Wednesday, August 27, 2014

The PowerShares Agricultural Commodity Fund (DBA): One of the Best-Looking Trade Setups Today

It's time to buy agricultural commodities again.
In February, I said commodity bulls were going to make a lot of money this year. The PowerShares Agricultural Commodity Fund (DBA) – an exchange-traded fund made up of 17 different agricultural commodities – had been declining for three years... And it was showing signs that it was finally ready to move higher.
Readers who took my advice to buy made solid gains. DBA rallied 20% over the next three months.
But in May, I warned you to protect your profits. I said if DBA couldn't hold above the $28 level, it would likely drop to the next support line at about $26. And that's exactly what happened. DBA has given back about 60% of its gains from earlier this year. (more)

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Canada Is Back in Black / By Marin Katusa / Aug 26, 2014
The unconventional technologies that have unlocked the oil and gas within the Western Canadian Sedimentary Basin (WCSB) will bring profits to companies operating there as long as West Texas Intermediate (WTI) oil prices stay above US$85 per barrel and natural gas prices remain above US$4 per million cubic feet (Mcf). We see the best of these companies having a great run for at least the next 12 months.
Here’s why.
Reason 1: The Weak Canadian Dollar
The Canadian dollar continues to weaken against the US dollar; we predict this trend will continue throughout 2014 and 2015. The Bank of Canada is in no rush to increase interest rates. Its latest Monetary Policy Report declared a “lower Canadian dollar should provide additional support” to the economy, which is certainly true for the WCSB. In fact, for every 10 cents the CAD weakens relative to the USD, the cash flows of exploration and production (E&P) companies increase by 15%.
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The Housing Market is Softening

The US housing market appears to be softening a bit after a torrid run-up in the last 18 months. National home prices, as tracked by the Case Shiller index, had jumped at nearly a 15% rate of change year over year as of earlier this year.  But the pace of change has slowed markedly in recent months to 8%.

The CoreLogic Home Price Index is showing a similar trend with prices slowing to 7.5% in recent months.  The average annual price change in 1978 has been about 5.5% so we appear to be coming more in-line with the historical average.

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Walter Investment Management Corp (NYSE: WAC)

Walter Investment Management Corp. provides business services to the residential mortgage industry in the United States. The company operates through six segments: Servicing, Originations, Reverse Mortgage, Asset Receivables Management, Insurance, and Loans and Residuals. The Servicing segment performs services for third-party investors in forward loans, as well as for on-balance sheet residential loans and real estate owned associated with forward mortgages. The Originations segment originates and purchases forward mortgage loans to third parties while retaining the servicing rights. The Reverse Mortgage segment primarily focuses on the origination, securitization, and servicing of reverse mortgage loans and a mortgage portfolio of federally-insured HECMs. The Asset Receivables Management segment collects post charge-off deficiency balances on behalf of third-party securitization trusts and other asset owners. The Insurance segment offers voluntary and lender-placed hazard insurance for residential loan customers, as well as other ancillary products to third parties through its insurance agency. The Loans and Residuals segment is engaged in the provision of assets and mortgage-backed debt of the residual trusts; and the unencumbered residential loan portfolio and real estate owned, which are associated with forward loans.
Take a look at the 1-year chart of Walter (NYSE: WAC) with the added notations:
1-year chart of Walter (NYSE: WAC)
After declining from October into February, WAC has held a very important level of support at $24 (blue) for most of the last 6 months. No matter what the market has done since February, WAC always found support at that level when tested. Now, the stock has approached $24 again, and that could provide another bounce higher.

The Tale of the Tape: WAC has a key level of support at $24. A trader could enter a long position at $24 with a stop placed under the level. If the stock were to break below the support a short position could be entered instead.
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