Wednesday, March 25, 2015

Is It Time To Buy SPDR S&P Oil & Gas Explorers ETF (NYSE: XOP) ?

The Market Loves To Hate Oil
As you'd expect, energy-related ETFs are an especially popular target for short sellers these days. In fact, almost every share held in long accounts for the SPDR S&P Oil & Gas Explorers ETF (NYSE: XOP) is also currently borrowed for short seller accounts.
The latest headache for oil prices and oil stocks: fears are growing that U.S. oil storage tanks could reach capacity in April. While Petroleum Administration for Defense District (PADD 1) storage is near capacity at around 85%, total storage is only at 60% capacity.
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$GM at a Fork in the Road

Let's lift the hood on $GM (General Motors Company: NYSE) and see what this stock has been up to over the past few months:

$GM : General Motors Company
As the daily chart shows us, the bulls have dominated the price action since early February; +DMI has remained above -DMI for nearly two months, but we're starting to see the spread between these two indicators diminish. What awaits remains to be seen.
Here we are at a fork in the road. The $39 level is resistance and the $38 level is near term support. Below $38, the $35.50 - $36 level would be another key support area to watch for.
Short-term and intermediate-term moving averages are beginning to converge, per the MACD signal. Coupled with a declining RSI signal, any pick up in bearish momentum could put pressure on $GM in the days ahead, assuming the bulls are unable to overcome the $39 level above.
On Monday, $GM closed at $38.59, just a penny above its 5 DMA currently at $38.58. The open price was $38.81 and high for the day was $39, so the bulls lost traction as the trading day neared its end. If the RSI signal falls below 60, this would generally be seen as bearish.
If the price action continues to exhibit overall weakness, and the short-term moving averages cross below the intermediate-term moving average, this would further support the bearish case. A spike in -DMI and subsequent cross and hold above +DMI would further validate the bearish stance; a rising ADX line in such a scenario would portend a trending move lower.
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Seaspan (SSW): High Income on High Seas

Seaspan (SSW) had a fair earnings report in its latest period. Normalized EPS per diluted share rose 3.7% in Q4, but fell 1.2% for the full-year. Normalized earnings have gotten a bit more problematic in the last few years.
The main driver of this measure used to be the fluctuation in currency and interest rate hedges, which I didn't mind at all.  But the company has gotten a bit more aggressive.
It no longer counts options compensation expense and a few others that are real expenses. It also excludes some one-time items that recur. I don't like these fictions, but everyone is doing it, so I guess the company feels it's entitled. My own figures show slightly lower results.
This is of small concern to us as preferred shareholders. More important is that net interest coverage from operating earnings was 4 times at yearend and EBITDA covered preferred dividends 4 times.
The company also raised the common stock dividend 9% and said in the conference call that the common dividend was sustainable. That's a good sign.
The call was upbeat about prospects and the company continues to expand its fleet. My only concerns are that management may be too upbeat for my taste and may be expanding too fast.
This won't affect ships already under contract, but if Seaspan's outlook is too optimistic, it may have trouble getting profitable rates on ships coming off charter in a weaker-than-expected economy.
The average length of the company charters is down to five years and change. When we first bought the common stock years ago, it was closer to eight years. Nonetheless, this is a problem for common stock holders, not us.
It is also encouraging that company insiders converted a lot of high-yielding preferred shares in 2014 (as scheduled), increasing the company's already very high percentage of insider ownership. These guys are definitely watching the ship.
We recommend Seaspan Corporation 7.95% Series D Cumulative Redeemable Perpetual Preferred Shares (SSW-PD) and Seaspan 6.375% Notes due April 2019 (SSWN). Both securities are buys on small pullbacks.
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Cameron International Corporation (NYSE: CAM)

Cameron International Corporation provides flow equipment products, systems, and services worldwide. The company’s Subsea segment offers integrated solutions, products, systems, and services to the subsea oil and gas market, including integrated subsea production systems involving wellheads, subsea trees, manifolds and flowline connectors, and subsea processing systems. Its Surface segment provides onshore and offshore platform wellhead systems and processing solutions, including valves, chokes, actuators, Christmas trees, and aftermarket services to oil and gas operators. The company’s Drilling segment provides drilling equipment and aftermarket services. Its Valves & Measurement segment provides valves and measurement systems to control, direct, and measure the flow of oil and gas.
Take a look at the 1-year chart of Cameron (NYSE: CAM) below with the added notations:
1-year chart of Cameron (NYSE: CAM)
CAM was moving along just fine up until the end of August, and from there the stock embarked on a 5-month decline that may, or may not, be over. During the sideways price action of the last 3 months, the stock has shown a tendency to find support and resistance at the $45 level (green). In addition, CAM appears to have a lower level of support at $42 (blue). CAM is currently sitting just under $45.

The Tale of the Tape: CAM has key levels at $42 and $45. A trader could enter a long position at $42 with a stop placed under the level. However, a short trade could be made instead at $45, or if the stock were to break below $42. Another long trade could be considered on a break above $45.
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Twitter TWTR Stock Jumps 6% To Take Buy Point

Twitter (NYSE:TWTR) broke out of a base on the stock market today, gaining more than 6%. The stock closed the session still in buy range.
The short-form social media platform recently unveiled group chat and more video capabilities to attract more users. Twitter also has a new agreement with Google (NASDAQ:GOOGL) for the integration of tweets in real time in Google's search results.
Meanwhile, Facebook (NASDAQ:FB) broke out of a cup-with-handle base last Thursday and is hitting new highs.
LinkedIn (NYSE:LNKD) has been trading relatively tight after gapping out of a flat base in early February.
Watch this video for chart analysis of Twitter.

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