's really going on.

Good companies will show themselves when we look at their books and bad ones will look odd.

SO, here's my BEAR ALERT for this week:

KITE

I'm not really of a mood to trust analyst ratings, especially when they all seem to be TOO in love with a company.

If you want to know more about what the company does, here's a link to their web site:
http://www.kitepharma.com/

It's an interesting thesis for sure, and I for one would hope and pray that there is real promise in what they say they are doing.  BUT I'm not in this for hope and prayer, I'm looking at a business and the trends in the business here disturb me.

If you look up KITE's information at your broker or on sites like Finviz (Images in this article are from FinViz), you will see that the price to sales ratio is over 487.  That means that the price of the stock is more than 487 times the the gross sales of the company.  The price to book ratio is 9.35.  Bristol Meyers' is only 7.06.  But WAIT!  It gets better.  The Price to FREE CASH FLOW ratio is 1077.75.  That means that you, the buyer of the stock at over $80/share are paying more that 1000 times the free cash flow of the company.

But the cash of the company is $8.98/share.  So, the free cash flow of the company is less than 1 cent per share.  They appear to have no debt, so at least they're not heavily leveraged.  But then when I started looking at the mechanics of the ownership of this company, I saw something rather odd:

If you look at the Annual Earnings of KITE in 2012, 2013, and 2014, you'll see that it goes from -0.48/share to -1.43/share to -1.91/share in 2014.  For a startup company developing a new product, this may seem normal and the acceleration may seem to be slowing, BUT there's another part to what's going on.

Recall that the earnings are being quoted on a PER SHARE basis.  That means that the total losses are really a function of the shares outstanding.  If that number were constant, there would be no problem, but unlike good companies like Disney (DIS), Schlumberger (SLB), or others who buy back their share and INCREASE value to the share holders, KITE has been increasing shares.

In 2012 they had 5.31 million shares outstanding with that -0.48/share loss.
In 2013 they had 5.47 million shares outstanding with the -1.43/ share loss.
In 2014 they had 22.82 million shares outstanding with their -1.91/share loss.
Currently, they stand at 43.73 million shares outstanding with authorization for 200 million shares.

So where are all these shares coming from?  I would normally figure that it's from the sale of stock to raise cash for operations until they get FDA approval for their product and/or service.  But something seems to have emerged this year and I think people are beginning to take notice.

If the prospects of this company are REALLY as good as the promoters of its stock would have you believe, then the directors and officers of the company would be buying as the opportunity presented itself.  They would even retain some of the shares they get in options as pert of their compensation packages.  However, looking at the insider transactions of KITE, I can see that it's quite the opposite.  The officers of this company have REDUCED their personal stakes in the company and at every turn, and it seems quite frequent, they are cashing in on options and dumping the shares on the market.  In fact, they have done NO buying at all except to execute AUTOMATIC SALES to the market.

Perhaps it's not as nefarious as I'm reading into it, but it looks to me that the officers and directors of KITE are lining their pockets with money from the people buying the stock from the market, and the money never goes into the books of the company, and the shareholder value is HEAVILY diluted.  Meanwhile, the stock is at ALL TIME HIGHS for it's price.

I may currently or at any time have or close a short or equivalent position in this or any other security, but for now, I see trouble ahead as people get wise to the shareholder dilution and the accelerating losses that are being masked in PER SHARE comparisons to analyst estimates when in fact it looks a little more like a shell game.

If one wants to look at this as being a time for a normal retracement, then let's look at the Fibonacci ratios:

I'd say this thing could EASILY hit $60 in the coming week to 2 weeks.

My rating for this company is SELL!  This company is bloated and frothy even if their technology will EVENTUALLY pan out.  For now, it's an expensive piece of BLUE SKY.

I'm not an accountant, and I'm not a financial professional, so you need to do your own due diligence, but these do not look to me like the books of a "best in breed" company.

Schlumberger - The NEW Belle of the Ball?

Jim Cramer is saying that Schlumberger (SLB) is de-risked.  It's hard to argue with that logic.  After all, SLB gave an abysmal earnings report, stated that supply is weakening as the dramatic cuts in E&P investments are STARTING to take effect., stated that revenue is dropping due to persistent pricing pressure, and on and on and on.  The company through all this managed to still turn a healthy profit and beat analyst estimates by one cent, but the revenue trend is not doing well (no pun intended).

The overall O&G market is plagued by a glut in supply, and an ever-decreasing capacity for storage.  This earnings season is showing an overall trend toward a slowing economy and that means FEWER truck on the roads, both here an abroad as international companies are getting hit harder.  Fewer trucks on the road means less demand for diesel.  Less demand for oil and a glut of supply spells trouble for oil producers.  The heavily leveraged companies like Sandridge (SD) or Magnum Hunter (MHR) are likely in deep trouble.

I even pointed out the long-term Head-and-Shoulders pattern I see in the 10-year chart.  Over the last 3 years SLB and other oil companies like Halliburton (HAL) have formed this same pattern:

The Head and Shoulders in the OIH was considerably more abbreviated in time:

This, I'm sure, has a lot to do with the many sectors and components to this index fund.  Natural gas, pipelines, tankers, producers, explorers, and others all make up this fund.  So it should be no surprise that this fund may very well be finding a bottom as industry focus shifts from one sub-sector to another.

With all this going for it (sic), SLB share price barely flinched and even seemed to rally on Monday after HAL reported similar dismal revenue numbers.    I have to wonder, though, how far those revenues can erode before dividends get reduced or altogether cut.

Yesterday at the close of trading, we learned that SLB has LEASED the exclusive rights to a fracking technology from Energy Recovery (ERII) for the next 15 years which sent ERII shares soaring over 100% in after-hours trading.  No doubt this is a short squeeze as the last reported Short interest in ERII was more than 3.5M shares, representing 35 days to cover at their A.D.V.

For SLB, this means that there is a near-term cash outflow over the next year of $125M JUST for the rights to use this technology.  SLB STILL has to actually invest in the execution of the technology and that will likely be far more than the licensing costs.  That plus the costs of the CAM merger, means that SLB's CEO was not kidding when he said that the next TWO YEARS were going to be rough.  SLB's CEO is taking a huge risk investing so much into fracking when natural gas is selling at its current prices.  I'm a little surprised that he isn't going after pipeline exposure as a glut of natural gas will not effect the pipeline revenues as much as it will for producers.  He might be better off making a play to buy up Magnum Hunter (MHR) as part of a restructuring of that company.

Anyway, with a forecast as ugly as SLB's I suppose it's just Wall Street logic that the prices should finally rebound.  I wouldn't my breath for a dividend after December, though; at least not for the next 2 years.

Schlumberger & Halliburton, A Double Tap to Oil & Gas?

     Tweets just don't give enough characters for an intelligent one-liner, let alone a detailed review of a topic like the 2015 Q3 earnings for Schlumberger (SLB) and Halliburton (HAL).  These are admittedly two well-run companies (no pun intended) in the Oil & Gas sector, but are suffering from the decline in commodity prices of the products they service.  Thursday, after market close, SLB posted financial numbers indicating that they beat by one cent per share on earnings, but missed on revenue.  This is definitely a testament to the quality of the management at SLB because they suffered greatly on revenue, but still managed to keep costs down to a level where they beat the estimates, if only by one cent per share, but ALSO managed to maintain a share buyback program as maximum allowable amounts, lowered long term debt, and negotiated an acquisition of another company to compliment their own corporate offerings long into the future (Cameron International - CAM).

    With all this going for SLB, what could possibly go wrong?  Well, for starters, in that same set of numbers, and confirmed by the phone conference Friday morning, SLB is lowering guidance well into the future.  They will have to, by law, stop their share buy-back until after the CAM shareholder vote; currently the next annual meeting is May 6 of 2016, so saying that the merger will be completed in Q1 of 2016 when the next scheduled vote is in Q2 of 2016 seems odd.  Clearly, there will need to be a hasty shareholder meeting put together if SLB's timeline is to be kept.

    Where SLB is concerned, their report and their history shows a progressive decline in revenue.  That sits at the heart of their problems right now.  HAL is due to report Monday morning, releasing numbers at 7:30 AM EDST and their conference call is at 8:30 AM EDST.  Analysts have already cut expectations for Oil & Gas companies based on the depressed prices for the commodity.  SLB managed to beat on earnings via a skilled use of cost control, but their revenues were a miss.  If HAL reports a similar miss on revenue and a similar dark outlook for O&G services then the entire sector will likely take a hit in the near term.  If HAL manages to beat on revenue then it will say a lot about SLB's report.  If SLB is reporting deteriorating revenue and HAL is improving or at least not deteriorating then we will likely know where SLB's revenue has gone...   From AMD to INTC.  

That's right, I'm saying it.  If HAL beats on revenues after the report and guidance we got from SLB on Friday then it likely means that SLB is losing market share.  Let me be clear in stating that I do not expect this, but we won't know HAL's numbers until they are published.  If HAL shows similar numbers both top and bottom line but has a more optimistic outlook, then it's probably just optimism.  Whether that optimism is well placed, only the passage of time and proven results, or the lack thereof, will be able to tell us.

From a chart perspective, I see HAL looking a bit bearish:

The Fibonacci retract in the downward direction seems to be consistent with a reversal from the long term bullish trend HAL has enjoyed for the last few years.  Further, there is the look of a possible Head and Shoulders pattern in that monthly chart.  The knowledge of a glut of oil and increasing reports of well shut downs and cutbacks, only further supports the notion of this being a bearish pattern worthy of careful consideration.  If you're long this stock, or any other on the O&G services sector, then I recommend either taking some profits or hedging with some Put options to cover your position.

When I look at the 10 year monthly chart for SLB:

I definitely see the Head and Shoulders pattern, but I also see that the retrace on the run-up from early 2009 has hit the 63% marker, and is currently a little over it.  If it breaks below this, then the H&S will be confirmed and SLB will likely see mid to low $50's before it's over.

If we look at the near term chart for CAM, the company being acquired by SLB we might get a feel for what is being anticipated by the share holders there.

    This seemingly bullish consolidation looks pretty good except for the hanging man candle from Friday.  High volume, but no movement and the price is at a peak.  This means that someone, or several, are selling at a pace that is overcoming the growth in price for this stock.  As a company, they seem well managed, feel free to review any of the analysts' reports on CAM, but to me, they look like a healthy company with a stock about to get a temporary knock-down.  The gap-up from the news of the buy-out will likely need to be covered in a retrace before this stock moves much higher.  I'd say wait for a better price to get in, or cover with Puts if you own it and don't want to give it up.

This is going to be a busy week for earnings reports, and HAL is either going to provide a little lift to the O&G sector (but at the demise of SLB's share price), or the entire sector is about to start off this coming week with a double tap to the Head & Shoulders.

How to Spot a Pernicious Short-Seller

Spotting a Pernicious Short Seller

I'm not here to pump any stock, but I have to find this story interesting.  I've been stalking a company for over a year called Medical Marijuana, Inc (MJNA).  The reason for my interest in them has been that they have publicly stated that they will not engage in the manufacture or sale of marijuana in violation of Federal law.  This is a hallmark of a responsible management - obeying the law and not testing the will of law enforcement.      

The CEO recently stated in a letter to shareholders,

"I feel it is important for me to make perfectly clear that although Medical Marijuana, Inc. is not in the business of directly selling or dispensing marijuana while it remains a federally controlled substance. However, we are poised and consider ourselves well-positioned for eventual cannabis legalization. We have a plan for that eventuality, and intend to leverage our relationships and expertise to help advance a truly legal cannabis industry when the day comes. Once legalization occurs or becomes better defined regarding states rights – we can quickly implement entry into this new market. Rescheduling – if not full de-scheduling – from the Controlled Substances Act would signal the clear demarcation point of our entry into the space.

Similarly, the Company also has plans for a repeal of Industrial Hemp Farming Prohibition. The numerous uses involving biomass-to-fuel, building and construction materials, textiles, bio-plastics and others – will all be part of the future of the company. Various Congressional bills are under consideration by our nation’s lawmakers. If for no other reason than to clean up toxic soils and provide an agricultural rotational crop – the Federal Prohibition of Industrial Hemp farming needs to end. The ancillary businesses, clean, renewable and sustainable – will create a huge number of new entrepreneurial enterprises and potentially a revitalization of our overall U.S. economy. It will be interesting to see the increase in overall national GDP numbers, should we allow hemp to be grown nationwide by our agricultural industry."

I feel it is important for me to make perfectly clear that although Medical Marijuana, Inc. is not in the business of directly selling or dispensing marijuana while it remains a federally controlled substance. However, we are poised and consider ourselves well-positioned for eventual cannabis legalization. We have a plan for that eventuality, and intend to leverage our relationships and expertise to help advance a truly legal cannabis industry when the day comes. Once legalization occurs or becomes better defined regarding states rights – we can quickly implement entry into this new market. Rescheduling – if not full de-scheduling – from the Controlled Substances Act would signal the clear demarcation point of our entry into the space.
Similarly, the Company also has plans for a repeal of Industrial Hemp Farming Prohibition. The numerous uses involving biomass-to-fuel, building and construction materials, textiles, bio-plastics and others – will all be part of the future of the company. Various Congressional bills are under consideration by our nation’s lawmakers. If for no other reason than to clean up toxic soils and provide an agricultural rotational crop – the Federal Prohibition of Industrial Hemp farming needs to end. The ancillary businesses, clean, renewable and sustainable – will create a huge number of new entrepreneurial enterprises and potentially a revitalization of our overall U.S. economy. It will be interesting to see the increase in overall national GDP numbers, should we allow hemp to be grown nationwide by our agricultural industry. - See more at: http://medicalmarijuanainc.com/letter-to-shareholders-by-ceo-stuart-titus-2014-annual-report/#sthash.CbzDGY25.dpuf

Now the second part of that I fond very interesting because the Composites industry is just getting started as the tools to engineer products with optimized composite structures have hit the scene as of 7 years ago and continue to mature (See Altair Engineering for more).  The potential uses for industrial hemp are enormous, and there are already hemp-fiber reinforced polymers manufactured today.

There was an article published entitled "Hemp Oil Hustlers" that purported itself as an expose of MJNA.  The company has come out swinging over this and has filed a libel suit over the article.  This might seem like banter, but 2 of the several parties involved have settled and one has given a public statement and supplied  a video with details about the misrepresented facts.  The fact that 2 parties have settled, and these details make it pretty clear that the argument by MJNA has teeth.

Further, they have secured approval from the government of Brazil to sell their products there.  The sales story for this company seems to be getting better and better.  So what does this have to do with spotting a pernicious short seller?

While the stock price for MJNA has risen over the last several days, the growth has been HIGHLY controlled by selling from a market maker, VNDM - Vandham Securities Corp of Woodcliff Lake, NJ.  These guys are special.  They ONLY appear on the ASK side of the Level 2.  Is it possible that they have purchased 100M shares of the company while it dropped to $0.06 over the last few months?  Perhaps, but with the news above, why wouldn't they be allowing the stock to rise more and why would they be pressuring the stock lower and lower as the price fails to move forward, only ever showing 20k, 25k, 50k, shares for sale, but with volumes of 50k, 100k, 150k, 350k shares NEVER make a dent in the selling from VNDM - the price never goes up.   However, when a 10M share dump barely makes a dimple in the price of the stock, clearly someone needed to buy shares and not kill the cow.  That's how short selling works; once the upward movement gets killed, the short seller sits back and buys panicked shares and closes his position and pockets a tidy profit at the expense of average traders and investors hoping to get a lift from good and proper news.

Short selling only happens on the ask (the rules are that one cannot short onto the bid side legally in order to crush a stock).  The rules are such that the short seller needs to account for where the shares were borrowed by the time the transaction closes (3 days).  If by the time the transaction settles that shares are not delivered (term used for this accounting) then there is a violation of SEC rules.  One would have to call it awkward if the short float for a stock were to exceed the number of shares available for sale.  Clearly someone wouldn't be borrowing shares when this gets discovered.

If one could simply short-sell a stock without limit, they would have the ability to crush the desire for investors to make an investment (especially long-term) in that company.  Who would do such a thing?  For starters, anyone with enough money to manipulate the price of a stock via short-selling so as to gain by buying to close those positions when support finally fails due to a lack of price movement.   Other motivations could include competitors looking to undermine their competition so that they could try to gain market share by getting their competition landed on the side lines at a critical time.  I've no idea if either of these are the reasoning behind the short selling, but my inquiry to VNDM about the fees to short a penny stock have gone unanswered.  If that changes I'll update this article to reflect that.

From the SEC's web site there is an article containing the following:

• Selling stock short and failing to deliver shares at the time of settlement with the purpose of driving down the security’s price. This manipulative activity, in general, would violate various securities laws, including Rule 10b-5 under the Exchange Act.

While not all short selling is manipulative, what I've seen here looks VERY suspicious.  It certainly has had the effect of keeping the price under TIGHT control.

FINRA is a group that is supposed to investigate issues like this, but apparently there would seem to be no one there who actually cares, and so this seemingly manipulative short selling goes on with impunity.

I won't recommend any stock for long term investment, but for myself, I'm still a believer in what this CEO seems to be trying to do.  His results are those of one who takes the job seriously, and that warrants a closer look and a proper bit of research.  Anyone else who would consider investing in any stock traded on the OTC markets should be sure to do his/her own due diligence, and know that stocks in this market sector are volatile and can present high risk to the money invested.  This is not something to be taken lightly.

One can only hope that market makers who short sell without having shares to deliver (naked shorting) will eventually get caught in their own cross-hairs.  The one thing that seems clear to me is that when you find a market maker who is only ever on the ask side of a stock and sells many times more shares than what is shown in the level 2, then you've probably found a pernicious short-seller.  Market makers get to have a "Level 3" where they can see the shares for sale and bids being hidden by other market makers.  This is information the public is NOT privy to, so they have a certain level of "inside information" and shorting like this is clearly trading on information not available to the average trader.

It's all part of the culture on Wall Street.  The home trader is playing blind, and the market makers get to see the whole playing field.

Monday April 13 Weekly Watch List

My first look-at stock for this week is PDLI

PDL Biopharma just recently took out a debt facility due by next year and this immediately dipped the stock until Friday April 10 when it popped up far enough to cross the 20 and 50 day moving averages in a single session on higher than average volume.

This tripped the MACD to cross upward and the RSI to cross the 50 line.

The weekly candles show a distinct hammer candle and this may bode well for the week(s) to come.

The weekly charts seem to have the 13 and 20-week moving averages as lines of resistance.  If these are broken in the coming week, then this may very well signal a reversal of the downward trend for this stock.  Friday's move was so strong that the A/D line on the weekly chart was also tipped upward after the previous 4 days were all in distribution.

SO, the trade plan for Monday is to try to acquire 1,000 shares of PDLI at $7.10 on a dip from the high, and then start looking for the exit around $7.80.  I would set a $0.10 moving stop once it passes $7.50 so that it would not require constant monitoring. 

PGN

I'm holding a little PGN into next week after it broke above its 20-day moving average on Thursday and then held support during the Friday sell-off from the traders.  That seems to indicate investor support and during after hours trading on Friday someone bought 56,600 shares on the ask price in 4 transactions.  This was either a short-seller getting out of the way or someone willing to make an $87,730 bet with premium transaction fees for after-hours trading.  If someone has got money like that to put into this with those premium fees, I bet he knows something.

I'm not planning on necessarily keeping this one for the whole week, but we'll see how the performance pans out.  There's a lot of room for this one to run if the trend actually reverses.

Week of 4/6/2015 - Friday Roundup

SGI Paper Trade - Friday 4/10/2015 Results

So here's the summary of the performance for Silicon Graphics for this week (4/6 - 4/10/2015):

SGI
               Open        Close       High        Low
Monday:        8.74        9.03        9.11        8.74
Tuesday:       9.03        9.01        9.12        8.94
Wednesday:     9.00        9.06        9.12        8.65
Thursday:      9.03        9.23        9.28        8.87
Friday:        9.27        5.25        9.41        9.07

The open, close, and low values over the week have a dip in them on either Tuesday or Wednesday, and the highs for the various days show steady progress upward.

Friday's intra-day prices show a long stretch at the 9.39-9.41 range (hours - note the exit signals in the plot above).  It's reasonable to assume that a patient trader could have taken profits at 9.40 but certainly at 9.39.  SO, if we assume, conservatively that we took profits on Friday per the plan then buying on Monday 1,000 x 8.83 at the open and then adding on the dip another 1,000 at 8.70, and then selling 2,000 x 9.39 we would have a profit of $1,250.  If I didn't add more on the dip, then I would still have made a $560 profit.

It might be worth holding SGI longer.  If it breaks $10 then it certainly has some room to run,  but for now I would call this trade closed and a success.

Not bad for letting the money do the work.  It just requires a good General to put that money to work properly.  That is the point of this blog - finding the best methods to put that money to work properly.

From last week, JIVE had a better week.  Perhaps I was just a little early to the show.

JIVE
               Open        Close       High        Low
Monday:        5.20        5.13        5.27        5.11
Tuesday:       5.09        5.13        5.25        5.04
Wednesday:     5.11        5.19        5.21        5.05
Thursday:      5.21        5.17        5.31        5.16

Monday:        5.14        5.17        5.21        5.11
Tuesday:       5.19        5.22        5.26        5.17
Wednesday:     5.21        5.25        5.26        5.20
Thursday:      5.24        5.31        5.33        5.24
Friday:        5.34        5.31        5.36        5.29

Certainly this one progressed better, but much slower.  I suppose this may be a company worth looking into the SEC filings and the books to see if it's worth a speculative investment.  In that case I would not hold more than 100-200 shares because the risk would be too high to hold more than that long term.  From the Weekly candles it does look like JIVE has plenty of room to run.

We'll check in on JIVE next week.and see how they fare for another week.  That's part of studying these picks; just because I may miss on one week, it's worth noting what happens in the weeks that follow because I'm using both Daily and Weekly data to make my decisions and for the sake of investment I would also look at monthly data (candles).

Week of 4/6/2015 - Thursday Update

SGI Paper Trade - Thursday Update

SGI moved up again today following a harrowing drop at the open Wednesday followed by an immediate recovery.  Today saw a higher high and a higher low in spite of lower volume.  Looking at this from the perspective of support and resistance, it looks like some of the traders have gotten out and now the investors are getting in.  

While this still has room to run I might be inclined to take profits around 9:45-10:30AM on Friday as the Level 2 shows weakening support, or at my planned 5% level ($9.27) - which ever comes first.  If it makes a higher high before 11:00 then it might be considered for another day's hold, but as soon as it makes a lower high by 11:00AM on any given trading day after Friday, profits should be taken.  If it holds support above half the body of the prior day's candle then I might consider getting back in for at least an overnight hold.  This would likely be a 3:30-4:00 decision based on the volumes and their implied direction (support or resistance).

For this trade, if I would have made my market buy at the open I would have likely gotten my 1,000 shares at $8.83 - $8.85 per share based on the volumes transacted at that time. Today, SGI bounced off that $9.27 (5% over the $8.83 assumed purchase) as the high of the day.  This represents a $440 gain minus any fees paid for the round trip.

If one were inclined to look at SGI as a longer term trade, the weekly chart shows this week as having a distinctly higher high and higher low, a good indicator of a longer term trade forming.  The MACD, while having not crossed yet, is curling in that direction.  Until that happens, and until SGI breaks above $9.94/share, this should be watched closely, regarded as a trade only, and any earnings reports should be carefully considered before holding large positions going into them.  SGI has had a history of under-performing.

That said, a longer term trade might have, based on the weekly chart for the last year - shown above), 9.64 & 9.94 as price targets.  If SGI breaks 9.94 then it could see as high $11-$12 as it fills in the gap from the precipitous drop it had earlier this year.  That drop mimicked the drop from the middle of 2014 when SGI missed its numbers and triggered a sell-off.

If you like the products of Silicon Graphics, like I do, then they are a company to watch and buy on the big dips.  they have a history of ground-breaking innovation in the domain of high performance graphics computing and engineering.

Week of 4/6/2015 - Pick and Update

SGI Paper Trade for 3/6/2015

My pick for this week was SGI.  I'll update the performance later, but thus far it's up but not as far as I was expecting.

I could have bought 1,000 shares around the open at roughly $8.80/share.  Currently, now Wednesday afternoon, this is dancing around $9.00 but peaked yesterday at 9.12.  So far this looks like it would have made a good overnight hold, but I'm not as happy with it as a week-long hold.

I'm still refining my methods of finding these opportunities.  The overall market can also affect stocks like these (technology), so that may also be contributing to what I'm seeing.

Week of 3/30/2015 - Thursday Roundup

JIVE Paper Trade Update - Day 4

JIVE opened at 5.21, popped to 5.31, and then spent pretty much the rest of the day fighting between 5.18 and 5.19 until it closed the trading session at 5.17.  The end of the day saw a little panic-selling, but there is a LOT of resistance at 5.19.

Today saw a higher high and a higher low, and the Holiday may have had as much to do with the panic selling in the last few minutes before the bell.  Someone placed a 5.24 bet after hours, undoubtedly hoping it might spur more enthusiasm come Monday.

JIVE
               Open        Close       High        Low
Monday:        5.20        5.13        5.27        5.11
Tuesday:       5.09        5.13        5.25        5.04
Wednesday:     5.11        5.19        5.21        5.05
Thursday:      5.21        5.17        5.31        5.16

If I were trading this with real money I would be looking for the exit come Monday morning.  The reasoning for this is the principle of "Up-or-Out."

When trading stocks, if a stock doesn't behave as expected, then we get out.  Our efforts are designed to capture a reasonably close time for a breakout and a miss on the breakout means it is more likely to fall and hurt our assets.  Frankly, I prefer to NOT have my assets hurting.

LESSONS LEARNED:

1) When Starting the week, don't just buy the opening price, watch for a drop and for support to come in, that's the point to strike.  I could have comfortably entered the paper trade on Monday or even Tuesday at 5.10 or 5.11 and made a few dollars on the trade in the end, even considering the trade fees.

2) Set a trailing stop so that if the trade goes wrong, then you don't lose your assets in it.  Try to trade  stocks that are of high enough quality that your broker will allow a trailing stop.  E*Trade will not let traders set stops (hard or trailing) for stocks on the OTC market.  Only exchange-traded securities (e.g. NYSE, NASDAQ) can have stop orders.

So, next week we'll look for some new opportunities.  I'm eyeing MCP and TC for now, but I'll publish a Sunday post with my watch list for next week.  My updates will be shorter in the future. and my weekly roundups will start to include weekly data of past watch-list stocks because I want to evaluate the value of looking at weekly and monthly charts for their MACD, accumulation and other indicators.

Week of 3/30/2015 - Wednesday Update

JIVE Paper Trade Update - Day 3

JIVE opened at 5.11 and closed at 5.19 on much lighter volume.  Seems people didn't want to panic-sell.  Hopefully, that's a good sign.  It peaked at 5.21 and initially dropped to 5.05.

As much as the highs of the day have dropped each day, the low ticked up a cent today over yesterday.  The high volume and accumulation at the end of the day (last 12 minutes) is encouraging.  So far this swing trade may take into next week or later to yield its gains, but it's looking like those gains will come.

JIVE
               Open        Close       High        Low
Monday:        5.20        5.13        5.27        5.11
Tuesday:       5.09        5.13        5.25        5.04
Wednesday:     5.11        5.19        5.21        5.05
Thursday:                              

Week of 3/30/2015 - Tuesday Update

JIVE Paper Trade Update Day 2

JIVE Opened lower this morning, rallied for a while, but then closed flat on a volume of just under 1.2M shares. In contrast, yesterday's pullback occurred on 761k shares.

This is the nature of a longer term swing trade or an investment stock.  There will be up and down days.  If I were to use the watch list in order to watch for a dip and then the bounce then I could have gotten into this paper trade at 5.10 pretty easily yesterday and I would be 0.03 per share in the black.  That's $30 on my 1,000 shares.  It could have runaway without me too, but it's OK if you miss the entry into some trades.  Don't chase the price.

If this makes my 5% minimum target then this will rally to  5.46 which would represent a theoretical $260 windfall.  At 10%, my upper limit where I intend to take profit so as to protect my capital and my earnings from a sudden down-swing, this would be $520 (This is of course not counting the trade fees which can vary from broker-to-broker).

ALWAYS remember the power of COMPOUNDING.  Every 5% victory I claim I can compound into larger and more stable stocks.  My odds of a win at 5% are very good compared to trying to get 20-30% winner that are FAR more rare.  Don't get greedy; Pigs get slaughtered.


JIVE
               Open        Close       High        Low
Monday:        5.20        5.13        5.27        5.11
Tuesday:       5.09        5.13        5.25        5.04
Wednesday:                             
Thursday:                              

One thing does concern me in the price behavior and that is the emerging dome pattern in the afternoon trading and into the close for the day.  I would likely set a sell price of 1.21 before the open tomorrow so as to protect my assets.  I would adjust that if the pre-market price shows a jump, but I wouldn't want to push a bad position.  If that last arrow would have curved up instead of down, then I'd be more assured for tomorrow.

Week of 03/30/2015 - Monday Update

Paper Trade Update for JIVE - Open Price for JIVE was $5.20 so 1,000 shares represents $5,200.

At the close of the Market Monday this was at $5.13 representing a $70 dip.

Of course we're not in this for a single day's trade, we're looking for a weekly winner.  So, I'm going to track the open and close prices for JIVE through Thursday.  Friday this week is a holiday and the markets will be closed.

JIVE
                     Open         Close        High        Low
Monday:        5.20          5.13          5.27          5.11
Tuesday:
Wednesday:
Thursday:

Incidentally, I sold my SD on a $0.01 trailing stop for a small profit $40-$50.

Monday March 30 Weekly Watch List

I've got one stock I like this week aside from the SD I'm currently holding.

JIVE seems to be making a bounce.  This is a software/technology company.  Here's their daily chart:

The last trading day they bounced up 2.3%.  Their Accumulation line shows accumulation of shares (more buys on the ASK than the BID day over day) and the RSI just broke over 50%.  The MACD show that it has just crossed into a bullish look.

Here's their weekly chart for the last 9 months:

This shows a steady increase over the last few weeks and a bullish MACD cross-over and an up-swinging A/D line.  The RSI, while still below 50, is showing promise as it is approaching it's 40% high.  Finally, the volume has popped up for 2 weeks straight.

LASTLY, the Monthly chart ...

... shows a white candle at the bottom of a precipitous drop over the last 8-9 months.  The volume for the current month is low compared to the last several, but this could be a cessation of the panic. The sudden stop of the sell-off and the slight rise in price may be a signal of a turnaround coming but remember that I'm a beginner at this, and I could be completely wrong.  This stock could pop slightly and then roll over and go down further.  I've NOT viewed the SEC documents for this company so this is purely a technical analysis of the price and volume movement.

For the sake of the paper-trade I'm going to assume that I buy 1,000 (fake) shares at the open today and set a sell price at 5-10% higher than my purchase price.  I will also assume a stop at 4.95 because the price breaking below that would be a sign of weakness and that it could roll over and fall again.  What we want is a set of candles making higher highs and higher lows each day, week, and month.

With all that said, this could go to 5.30 or perhaps 5.50 by the end of the week.