2012 – The Year of the Investing Freak

Posted by Investing Freak on December 31, 2011
General / 1 Comment

2011 was a very busy year that really took time away from blogging. The learning never stopped though and this will be reflected in 2012 with the blog focusing mostly on making investing decisions and research and less getting involved in news and politics.

There is too much noise in the world and it is good to have an idea about the current situation in (for example) Iran and how it might affect oil prices if there is a disruption, but we all have our opinions about a certain topic and I’m no expert.

Although I do not have a sneak peek of what’s to come I hope you all have a Happy New Year and see you back here next year.

K

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Back in the red zone!

Posted by Investing Freak on October 14, 2011
Market Analysis / Comments Off on Back in the red zone!

 

It has been nearly 6 weeks since my last update and as promised I have kept an eye on the weekly chart vs the ever so noisy daily chart. What has happened the past 6 weeks is the market moving down for a fake out on the daily yet closing right on the green area i had highlighted and then lifting to the red zone.

Will they score this time or will they turn it over to the bears again for another move down? You be the judge ūüôā

 

Good Night

-K

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Noise Noise and more Noise!

Posted by Investing Freak on September 06, 2011
Market Analysis / 1 Comment

The news have been going on and on about how the US economy is back to disappointing data, European countries are all in trouble as Italy is now getting thrown around just like Greece, Ireland, Portugal & Spain.

If you think the market action of the past 4-6 weeks has been on the data then please stop reading and save yourself five minutes which you can use to watch Jim Cramer over at CNBC.

On the July 28th post titled “Deal or No Deal -Debt Ceiling Edition- $SPY” I¬†talked about¬†how¬†the market¬†had been setting up and that no “Debt Ceiling” deals would matter. It was obvious a debt “downgrade” was coming but that should¬†have been¬†no reason for the market to really go skydiving as it did. ¬†If you were an¬†great A+¬†student and partied a bit too hard, if your next grade was an A nobody would treat you with less respect¬†especially when they’re getting grades from B+ and lower, (the analogy here being US credit rating vs ratings of many countries in the world).

The market was simply setting up for a technical Head & Shoulders pattern and there was a great chance of it playing out (which it did). Click chart below to enlarge.

 

The chart above is an updated chart of the previous post. The light yellow represents all the time It took since my last submission to the blog. The Fibonacci retracements drawn on the monthly chart really have helped see that we were about to enter a rangebound market (the area between the Red and Green boxes).

The “crash” from¬†1300 to 1170’s surprised me in terms of the velocity in¬†which¬†happened. ¬†I expected it to trickle down for a few weeks¬†but when the dam broke there simply wasn’t enough incentive to stay short the weeks following as there was a great possibility for a short cover.

The suggestions I made was to buy some SH shares or SPY puts.  I did both and got out with enough profits to allow me to break away from the markets for a few weeks.  Now I am back and so are many professional traders and when they fire up their charts they will see what I am showing above. They will wait out this rangebound trade until either a break above 1235 or a break and close on Weekly chart below 1120 which could set up for another 80 point slide.

Right now we are mid range and since Daily is too noisy I’ll keep checking the Weekly every few weeks and report the progress.

 

Hope some of you made money or at least the posts have been helpful to give you a second view from a Freak’s viewpoint.]

Till next time,

K

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Deal or No Deal -Debt Ceiling Edition- $SPY

Posted by Investing Freak on July 28, 2011
Market Analysis / 2 Comments

     The US Debt ceiling could get hit on August 2nd which is 3 business days away. While everyone is struggling to make ends meet, Wall street and Pennsylvania Avenue are business as usual. Wall Street wipes out retirement investments and retail investors while our Elected majesties play games with each other like they are in kindergarten and whoever wins the argument gets a prize.

¬†¬†¬†¬† Wake up because the time to act has passed. Instead of throwing money to bail out banks, and prop the markets for the past 2-3 years (Bubble 2.0) we should have let the “economic collapse” happen and now we’d be either in a hot burning inferno or on a better stage to recovery Worldwide.

Deal of No Deal

¬†¬†¬†¬† A week ago S&P rating agency warned that the USA could lose it’s AAA debt rating if things weren’t solved for a better fiscally sound future, just today S&P said that it will not likely downgrade US debt rating. BULL$h!t we know full and well that with or without a debt resolution in the next few days that our rating will be cut one way or another. If it’s not S&P it will be Moody’s etc, these rating agencies are the ones that allowed things to get here when they rated the¬†Credit Default¬†Swaps¬†& junk bonds safe and apparently it was blamed on a “programming code mistake” of sorts.

¬†¬†¬†¬† If we do not reach an agreement on the debt¬†ceiling¬†the economy will go in a tailspin. Stock market will head to the south pole for the economic ice age, USD $¬†will be worth less, imported goods (Yes¬†Chinese¬†lead painted toys, middle eastern oil and the goodies in between) would become more expensive, US consumer spending would halt, US workers, contractors, aid for people, road work etc would be at a stand still and no money would be moving much if any at all. Unemployment would rise higher, banks would loan no money as they seek to avoid risk and stay liquid. And with a downgrade in our rating which is a no-brainer that would mean we’d have to pay higher interest on future debt we¬†incur¬†(Look at¬†Greece¬†interest rates on debt spike at downgrades, that will be the same here). ¬†Anyways that is the doomsday scenario but right now we can do nothing but stick a fork into each politician and have them for dinner when we can’t afford food.

Take a look at how all this money came to become the $14 trillion+ debt.-Click to Enlarge– or go to NYT article

Whats in it for me?

¬†¬†¬†¬† Lets take a quick¬†look at how the market might be affected by this uncertainty, ¬†but the obvious thing is most of the stocks will head down because on the 10-K SEC filing of every company¬†one Risk factor is “Economic Uncertainty”. ¬†Two weeks ago I posted the chart of /ES saying that it looked like a head and shoulders formation. This time the chart has the fib retracements¬†that were drawn on a Monthly chart spanning back 20 years and drawn from major peaks to major troughs. ¬†The ratios are hard to see but you will¬†immediately¬†notice where a lot converge.

So here we have a market that wants to hit 1250-1268 area in initially but ideally the 1225 in the very near term is last resort for support and thats 70 points below as of this writing.  Lets see what our knuckleheads do today, most likely nothing as always.

 

Possible downside trades would be SPY put options or buy SH shares for a hedge (SPY inverse)

Happy Trading,

K

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$SPY $/ES – Head & Shoulders (Knees & Toes) Pattern emerging

Posted by Investing Freak on July 12, 2011
Market Analysis / 2 Comments

The past week or so we expected an oversold bounce and now that it has come and gone more contagion fears have emerged, this time in Mario & Luigi land that makes pasta, pizza and tomato sauce along with the cheeses.

This latest¬†fear-mongering¬†along with recent economic data in the US and worldwide( which have been less than expected) and also the upcoming U.S. debt limit crisis which will get resolved (just not until it has hurt a good chunk of the economy) but not in a timely manner because like their waistlines, Americans cant/don’t like to curb their spending.

 

I was looking at my favorite time frame, the Weekly and on the futures I noticed an early stage but possible H&S pattern. Here it is simplified for your enjoyment, voice in your ideas in the comment box.

Positions: Rolled a July put into a September put.

I was right just not satisfied after the 8 day rally which reignited at the green moving averages above (risk reward wasn’t there anymore but I was high on “hopium”)

 

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Market Analysis: Quick look at potential $/ES price target

Posted by Investing Freak on July 02, 2011
Market Analysis / Comments Off on Market Analysis: Quick look at potential $/ES price target

Quick Trivia, what $/ES price target has been touched two dozen times in 5 years?

Answer comes right after a brief chartology interruption.

 

Let’s Have a look at $/ES on weekly chart from 2006-2009 and count how many times we touch a certain area (I should have initially hid the price on the chart to make it more fun).

I have even made it easier for you by placing bright green dots on it. The answer is 19 times. Ok so big deal… why does this matter? Follow me on a journey below this chart.

The last time this number was tagged or gotten close enough to was in April of 2011 at 1373.50 high which led to the correction of over 100 points (of which we have now regained 70 of them again). And so ladies and gentlemen If you checked out the comment in the previous post where I wrote that any shorts should have covered at $131 latest before the¬†melt-up really heated up then you are either sidelined or took a small long position as not to miss the action. ¬†This leaves us to tonight’s Trivia Target answer which is (rounded) $1375 for possible resistance and last refueling station for future space explorations. ¬†Click to Enlarge as the preview looks blurry.

If that oil runs out then¬†Houston¬†to earth¬†Houston¬†to earth do you copy? we are coming down right over the¬†Mediterranean¬†sea. Yeah the European debt crisis is what I meant, I feel the need to explain it because I think faster than I type (who¬†doesn’t) and¬†don’t¬†want readers to get confused.

So there we have it. Should be some light trading weeks coming up volume wise and the 1375 might not be out of the question if not more. I’d take off some longs near that level and let part ride.

 

Have a Happy 4Th of July weekend to those that celebrate it (Americans) and good night to the rest of my world readers.

 

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Market Analysis: A technical look at the $SPY

Posted by Investing Freak on June 28, 2011
Market Analysis / 3 Comments

Nearly six months ago I was wired to around 200 news feeds constantly receiving mixed news both from bearish and bullish camps and I sided with one side after doing my own “biased” research. I decided that the market was nearing a top. Ha!! Uncle Bennie wouldn’t let the party die down would he? Everybody loves the cool-aid and the party hats on CNBC keep coming back and making weird noises (yes Jim Cramer I’m talking to you haha).

Fast forward to what happened during those 6 months is summed up in one sentence. “Life happened in ever aspect, got very busy and also stopped the information flow to clear my mind”.

Now that I got that out of the way I will point out that while I took a break from financial news and focused on life I also shared informal emails with a few InvestingFreak readers.

Lets have a look at a few charts I sent out in early May, keep in mind that I like to mainly focus on the weekly for trends while trading on the daily with an eye on the hourly. I will explain why these are the only 3 time-frames I watch in an Investing School video coming soon.

The SPY on a weekly chart dated May 9th 2011. It shows an uptrend channel with the market at the very top of it poised for a correction. The green lines moving up are EMA’s which act as support.

The chart as of today shows the progress for the past 7-8 weeks where a correction did occur and it is bouncing just on top of the Exponential moving averages. There is a bit of “resistance” at 130-130.50 and plenty of support (remember this is weekly and a lot can happen within the week so remember that) at 120-125 area.

Lets have a closer look at how its doing in the daily chart to see what we should look for temporarily.  On the daily the Moving averages are hovering right above in the 129.83-130.57 range and causing the SPY to stay range-bound in this box like formation. Notice an added support line on here and its thinner than the others? That is because its drawn on the daily chart and its a way for me to distinguish importance. The past two days the market has bounced nicely but be wary of the impending resistance on top.

Going long two days ago would have been a good risk reward with a stop below 126 but at this stage going short on the daily $SPY is a better risk reward ratio with a stop right above 131.
Whatever your play is just be cautious, do your own research and feel free to use these charts and my numbers (which¬†aren’t¬†perfect science) to make better trades. Stops are important to being liquid and getting out when you are wrong, do not move stops if the trade¬†isn’t¬†going against you and until we break Pandora’s box there might be more sideways action to play with.

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Stock Talk Update: $RIMM Research In Motion play cost me 18.5%

Posted by Investing Freak on June 28, 2011
General / Comments Off on Stock Talk Update: $RIMM Research In Motion play cost me 18.5%

I last wrote about $RIMM a day or two before their 6/16 earnings “Research in Motion near 2009 Lows” and at the end of that article I mentioned that I had an intention of Buying some RIMM within the week.
Well ladies and gents in honor of full transparency I did create a small position on 6/15 at 35.43 and closed it the day after earnings at 28.86 for a loss of -18.5%.

Plenty of things I wrote in the previous article including the charts were a clear warning for me to steer clear especially near earnings but my fatal flaw of chasing risk got the better of me.

Once again here is the chart I posted on the 15th at midnight (after which I acquired shares right before close that trading day). Clearly this is a downtrend with the major moving averages on top which naturally become resistance (plenty of gap-downs too).

I also mentioned that in the SEC filings the company made it clear that one of their biggest risks is being too slow to roll out competitive products and they have patent¬†infringement¬†aplenty which haven’t been settled. And as soon as I acquired my stake even before earnings came out I missed this news:

Dolby Laboratories said Wednesday it has filed patent infringement lawsuits against Research In Motion in the United States and Germany and is seeking to halt sales of devices made by the Blackberry maker.

RIM is using Dolby’s patented technologies in its Blackberry smartphone and Playbook tablet computer without having obtained licenses, Dolby said.

Dolby said all of the other major smartphone makers have agreed to license the Dolby technologies.

Source: Associated Press (Jun 15, 2011) “Dolby files patent infringement lawsuit against RIM”

What blinded me the most in this case is the magically low PE ratio which I mentioned being at 5.63 and even here I laid it out in the article i wrote to the world!

“P/E¬†ratio¬†isn‚Äôt always indicative of an undervalued stock and it might well be the case that RIMM has lost its edge.” I¬†don’t¬†listen to myself too well it seems and that cost me dearly.

Of course now that the PE is at 4.48 and the stock suffered another gap down¬†isn’t¬†it time it fills them all? This is a good long term investment now right? Well dear trader/investor/friend that is up to you and your trading rules. Nobody can predict the future of a stock or anything in life but educated guesses lead to better probabilities. Alas this is the end of RIMM coverage from the freak. ūüôā

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Basics 101 – Valuation and Investing

Posted by Investing Freak on June 16, 2011
General / Comments Off on Basics 101 – Valuation and Investing

The first in many posts at the Freak Investing School is a series of videos from the awesome Khan Academy.

Over the years I’ve read and studied many books on corporate finance , accounting, investing etc and yet when it comes time to explain the basics I can’t do as good of a job as these videos by Sal Khan. They are hands-down the best interactive source to learn the basics so you will have a better idea of the companies you invest your hard earned money with.

There are a total of 12 videos and while I will link each one below I will only embed the first four.

 

1. Price and Market Capitalization (11:55)     Introduction to price and market capitalization.

[youtube=http://www.youtube.com/watch?v=fa-VZ-SDxgY]

2. Introduction to the Income Statement (15:27)   The income statement, revenue, gross profit, operating profit, net income, ROA and ROE.

[youtube=http://www.youtube.com/watch?v=Z7C4cz2HkeY]

3. Earnings and EPS (10:14)  Earnings, EPS (earnings per share) and how they relate to the income statement and balance sheet.

[youtube=http://www.youtube.com/watch?v=RouNXdkC0do]

4. Introduction to the Price-to-Earnings Ratio (14:47) Price to Earnings Ration (or P/E ratio).

[youtube=http://www.youtube.com/watch?v=cppxO67e6eo]

 

– If you were able to get through the first four videos and understood the concepts Congrats!-
Below are more videos to further enhance your learning so you can invest smarter.

  • P/E Discussion (15:34) Discussion of the price-to-earnings ratio.
  • ROA Discussion 1 (10:31) & ROA Discussion 2 (10:17) ¬†The various ways to measure return on assets.
  • Depreciation (12:33) Depreciation a capital asset
  • Amortization (7:45) ¬†Introduction to amortization
  • P/E Conundrum (13:41) ¬†A situation where the price to earnings ratio seems to not fairly price an asset.
  • Enterprise Value (17:29) ¬†Solving the P/E¬†conundrum¬†by looking at Enterprise Value
  • EBITDA (14:07) Review of¬†Enterprise¬†Value (EV) and comparing it to EBITDA

This should hopefully give you a better idea about the basics of investing (mostly fundamentals). As a fun fact if you watched all of the videos like I did you have watched nearly 2.5 hours worth of material, keep it up and soon you will be very comfortable doing your own research and investing.

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We are the champions! Congrats Bruins!

Posted by Investing Freak on June 16, 2011
General / 3 Comments

I had to post this or I wouldn’t be a true Boston sports fan… sorry

CONGRATS B’s Well deserved!

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