New Watch List Entries
GLD - Gold ETF
USO - Oil ETF
Active Watch List Candidates
CY - Cypress Semiconductor
Dropped Watch List Entries
GG has been removed.
UA has graduated to the active play list.
New Watch List Candidates:
SPDR Gold ETF - GLD - close: 152.81
The jobs report on Friday was a disaster and all but assures that the Federal Reserve with continue with its open-ended QE program. A couple of days ago the Bank of Japan announced a colossal QE program double its money supply. Japan's move has sparked fears of a currency war as every country races to devalue their currency to stay competitive. That would put upward pressure on commodities like gold.
Plus, we have slowing economic data and Europe seems to be moving quickly back toward the cliff of ruin. This will also put a bid under gold. Coincidentally the GLD is bouncing from support near the $150 level. Currently the ETF is suffering from a multi-month down trend. Therefore we will wait for the GLD to close above resistance.
I am suggesting we wait for the GLD to close above $156.50. Then buy calls the next day. If that happens we'll use a stop loss at $149.00, which is just under Thursday's low. Our long-term target is $200 but the 175.00 area will be overhead resistance. Note, we'll probably close the 2014 calls well before the GLD hits our long-term target.
Breakout trigger: Wait for a close over $156.50
buy calls the next day, stop loss @ 149.00
BUY the 2014 Jan $160 call (GLD1418a160) current ask $5.20
- or -
BUY the 2015 Jan $170 call (GLD1517a170) current ask $7.95
Chart of GLD:
Originally listed on the Watch List: 04/06/13
U.S. Oil (ETF) - USO - close: 33.28
Oil is likely to go a lot higher in the next 12 to 18 months. While no one expects North Korea to actually pull the trigger, if a fight does break out, we will see oil prices rise merely due to heightened geopolitical tensions. If Japan and China start fighting over some disputed islands, we'll see oil rise. If the U.S. or Israel decides to strike at Iran to stall the country's nuclear weapon program we will definitely see oil spike. Many are worried that the time frame for a strike on Iran could be late this summer. Plus, we are quickly approaching summer when oil and gas prices tend to rise with seasonal trends of demand.
If that wasn't enough, global QE programs should create a bid underneath commodities. A weaker currency means you have to use more of them to buy commodities, which creates higher commodity prices.
Bears will argue that a slowing U.S. economy, the significantly slowing European economy, both of which will also slow down the Chinese economy. Altogether a global economic slowdown will reduce demand for oil and thus keep prices from rising significantly. Without any geopolitical events to spark the rally, they could be right.
Right now the USO oil ETF is churning sideways inside a large, pennant shaped formation of lower highs and higher lows. A breakout is imminent. I am suggesting we wait for a breakout higher. Specifically, wait for a close above $35.50 and then buy calls the next day. If triggered we'll set our long-term target at $45.00. Unfortunately, USO does have 2015 calls available but the spreads are obscenely wide and make those options untradeable.
Breakout trigger: Wait for a close over $35.50
buy calls the next day, stop loss @ 32.75
BUY the 2014 Jan $35 call (USO1418a35) current ask $1.89
Chart of USO:
Originally listed on the Watch List: 04/06/13
Active Watch List Candidates:
Cypress Semiconductor - CY - close: 10.80
Semiconductor stocks had a rough time last week but traders are buying the pullback in CY near its 100-dma. Aggressive traders could buy a breakout past $11.00 or the March high near $11.50. I am suggesting less risk tolerant investors (and the newsletter) wait for a close above $12.00.
FYI: CY is due to report earnings on April 18th.
More aggressive traders might want to consider bullish positions on a breakout past the $11.50 mark. I am suggesting we wait for CY to close above $12.00 and then buy calls the next day. If triggered our target is $16.00.
Breakout trigger: Wait for CY to close above $12.00,
then buy calls the next day, stop loss @ 10.45
BUY the 2014 Jan $13 call (CY1418a13)
BUY the 2015 Jan $15 call (CY1517a15)
Originally listed on the Watch List: 03/16/13
Goldcorp. Inc. - GG - close: 31.79
Gold prices managed a bounce from support. Not so for shares of GG. The stock broke down under key support near $32.00 and hit new multi-year lows. I am removing GG as a watch list candidate. Our trigger, a close above $34.25, was not met.
Trade did not open.
04/06/13 removed from the newsletter.
Originally listed on the Watch List: 03/30/13