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January 03 Will the Santa rally continue in 2008? My Bullish thoughts are...
Yes. Long and Strong!!!
Big money will flow into the strong industries. Financials are more than stocks. Those are the companies that invest money of the individual investor to produce future results. I think this is where the big money will flow.
Energy - Oil drillers and services Basic Materials - Miners and Steel makers Chemical manufacturing - Agriculture and related services Technology - Communication and solar
I will be placing my money with the best of the best companies in the strong industries and strong sectors. One nice thing about investools is the ease of fundamental analysis. Analyze the fundamentals and trade on the technical's.
Just an affirmation I employ daily into my investing:
No shortage of information and data to guide me in my decision making. The market is abundant with money making opportunities. My trading system is an effective means for me to make money. I trust my system. I employ my system. Money flows freely and easily into my brokerage account.
Here's to wealth and prosperity in 2008.
Merry Christmas and Happy New Year,
Todd
P.S. I am damn good looking too!
August 27 Criticism of Ben BernankeNever has so much disrespect been expressed to a high level government official as Ben Bernanke. In my opinion the Princeton professor has been a shinning example on how to manage the direction of the American economy with minimal government intervention.
Recently the successor to Allen Greenspan has been criticized for having a lack of experience when addressing the credit market issues. Ben Bernanke should first be commended on his ‘soft landing’ strategy which has been brilliant in managing inflation.
High level politicians in the House of Representatives and Congress have been critical of his abilities to deliver guidance and direction to avoid a recession. Wall Street hedge fund managers and bankers have been critical of his public statements that the credit market problems have been contained. In my opinion these sorts of criticism translate to a group of people who must come forward and admit that they committed egregious errors when issuing credit. To criticize Mr. Bernanke is simply ludicrous.
Blame is better to give than receive. Ben Bernanke is a victim of two political parties struggling for attention to win the presidency. He is also a victim of bankers and hedge fund managers who clearly made poor investments and are in dire need of assistance to retain liquidity for the markets.
I am a supporter of Mr. Bernanke and I think his guidance is in the best interest of the country. I believe that Mr. Bernanke does not have an agenda other than what is best for the country. I hope that he remains the data dependant servant of the people of the country which I believe him to be. I sincerely hope he does not fall into the political traps so frequently set by politicians. It is not the place of the Chairman of the Federal Reserve to endorse a political party or side with a presidential candidate. Nor is it the obligation of the Federal Reserve to bail out hedge fund managers who failed to properly manage risk resulting in catastrophic loss to their individual investors.
Two things need to occur. Politicians need to allow the people in the markets the freedom to sort out their problems for themselves. Hedge fund managers and bankers need to reach into their own personal accounts to make right of what is wrong. I will not shed a tear if high level bankers can’t afford to purchase 100 million dollar paintings or submarines or the other ridiculous toys of the ultra rich and or ultra bored. As a final note to hedge fund manager and bankers – you screwed up, now fix it. I believe that is what your collection department would say if I were the one in dire straits.
Good trading, Todd Ambrose MBA Former third party collection agent
President www.successfulstockoptiontrading.com Todd Ambrose LLC
Disclaimer: This opinion is published solely for information purposes and is not to be construed as advice or a recommendation to buy or sell a security. Trading involves risk, including loss of principal and other losses. Trading results may vary. No representations are being made that utilizing techniques mentioned in this article will result in or guarantee profits in trading. Past performance is no indication of future results August 25 Fundamental analysisFundamental Analysis Strategy for Today and Tomorrow
Fundamental Analysis
nGoal: How to use Fundamental Analysis with Technical Analysis to increase probability of successful trading nObjective qFundamental Analysis to determine the health of the Markets, Sector, Industry and Stock nStrategy qFundamentals for establishing how to enter a trade nTactics qFundamentals as a means of establishing execution
Determining Your Trading Style
nInvestor – Buy and hold. Fundamentals are extremely important. nTrader – Professional traders generate monthly cash flow. Positions are typically closed within days to weeks. Many traders will use fundamental analysis to mitigate risk. nSpeculator – Buy and sell short term positions, typically holding their position for days or weeks. Speculators are willing to take high risks with little utilization of risk management techniques Fundamental Analysis For Health of the Markets, Sector, Industry and Stocks nFundamentals help determine past performance and future expectations qMarket analysis – Bull, Neutral, Bear? qSector analysis – Strong or Weak? qIndustry analysis – Is Institutional money moving in or out of the industry? qStock analysis – Decide! nBull, Strong, Big Money Moving In, Strong Stock nBear, Weak, Big Money Moving Out, Weak Stock Market Analysis nDetermine if the market is a Bull, Neutral or Bear direction based upon upcoming events qInvestools – Trading Tools > Strategies > Market Analysis –
Intermarket Analysis - Table of Economic Indicator Effects nNews, Economic reports – everything qNews – Radio, T.V., Newspaper, Internet nBloomberg - Everything qEconomic calendar qhttp://www.bloomberg.com/markets/ecalendar/index.html
Sector and Industry Analysis nInvestools qTrading Tools > Industry Groups > Sectors – list of sectors qBig Chart qIndustry Groups ratings nBloomberg – News nGoogle – chart comparison qhttp://finance.google.com/finance?client=ob&q=MS
Stock Analysis nInvestools – Corporate snapshot qPhase 1 – Acc/Dist above 60 qPhase 2 – F/E 3.25 & Price Pattern 2.50 or greater nOpposite for short positions nFinancial Statements qIncome statement qBalance sheet qCash flow statement nhttp://finance.google.com/finance?client=ob&q=MS
The Big Three nBalance sheet – A snapshot of the company qYou look good today, but what about tomorrow? nCash Flow statement – Where is the money coming from and where is it going? qMoney from operations means sales (good) qMoney from financing means debt (not always good) nPharma companies use cash from financing for R&D – searching for the wonder drug to boost stock and pay off investors qMoney from investments (good but tricky) nEx: Real estate sale – good cash flow now but may be a one hit wonder. How does the company really manage money nIncome statement – All business activities that generate income or result in a loss for a company What to look for on the Income Statement nLook for trends and patterns over times frames qQuarters or Years nIncrease in Revenue – (Decrease (bear)) nDecrease in Expenses – (Increase (bear)) nIncrease in Net Income – (Decrease (bear)) nRATIOS – Ratios only have significance if there is a ratio of like kind for comparison
Financial Statements terms analysts use nSales and Revenue are synonymous and refer to the top line of the income statement nCosts are money spent making a product and/or service. Expenses are money spent to develop, sell and manage the whole selling process nProfits, Earnings and Income are synonymous and mean the bottom line. Net income on the income statement is The company's total earnings, reflecting revenues adjusted for costs of doing business, depreciation, interest, taxes and other expenses. nCosts and Expenses become Expenditures when money is actually sent to vendors to pay for them nSolvency means having money to pay your bills. Profitability means sales are greater and costs and expenses. A company can be both Profitable and Insolvent at the same time by making money but not having enough to pay the bills. nSub-prime loan credit market crisis – Airline crisis etc…
Analyst example (good)
nXYZ Company has increased spending (Cash moving out of company) to recruit new talent (Employee costs and benefits expense) in an effort to improve upon existing products and develop new products (research and development). nXYZ seeks results in an increase in sales (revenue) and a higher net income (higher profit ratio than previous time frame). qAccording to a person who has knowledge of the matter
Analyst example (bad)
nThe Balance sheet looks great (Today). XYZ company has secured a tremendous amount of new financing (New Debt offsetting operations revenue) for research and XYZ is expecting gross profits to increase. (Not Net Profits, so what of expenses) New financing for XYZ company will help to ensure solvency. qTransitional terms can be bad news. However – In addition to – But – expenses to produce ABC product could hinder net profits.
Morgan Stanley Example (MS)
nWeak Market – Credit market crisis with tightened lending and sub-prime lending crisis – S&P down 100 pts nWeak Sector – Financial sector experiencing sell-off attributed to credit concerns and lack of liquidity nWeak Industry – Brokers face concerns over lending practices and the strength of hedge funds nWeak Stock – MS – Ph 1 4/5 Acc/Dist 28.3 – Ph 2 F/E 3.38 – Big chart low score – Brokers = 1 nKNOW THE FUNDAMENTALS – TRADE THE TECHNICALS
Morgan Stanley – Chart for entry
Fundamentals of Volume
nVirtual Volume – On the Investools corporate snapshot page is a helpful indicator of equity strength for the day – Candlestick chart reading is a good substitute for V.V. nContinuation pattern – If a stock is in a bullish trend it should continue to stay bullish, or if a stock is in a bearish trend it should continue to stay bearish. nReversal pattern – If a stock is currently bullish it likely to turn bearish, or if it is bearish it is likely to turn bullish nWarning – Time to decide knowing that things can change Morgan Stanley – Plan and Exit nOption Fundamentals nDetermine the strategy to use for the trade nSHORT TERM SWING TRADE – The plan nRisk speculation – Continuation pattern – Chart moving down – after 4 days of downward movement, the probability of an upward day is greater now than 4 days ago. n2 to 3 day trade. Will not hold over the weekend
nDays to Expiration – Less time increases risk nOpen Interest minimum – 20x contracts purchased nDelta = .50 – $2.00 move in the equity is $1.00 move in the option nSale target at $4.30 – 25% markup from purchase price 3.2/.75 = 4.26 nStop loss at 2.4 – 25% loss on the trade
Morgan Stanley – Chart for entry
Morgan Stanley – Buy to open Oct 55 put at 3.2 on 8-14 – Sell to close on 8-16 at 4.5 The Morgan Stanley trade nDear Mr. Todd Ambrose, nThe following transaction has been completed on 8/14/2007 11:34:50 AM (ET): nAccount Number: xxxx-xxxx - Todd Ambrose nOrder number: 41681249 nSymbol:.MSVK nDescription: MS OCT 55 Put nStock: MS at 57.86 nAction: Bought to Open nQuantity:10 contract(s) nPrice: $3.20 nCommission:$11.00 nReg Fees:$0.00 nNet Amt:$3,211.00
nDear Mr. Todd Ambrose, nThe following transaction has been completed on 8/16/2007 12:42:35 PM (ET): nAccount Number: xxxx-xxxx - Todd Ambrose nOrder number: 41815045 nSymbol:.MSVK nDescription: MS OCT 55 Put nStock: MS at 55.47 nAction: Sold To Close nQuantity:10 contract(s) nPrice: $4.50 nCommission:$11.00 nReg Fees:$0.07 nNet Amt:$4,488.93
Summary
nMarket – Know the trend – confirmed by news & chart nSector – See growth or decline – news & chart nIndustry – See institutional money – big chart nStock – phase 1 & phase 2 – ACC/DIST & Financials nStrategy – long – short or neutral – Options? nEntry – Strategy – Trade on Technical's – Don’t fight the trend. The trend will tell you what to do, indicators tell you when to do it. nMonitor – Watch your position nExit – Know profit and loss limits. Stick to the plan from the beginning to the end
References
nInvestor research website WWW.BLOOMBERG.COM nGoogle for everything WWW.GOOGLE.COM nIndividual investor educational website WWW.INVESTOOLS.COM nIttleson. T. (1998) Financial Statements A step by step guide to understanding and creating financial reports. New Jersey: The Bookmark press. ISBN: 1-56414-341-4 nMorgan Stanley website home page http://www.morganstanley.com/index.html
Good trading, Todd Ambrose MBA President www.successfulstockoptiontrading.com Todd Ambrose LLC
Disclaimer: This opinion is published solely for information purposes and is not to be construed as advice or a recommendation to buy or sell a security. Trading involves risk, including loss of principal and other losses. Trading results may vary. No representations are being made that utilizing techniques mentioned in this article will result in or guarantee profits in trading. Past performance is no indication of future results August 22 Going to the windowBuy on weakness and sell on strength. If you’re a bull, today is a strong day and a day where individual traders may wish to see a bit of a pull back. If you’re a bear then today may be a day to buy. Bears may want to look to the weakest of sectors.
I believe that the move by the fed to reduce the discount rate by 50 basis points was a good psychological move for the markets and equities of every sector. The psychology by skeptical market analysts has changed to one of ‘gloom and doom’ to ‘its time to pull ourselves up by the bootstraps and take care of our credit market problems’. In other words, the markets and the people closely tied to the problems will take care of business.
When a company ‘goes to the window’ is it OK to borrow, but it comes with obligation. The fed says – we’ll help you but we also need to send an army of investigators to determine why you have problems. This is an awful experience for a company. Business functions best when government is not involved. No one wants to ‘go to the window’.
I heard on Bloomberg radio one my favorite economists put this concept into perspective: Richard Yamarone said ‘going to the window is like going into rehab’ – You’re near total ruin – you admit you have a problem – everything you do is public knowledge – your reputation is tarnished – you do get clean – you can go on with business – but recovery is a long hard road’ I believe that those who go to the window will recover.
But what of those companies who don’t have a problem like BHP? The companies have been affected by the actions of violent sell-offs disguised as profit taking. Yamarone went on to say those companies which are well managed, do not have finance problems and are not related to sub-prime concerns will grow faster than those who do have problems.
My bullish sectors are basic materials, energy and tech My bearish sectors are retail, financial and real estate
This is a sum-zero market. Money is transferred not lost. In my opinion, fundamentals, watching the big money and patience are more important than ever. The best place for money to be transferred is into the brokerage account of the individual investor. August 21 U.S. SteelAnalysis for U.S. Steel X
Strong market in a correction mode – The U.S. market has good value and strong fundamentals. The recent credit market problems will be corrected soon. Market sentiment is that the selling is over and the rumor is that the institutional money is ready to come back into equities. Strong Industry – Steel Phase 1 & 2 provided by Investools http://www.ussteel.com/corp/index.asp Strong technical – stock up-trending and strong liquidity. At the time of writing this entry, it has been a month of constant selling of almost every equity in the steel industry, including U.S. Steel (X). Markets and stocks dropping based on bad news from several sectors including housing and sub-prime lending. The lack of sales and production from the auto industry has not helped the steel industry.
I believe that the move by the fed to reduce the discount rate by 50 basis points was a good psychological move for the markets and equities of every sector. The psychology by skeptical market analysts has changed to one of ‘gloom and doom’ to ‘its time to pull ourselves up by the bootstraps and take care of our credit market problems’. In other words, the markets and the people closely tied to the problems will take care of business.
Why U.S. Steel (X) now? It appears as though the selling of the credit market liquidity problems have stopped shocking the market. Most investors and traders know that there needs to be a point where the market turns around and the only way it can turn is if investors start buying. U.S. Steel (X) is a strong company in a strong sector and the company has also sold some of its assets to JSW Steel ltd. This is good for the cash flow statement, reduces the pressure of cash from financing and allows for greater cash flow from operations. In a market where liquidity is a problem, U.S. Steel seems to know how to liquidate. Good management.
On the chart, previous to the market sell-off the stock has been an up-trending stock. The RSI is showing new strength, the MACD is showing strength and the ACC/DIST indicator is moving upward. This means institutional people are buying, on the other hand, as of Monday August 20, 2007 Investors Business Daily gives U.S. Steel an accumulation rating of E. This is a poor rating.
Buy on weakness and sell on strength. I view U.S. Steel as a buying opportunity. I particularly like the October 85.00 calls and the January 90 calls.
Good trading, Todd Ambrose MBA President www.successfulstockoptiontrading.com Todd Ambrose LLC
Disclaimer: This opinion is published solely for information purposes and is not to be construed as advice or a recommendation to buy or sell a security. Trading involves risk, including loss of principal and other losses. Trading results may vary. No representations are being made that utilizing techniques mentioned in this article will result in or guarantee profits in trading. Past performance is no indication of future results. |
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