Friday, January 3, 2014

Why Stocks Could Decline By 20% in 2014

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Coffee Looks Set for a Reversal

2014 may be the year of the coffee trade.
After falling by 67% over the past three years, the price of coffee is starting to rise. Today, coffee trades about 18% higher than when it bottomed two months ago.
More importantly, the price may have just taken out an important resistance level on the chart.
Take a look at the chart below...
coffee price per pound
It's too early to know for sure if the price reversal will hold. The rally hasn't been strong enough yet to provide a convincing breakout on the chart. But a breakout above the $1.20 price level would do the trick. If that happens, look for a rally to the next resistance level at $1.45 and possibly $1.60.
That would be a 60% gain off the bottom – which would be enough to declare 2014 a big year for coffee.
Admittedly, coffee looked set to rally last year, too. That rally attempt failed and coffee had a miserable year. Now, though, the coffee bear is another year older, and the price is about 30% cheaper. At this point, there's more upside potential than downside risk for a trade.
Of course, what's good for coffee isn't good for companies who profit off the stuff. Rising coffee prices will pressure the profit margins for companies like Starbucks (SBUX) and Green Mountain Coffee (GMCR). These stocks are up 69% and 79%, respectively, over the past year. But if coffee prices rise, it will be hard to argue for more upside.
Traders looking to profit on a possible rising trend in coffee prices should consider the iPath Dow Jones-AIG Coffee Total Return Sub-Index ETN (JO). This exchange-traded note uses the futures market to track the performance of the price of coffee.
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Market Vectors Russia ETF (NYSE: RSX): Renewed Interest in Russia Could Pop This Fund 15%

In about six weeks, the world will train its eyes on Russia. More specifically, millions of television viewers around the globe will tune in to watch the sporting action during the two-week Sochi 2014 Winter Olympics.
The games will be a source of national pride for Russia, as it allows the country to show off its first-class winter sports facilities. Of course, the fact that the whole world will be watching the games has not been lost on those who want to make a politically violent statement.
Over the past several days, there have been a series of deadly terror attacks in Russia. The suicide bombing attacks are thought to be the work of an Islamic group (though no group has yet claimed responsibility for the attacks) intent on creating a sense of fear in the host nation prior to the big event. I suspect that given the Russian government's swift and aggressive historical response to terror, the games will go off without a hitch.  (more)

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Tractor Supply Company (NASDAQ: TSCO)

Tractor Supply Company operates retail farm and ranch stores in the United States. Its stores provide a selection of merchandise, including equine, livestock, pet, and animal products, such as items for their health, care, growth, and containment; hardware, truck, towing, and tool products; seasonal products comprising lawn and garden items, power equipment, gifts, and toys; maintenance products for agricultural and rural use; and work/recreational clothing and footwear products. As of September 28, 2013, the company operated 1,245 stores in 47 states, as well as a Website under the name. It serves recreational farmers and ranchers, as well as tradesmen and small businesses.
To review Tractor’s stock, please take a look at the 1-year chart of TSCO (Tractor Supply Company) below with my added notations:
1-year chart of TSCO (Tractor Supply Company)
TSCO has been somewhat of a unique stock among most in that it has done nothing but rally higher all year long. It has consolidated sideways several times along the way with the most recent consolidation having formed an obvious $75 resistance (blue), which was also a 52-week high resistance. Finally, last week TSCO broke through that $75 resistance.

The Tale of the Tape: TSCO broke out to a new 52-week high and has now pulled back. A long trade could be made at $75 with a stop placed below that level. A break below $75 would negate the forecast for a continued move higher.
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My 2014 “Predictions”

Let me just start out by saying that year-end predictions don’t mean a thing. The big firms give their year-end targets, fund managers talk their book, the blogosphere weighs in, and anyone with a twitter handle has an opinion. But if the data changes, what are you going to do, stick with your predictions and lose money? No, if things change, you make adjustments. There should be a worst case scenario exit before initiating any position, at any point in the year, not just on December 31st. So what does a prediction even mean anyway? To me, it’s what I see right now heading into January. And that’s it.
So now that we’re clear, here are a few things that I’m expecting as I see things right now:
  • Crude Oil prices double in Gold terms. $CL_F/$GC_F currently at 0.08 – goes to 0.15+.
  • Interest rates see 2% before 4% (10-year).
  • Corn Rallies 30%.
  • Blackberry doubles in Price.
  • And Lebron ends the regular season shooting 50% better from the field than Carmelo Anthony
Let’s take each one by one.  (more)

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EnteroMedics (NASDAQ: ETRM): This $2 Weight Loss Stock Could Double Within 6 Months

We are losing the battle of the bulge. Though health care practitioners have been trying to raise awareness about the perils of obesity for a decade, the numbers keep getting worse.

According to a survey conducted by Gallup-Healthways, 27.2% of all Americans are classified as obese, up a full percentage point from 2012. For people aged 45-64, a stunning 32.5% of the population is considered obese. All of those figures go hand-in-hand with rising rates of diabetes and hypertension.

Although investors had been pinning their hopes on obesity drugs offered by Vivus (NASDAQ: VVUS), Orexigen Therapeutics (NASDAQ: OREX) and Arena Pharmaceuticals (NASDAQ: ARNA), the fact that all three of those stocks still trade below $10, despite many years of hype, shows that pill-based approaches have been underwhelming.  (more)

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