Wednesday, November 30, 2016

Oil In Focus

The big news of the day so far is OPEC agreeing to cut 1.2m barrels per day. Crude enjoyed most of its gains before the news hit.


Individual stock momentum has waned a little bit, and my best short-term market barometer for the market is my 5-day rolling watchlist, and that has been weak. That can obviously change in a heart beat and just tells you that it ain't always sunshine and rainbows.

Below are the stocks on my watchlist that I have an interest in getting long if and only if they go through yesterday's high.


A majority of stocks move in spurts, after a period of consolidation they tend to breakout in the direction of the preceding trend, the spurt typically lasts 3-5 days, here's an example;


Frank Zorrilla, Registered Advisor In New York. If you need a second opinion, suggestions, and or feedback in regards to the market feel free to reach me at fzorrilla@zorcapital.com or 646-480-7463. 

We live in a world in which we are bombarded with information, tweets, blogs, etc., content is the new salesman, content is the new marketing, content is the new networking. With information being so readily available, bloggers try to differentiate themselves with their writing skills, volume, and consistency, putting out blog posts to meet quotas. We are seeking to stand out from the crowd by showing performance, by taking all the information and seeking alpha, that’s the sole purpose of the blog. It won’t always be pretty; it’s never easy, and performance is spotty, but we seek superior risk-adjusted returns, not notoriety for our writing skills.  If this is something you can relate to, then this blog is for you.

Tuesday, November 29, 2016

Red Hot Momentum

Oil stocks are under pressure this morning, there's a big OPEC meeting tomorrow that will probably dictate the short-term movement of oil stocks.

Market continues to be extended by many measures, that at times means something other times it doesn't. The longer your time frame the more irrelevant these short-term measures are.  One interesting breadth measure that confirms that we are extended is Pradeep Bonde (Stockbee) breadth measure of how many stocks are up +50% or more in the last month.  That number is now at 35, typically above 20 signifies a hot market and this when momentum starts to wane.


With the above being said; the questions as trader that you ask yourself are;

  • Do you take the trades at regular size and disregard the breadth numbers? 
  • Do you reduce size to take into account the breadth numbers? 
  • Or do you not take any trades until we consolidate further? 
  • Fact is, we won't know what is the correct thing to do until after the fact.
Below are the stocks on my watchlist today that I have an interest in on the long side if and only if they go through yesterday's high.


Frank Zorrilla, Registered Advisor In New York. If you need a second opinion, suggestions, and or feedback in regards to the market feel free to reach me at fzorrilla@zorcapital.com or 646-480-7463. 

Monday, November 28, 2016

A Handful Of Names To Watch



Like I said in the previous post, by many measures the market is short-term extended, sideways to down action would be healthy and there's a limited amount of decent risk reward entries.

With that being said, OLED, LC, FELP, PI, YRD, EDIT, are the names on my long only watch-list today. I have an interest in these names if and only if they go through their previous day high.


Frank Zorrilla, Registered Advisor In New York. If you need a second opinion, suggestions, and or feedback in regards to the market feel free to reach me at fzorrilla@zorcapital.com or 646-480-7463. 

Scarcity

As far as the way I see things we have a very limited amount of decent risk reward entries; this is no surprise given the straight up move we have witnessed since the election. Sideways action would do wonders to a lot of charts and set them up better for a second move higher. Holding on to your current holdings and or waiting for some corrective price action via price or time is probably your best bet as a swing trader.

With that being said, below you can have the Top 20 Sectors based on 3-month momentum. This is always good to know since a bulk of a stock's move is correlated to its sector/industry move.


Most of the individual stocks within the above sectors are extended in the short-term.

Frank Zorrilla, Registered Advisor In New York. If you need a second opinion, suggestions, and or feedback in regards to the market feel free to reach me at fzorrilla@zorcapital.com or 646-480-7463. 

Saturday, November 19, 2016

Keeping Track Of Potential Big Movers

LGF, HAWK, BERY, EGOV, XON are stocks that are trying to emerge from bases. I'm always intrigued by bases because typically a prolonged period of contraction leads to an extended period of expansion. We have covered bases extensively here (SEE BELOW) on the blog, and they are one if not my favorite set-up.

Stan Weinstein, the author of Secrets For Profiting In Bull and Bear Markets, has a great definition the "basing area," specifically the one's that are formed after several down months.

The Basing Area: "After XYZ has been declining for several months, it eventually will lose downside momentum and start to trend sideways. What's actually taking place is that buyers and sellers are starting to move into equilibrium, whereas previously the sellers were far stronger, which is why the stock had plummeted. Volume will usually lessen--dry up--as a base forms. But often volume will start to expand late stage 1, even though prices remain little changed. This is an indication that dumping of the stock by disgruntled owners is no longer driving down the price. The buyers who are moving in to take the stock off their hands are not demanding any significant price concession."






Frank Zorrilla, Registered Advisor In New York. If you need a second opinion, suggestions, and or feedback in regards to the market feel free to reach me at fzorrilla@zorcapital.com or 646-480-7463. 

Friday, November 18, 2016

What A Small Pullback Would Do

The market continues to grind higher, low-risk are scarce and a small pullback would do wonders to many charts.

CTRV, OI, TA, QCOM, GILD, are the names on my long only watchlist that are of interest if and only if they go through yesterday's high.


Frank Zorrilla, Registered Advisor In New York. If you need a second opinion, suggestions, and or feedback in regards to the market feel free to reach me at fzorrilla@zorcapital.com or 646-480-7463. 

Thursday, November 17, 2016

All The Way Up

The indices have been grinding higher over the last two weeks, the stocks that took off initially (bio's, small caps, financials) have slowed down a little over the last two days allowing the post-election losers to bounce a little, specifically FANG.

CTRV, AKAM, OI, FMSA, PYPL, TWTR, MPC, YELP , CYOU, QCOM, are the names on my long watchlist today. These stocks are actionable to me if and only if they go through yesterday's high.


Frank Zorrilla, Registered Advisor In New York. If you need a second opinion, suggestions, and or feedback in regards to the market feel free to reach me at fzorrilla@zorcapital.com or 646-480-7463. 

Wednesday, November 16, 2016

Nintendo Is Turning Back The Clock

Nintendo has turned back the clock by re-releasing the original Nintendo console, now called NES mini, fully downloaded with 30 games. So far it has been an absolute hit, sold out everywhere (partly due to limited supply) and selling on Ebay for over for over $200, the original price is $60. The NES Classic without a doubt is the Christmas gift to have for those who grew up playing the original Nintendo.



My opinion is subject to change as new information comes in.

Frank Zorrilla, Registered Advisor In New York. If you need a second opinion, suggestions, and or feedback in regards to the market feel free to reach me at fzorrilla@zorcapital.com or 646-480-7463. 


Saturday, November 12, 2016

Epic Week

It was an unforgettable week for Wall Street and Main Street. It all started Tuesday night, as Trump chances of winning was becoming clearer the dimmer the Futures were looking. At around 11 pm when it was almost clear that he would be the new President the SP500 futures were limit down -5%.


One has to wonder if Hillary had won if the reaction would've been the exact opposite; limit up first and then limit down.

Leading up to the elections there was a lot of put buying, and one can argue that many were caught off guard on the short side and then were forced to cover.



Small caps, Biotechnology, Industrials, and Copper were the standouts on the positive side. FANG (Facebook, Amazon, Netflix, Google, Apple, and many other technology stocks were the clear losers, along with Gold, Gold Miners, Bonds, and Emerging Markets. The huge moves in the winners and losers this week probably was overdone. These are 'bigly' moves are based on hope and possibilities of what can change with the new administration, changes that may or may not happen, and regardless it's way too soon.

Suddenly, a couple of legendary (Carl Icahn, Stanley Druckenmiller) investors who have been bearish for years turned bullish and are now confident about the market/economy and our new elect President. In hindsight, their bearish view now looks more like it was political more than anything else. Three days in and suddenly a Trump presidency detoured the U.S economy for these guys? By looking at Icahn's stock any change is good, look below.


The small-cap index had a helluva week, the type of rally it had this week typically only happens when you are in a deep bear market. It seems like they try to price in 4-years of a Trumpstatic economy in 3 days.


The overly enthuse will think this will be a non-stop move higher, but the tendency of the last few years has been for the market to stall and turn down after touching highs.  Here you have the stats when the Small Cap index has had a winning streak of 5-days or more.

Courtesy of Schaeffer's Research

The case for the move higher in biotechs/pharma this week was the fact that the Republicans won the house and that Hillary lost, maybe the new administration won't come down as hard on them for price gouging.  Another reason for the bullishness this week might be the fact that U.S. based pharma companies have $98-billion overseas that might have to come back into the U.S. and that could lead to significant acquisitions in the sector. For more on this click here.

The fear in the FANG stocks might come from comments Trump made during his campaign. Fear that they may have to bring back all the cash they have overseas and pay a massive tax bill, or it could just be a huge rotation into stocks that might benefit more under the new elect, I think it is way too early to come to a conclusion.

The market is very dynamic, and it never pays to have firm opinions based on what you think is going to happen.

Here is a possible playbook based on previous presidential cycles;

For more on Presidential cycle patterns click here.

Frank Zorrilla, Registered Advisor In New York. If you need a second opinion, suggestions, and or feedback in regards to the market feel free to reach me at fzorrilla@zorcapital.com or 646-480-7463. 

Wednesday, November 9, 2016

About Last Night





Two things that stood out today; the huge day the biotech sector had and the underperformance of FANG; Facebook, Amazon, Netflix, Google, Apple, were all down.

You can attribute the huge performance in the biotech sector to the fact that the Republicans won the House and that Hillary lost the election. A lot has been priced in the biotech sector; I'm just not sure the headline risks are gone.

The FANG underperformance today probably stems from the fact that the Trump administration might push them to bring back the boat load of cash they have overseas.  I think it is too early for that to be a big worry for these stocks, next year it's a different story.

Few lessons about the action last night and today;

  • It always pays to have something on, specifically index ETF'S; SPY, IWM, QQQ, maybe even XIV, when you get a bounce the index will always bounce, specific sectors, or stocks might not.
  • It has not paid to de-risk, many years ago we used to take the stairs up and the elevator down, now we are also taking the elevator up (express). In these type of express elevator ride to the last floor moves, when you want to put risk back on you always feel like you are chasing because things are happening so quick. But by always having something on (point 1) your fear of missing out won't be that great.

Frank Zorrilla, Registered Advisor In New York. If you need a second opinion, suggestions, and or feedback in regards to the market feel free to reach me at fzorrilla@zorcapital.com or 646-480-7463. 

We've Been Here Before

We just had one of the most if not the most memorable election in history. The Dow Jones had a decent swing overnight, roughly 900-points (5%) on the back of Trump winning the election. Throughout history, we have been through many crises, big events, etc., that tend to cloud our judgment in the short term that ends up costing us in the long term. With the rise of social media, and up to the minute news, the future events will be sensationalized a lot more than they should be. In the short term, anything can happen, over the long term the odds are on your side.

The point is; we've been here before.


Frank Zorrilla, Registered Advisor In New York. If you need a second opinion, suggestions, and or feedback in regards to the market feel free to reach me at fzorrilla@zorcapital.com or 646-480-7463. 

Thursday, November 3, 2016

Looking Underneath The Hood

Most of the time and for most investors, we get tied down to thinking that we know what the market is doing just by looking at how the DOW JONES or SP500 closed on the day. Occasionally that is all you need to know, but for the majority of the time, it only tells you half the story.

Since July the SP500 has done nothing but trade sideways, the closing price on 7/1 was 2,102.95, the closing price yesterday was 2,097.94. However, underneath the surface, we have seen some real carnage on individual stocks. The Dow Jones is comprised of 30 stocks; that doesn't tell you anything about what is going on unless all you own is the Dow Jones. The SP500 is comprised of 500 stocks, the top 5 having just as much influence on the index as the bottom 250 combined. In other words, the top 5 stocks can make the index look better or worse than what is actually going on depending on what the top 5-10 stocks are doing.

In the meantime, let's take a look at breadth charts below to get a better feel of the environment (starting 7/1).

SP500 versus 1-month lows

SP500 versus 3-month lows

Here are the stats; the SP500 closed at 2,102.95 on 7/1/2016, it closed at 2,097.94 yesterday, a difference of 5-points.  On 7/1/2016 we had 137 1-month new lows and 69 3-month lows, fast forward to yesterday and those numbers stand at 1,642 new 1-month lows and 976 3-month lows in individual stocks, all while the SP500 is only down net 5 points.

The good thing is that spikes in these breadth ratios tend to lead to short-term bottoms (1-5 days).

Frank Zorrilla, Registered Advisor In New York. If you need a second opinion, suggestions, and or feedback in regards to the market feel free to reach me at fzorrilla@zorcapital.com or 646-480-7463.