Wednesday, April 16, 2014

Why I'm Buying Stocks This Week

There were plenty of warning signs heading into last week's hard stock market selloff.
There was the precarious look of the financial sector... the historically low reading on the Volatility Index... and the endless stream of talking heads appearing on the financial networks urging investors to buy stocks.
The S&P 500 closed Friday at 1,816 – down about 4% from the all-time high it posted earlier this month. The index has given up all of its gains for the year. And there's a rapidly growing belief that the long-awaited correction is finally here.
But it isn't... not yet, anyway.  (more)
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Delta Air Lines, Inc. (NYSE: DAL)

Delta Air Lines, Inc. provides scheduled air transportation for passengers and cargo worldwide. Its route network comprises various gateway airports in Amsterdam, Atlanta, Cincinnati, Detroit, Memphis, Minneapolis-St. Paul, New York-LaGuardia, New York-JFK, Paris-Charles de Gaulle, Salt Lake City, Seattle, and Tokyo-Narita. The company sells its tickets through various distribution channels, including telephone reservations,, traditional brick and mortar, and online travel agencies. It also provides aircraft maintenance, repair, and overhaul services for aviation and airline customers, as well as offers staffing services, professional security and training services, and aviation solutions for third parties; vacation packages; and aircraft charters, and aircraft management and programs. The company has a fleet of approximately 900 aircraft.
Please take a look at the 1-year chart of DAL (Delta Air Lines, Inc.) below with my added notations:
1-year chart of DAL (Delta Air Lines, Inc.)
DAL has come down to a two different levels of support. First, the stock has approached an important up-trending level of support (blue) and, as you can see, has already broken that support. This would imply lower prices ahead for the stock, but first the $33 level (green) will have to be broken.

The Tale of the Tape: DAL has a key area of support at $33, but has already broken trendline support. A long trade could be made at $33 with a stop placed below that level of entry. However, if the stock were to break below $33 traders might want to look to get short on the stock.
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Gold & Silver Smashed As Incredible Event Unfold In Europe / April 15, 2014
On the heels of continued uncertainty around the globe, today an acclaimed money manager spoke with King World News about the gold and silver smash, China’s continued massive accumulation of gold, and the incredible events unfolding in Europe.  Below is what Stephen Leeb had to say in this fascinating interview.
Leeb: “Eric, overnight there was some data that was disappointing from China.  Gold and silver have been hit, but strangely enough, oil has been firm.  The key thing the markets are failing to realize is that the Chinese are getting the job done.  They are not going to slow their economy to the point where they have high unemployment and riots in the streets….
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Why the Shorts Are Wrong With TESLA (TSLA)

It’s no secret that high flying names like Facebook (FB), Netflix (NFLX), Priceline (PCLN) and Amazon (AMZN) have had a rough go of it over the last month. Still, when it comes to shorting names like those nothing can hold a candle to Tesla (TSLA). According to the research firm Markit, Elon Musk’s electric car company was the most shorted name on the Nasdaq 100 over the past month. This from a stock that, despite recent troubles, is up close to 360% in the last year.
“It’s been highly shorted for a while and i think you need to look at the reason why these companies are shorted,” says Joe Fahmy of Zor Capital. “People aren’t comfortable when stocks make these big moves too fast.”
Tesla, however, is different. “You can’t use traditional metrics to value companies that are disrupting our lives and revolutionizing the way we do things.” (more)

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China Demand News, Lessening Ukraine Tensions Sink Gold / By Dan Norcini / April 15, 2014
Last evening I posted the news concerning the World Gold Council’s report about Chinese gold demand for 2014. Please see that post for the details.
Also, chatter continues to surface that China’s economy is slowing. Now whether or not that is indeed the case can be argued, ( I tend to think that it is because of what is happening with the price of copper )  but many traders are viewing such talk as bearish for the price of the metal. The reason? If the economy slows the thinking is that there will not be as much money around with which to buy gold. Along this line is news out of China that its money supply grew only 12.1% in March compared to the same period the previous year. The People’s Bank of China has a target of 13% growth. This is the first time since April 2012 that the target has been missed.

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