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Playing the Bernanke Taper Tango

By  +Follow September 17, 2013 1:47PM
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September is half over and the market continues to shrug off the Syrian debacle, the Bernanke Taper Tango, the debt ceiling debate and the potential shutting down of the government over Obamacare. No… instead, the market seems to be more interested in the far more economically sensitive data like the news that Obama's hand-picked replacement for Bernanke withdrew his name from consideration. Now, that is real financial data to trade on. As tongue-in-cheek as this writing indicates, there is one true axiom that should not be ignored… the market is never wrong. We may disagree with the market and how it, collectively, interprets or misinterprets information, but at the end of the day, we can only measure our success on the bottom line of our respective portfolios.

Quote worth Quoting Again

"Whenever you find yourself on the side of the majority, it is time to pause and reflect."...
Mark Twain

The Fed meets this week (Tuesday/Wednesday) for their September FOMC meeting. My guess is (as is the consensus of most Fed-watching analysts), some sort of benign scaling back of the Fed's $80-$100 billion per month of US debt monetizing activities (aka, bond repurchase and balance sheet expansion Fed-speak). Still… when the news comes out this Wednesday afternoon, my guess is it will be a 'sell-the-news' event; but not significantly so. A tapering of some kind is already baked into the cake. Add to this that the Fed is likely to paint a more rosy future for our economy and the markets may, indeed, rally nicely. Baring all other inputs, I would be a buyer on any Fed-induced pull-back on Wednesday.

Bottom-Line: The Turner CrossOver Oscillator is Bullish; the investor sentiment is becoming less and less Bearish; the Time-Cycles for the broader market are only slightly Bullish, as a group. However, the Sector forecasts are not so benign. The Energy, Financials, Telecom and Technology sectors are showing strong support for a Bullish play right now. A great strategy is to use the Equity Screener program to look for high-scoring stocks in each of these three Sectors. Then, I plan to wait until the Fed's tapering announcement on Wednesday afternoon. If the market pulls back, I'll see if I can pick up one or more of the following stocks at a discount.

My three picks are: CLR (Continental Resources Inc., an Energy company), QCOM (QUALCOMM Inc., a Telecom Sector company), and SLM (SLM Corporation, a Financials Sector company). See the details below.

Keep in mind that I am NOT putting on a trade for these three stocks, but will wait to see how the market reacts to the Fed on Wednesday. My systems all tell me to expect a bounce down for the broader market. This may give me an opportunity to pick these three highly ranked stocks at a bit of discount. If not, then I'll probably move ahead and try to pick them up anyway, if they have not run away from me too far. I'll let you know the final decision in a Wednesday afternoon email.

 

 

Demand Fundamentals for: CLR (Total Score = 84 / 100)

Demand Fundamental

Value

Score

Qtr/Qtr Revenue Growth

40.9%

15 / 15

Qtr/Qtr Earnings Growth

103.5%

15 / 15

Year/Year Earnings Growth

47.04%

7 / 10

Year/Year Revenue Growth

47.55%

7 / 10

Multi-Year Revenue Growth

34.6%

8 / 8

Multi-Year Earnings Growth

91.7%

8 / 8

Relative PE Rank

5 / 125

5 / 6

Return On Equity

22.6

5 / 5

Yield

.00%

0 / 5

Institutional Holding

22.45%

4 / 6

Stock Price

100.63

4 / 4

Fundamental Peer Group Rating

86 / 125

6 / 8

 

Demand Technicals for: CLR (Total Score = 78 / 100)

Demand Technical

Value

Score

Technical Signal

LONG

35 / 35

Trading Zone

ZONE 4

5 / 10

Average Trading Volume

880,751

8 / 10

Industry Status

LONG

20 / 20

Sector Status

LONG

10 / 10

Technical Signal Age

94 Days

0 / 15

Current Stop Loss

91.53

 

 

More Information for: CLR

Summary Stats

Summary Status

90-Day Sector Risk

Previous Close: $100.68

Technical: LONG

0-30 Days: BEARISH

Market Cap: 18.69 Bil

Fundamental: STRONG BUY

30-60 Days: BEARISH

Long Stop: 91.53

Composite: STRONG BUY

60-90 Days: BEARISH

Short Stop: 110.09

Expected Move: 6.30

Optionable: Y

Weekly Optionable: N

 

Continental Resources Inc ($CLR) - Continental Resources, Inc. engages in the exploration, development, and production of crude oil and natural gas properties in the north, south, and east regions of the United States. The company sells its crude oil production to end users, as well as to midstream marketing companies or oil refining companies at the lease. As of December 31, 2012, its estimated proved reserves were 784.7 one million barrels of crude oil equivalent, with estimated proved developed reserves of 317.8 one million barrels of crude oil equivalent. Continental Resources, Inc. was founded in 1967 and is headquartered in Oklahoma City, Oklahoma.

 

 

Demand Fundamentals for: QCOM (Total Score = 76 / 100)

Demand Fundamental

Value

Score

Qtr/Qtr Revenue Growth

35%

15 / 15

Qtr/Qtr Earnings Growth

30.6%

10 / 15

Year/Year Earnings Growth

23.8%

7 / 10

Year/Year Revenue Growth

26.61%

7 / 10

Multi-Year Revenue Growth

16.6%

6 / 8

Multi-Year Earnings Growth

10.1%

6 / 8

Relative PE Rank

5 / 61

5 / 6

Return On Equity

18.8

5 / 5

Yield

1.75%

1 / 5

Institutional Holding

78.44%

4 / 6

Stock Price

68.09

4 / 4

Fundamental Peer Group Rating

46 / 61

6 / 8

 

Demand Technicals for: QCOM (Total Score = 85 / 100)

Demand Technical

Value

Score

Technical Signal

LONG

35 / 35

Trading Zone

ZONE 4

5 / 10

Average Trading Volume

13,157,396

10 / 10

Industry Status

LONG

20 / 20

Sector Status

LONG

10 / 10

Technical Signal Age

38 Days

5 / 15

Current Stop Loss

65.38

 

 

More Information for: QCOM

Summary Stats

Summary Status

90-Day Sector Risk

Previous Close: $68.58

Technical: LONG

0-30 Days: BULLISH

Market Cap: 117.64 Bil

Fundamental: STRONG BUY

30-60 Days: NEUTRAL

Long Stop: 65.38

Composite: STRONG BUY

60-90 Days: BEARISH

Short Stop: 72.48

Expected Move: 2.10

Optionable: Y

Weekly Optionable: Y

 

QUALCOMM Incorporated ($QCOM) - QUALCOMM Incorporated designs, develops, manufactures, and markets digital telecommunications products and services. It operates in four segments: QCT, QTL, QWI, and QSI. The QCT segment develops and supplies integrated circuits and system software based on code division multiple access (CDMA), orthogonal frequency division multiple access (OFDMA), and other technologies for use in voice and data communications, networking, application processing, multimedia, and global positioning systems. The QTL segment grants licenses to use portions of its intellectual property portfolio, which includes patent rights useful in the manufacture and sale of various wireless products, such as products implementing CDMA2000, WCDMA, CDMA TDD, GSM/GPRS/EDGE, and OFDMA standards, as well as their derivatives. The QWI segment provides fleet management, satellite- and terrestrial-based two-way wireless information and position reporting, and other services- software and hardware to transportation and logistics companies- content enablement services for the wireless industry- push-to-talk and other software products and services for wireless network operators- and development, and other services and related products of wireless communications technologies to government agencies and their contractors, as well as builds and manages software applications that enable certain mobile commerce services. The QSI segment invests in early-stage companies that support the design and introduction of new products and services, as well as holds a wireless spectrum license. The company operates primarily in China, South Korea, Taiwan, and the United States. QUALCOMM Incorporated was founded in 1985 and is headquartered in San Diego, California.

 

 

Demand Fundamentals for: SLM (Total Score = 73 / 100)

Demand Fundamental

Value

Score

Qtr/Qtr Revenue Growth

36.8%

15 / 15

Qtr/Qtr Earnings Growth

71.6%

15 / 15

Year/Year Earnings Growth

52.32%

10 / 10

Year/Year Revenue Growth

52.32%

10 / 10

Multi-Year Revenue Growth

11.22%

4 / 8

Multi-Year Earnings Growth

0%

1 / 8

Relative PE Rank

3 / 38

3 / 6

Return On Equity

30.4

5 / 5

Yield

2.32%

1 / 5

Institutional Holding

97.9%

1 / 6

Stock Price

24.83

4 / 4

Fundamental Peer Group Rating

24 / 38

4 / 8

 

Demand Technicals for: SLM (Total Score = 80 / 100)

Demand Technical

Value

Score

Technical Signal

LONG

35 / 35

Trading Zone

ZONE 4

5 / 10

Average Trading Volume

3,407,187

10 / 10

Industry Status

LONG

20 / 20

Sector Status

LONG

10 / 10

Technical Signal Age

451 Days

0 / 15

Current Stop Loss

22.34

 

 

More Information for: SLM

Summary Stats

Summary Status

90-Day Sector Risk

Previous Close: $24.77

Technical: LONG

0-30 Days: BULLISH

Market Cap: 10.8 Bil

Fundamental: STRONG BUY

30-60 Days: BULLISH

Long Stop: 22.34

Composite: STRONG BUY

60-90 Days: BEARISH

Short Stop: 26.8

Expected Move: 1.82

Optionable: Y

Weekly Optionable: N

 

SLM Corporation ($SLM) - SLM Corporation, also known as Sallie Mae, originates, acquires, finances, and services private education loans in the United States. The company operates through three segments: Consumer Lending, Business Services, and FFELP Loans. It also provides servicing, loan default aversion, and defaulted loan collection services for loans owned by the Department of Education (ED), Guarantors of FFELP Loans, and other institutions. In addition, the company offers processing capabilities to educational institutions, 529 college-savings plan program management services, and a consumer savings network. Further, it provides campus solutions, such as electronic billing, collection, payment and refund, and tuition payment plan administration services. The company promotes its products through the financial aid offices on campuses, as well as through direct marketing to students and their families. SLM Corporation was founded in 1972 and is headquartered in Newark, Delaware.

Closing Comments...

I do not believe the volatility (and, perhaps, seriously so) is going to continue to be so benign. I am building and adding to my positions, but I am adding only in small increments. As I mentioned at the top of this week's report, the Fed's tapering announcement on Wednesday 'could' have a negative impact on the market... but, I suspect it will be very short lived. Adjusting your timing to wait until after that announcement seems to make a lot of sense. On the other hand, with the market up triple digits today, one might assume bad news (if any) is already in the market.

I prefer the 'buy-the-rumor-and-sell-the-news' approach with regard to the Fed. Plus, my Oscillator is becoming more and more Bullish and a lot of the time-cycle sector forecasts are Bullish, as well. I continue to advise caution right now, but some nibbling along the edges on the Bullish side is worth some consideration.

However, I would not be going long oil right now. Shorting crude oil looks more attractive from a time-cycle forecast perspective.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions.


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By  +Follow September 17, 2013 1:47PM
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