Friday, September 4, 2015

Turkey $TUR Is A Sell

I know everyone is worried about rising rate environments and whatever China is up to or not up to these days, but I think one of the most interesting scenarios globally right now is actually what’s happening in Turkey. I’m not one to ever watch TV or read the news, but I do see headlines coming across the stocktwits and twitter streams which gives me a pretty good idea of what they’re talking about. Generally, it’s either too late or not relevant. So I think the fact that Turkey is not getting much press these days means we might be on to something.
Here’s what I’m seeing. This is a weekly candlestick chart going back to that epic crash back in 2008. After the 2010 peak, prices corrected nicely and found support at exactly the 61.8% Fibonacci retracement of the entire rally. Once again these levels come into play beautifully. I still don’t understand how so many people purposely choose to ignore them. Anyway, prices then bounced in 2012-2013 towards those former highs before rolling over to find support once again at that key retracement just above $41. Notice how weak the next bounce in 2014 turned out to be. It was a heads up that we could ultimately break the support that had held since 2011. Sure enough, we are now below all of that support:
9-2-2015 12-58-34 PM kTUR w
This is a problem. Sometimes you get failed breakdowns that turn into a whipsaw, which becomes the catalyst for a nice rally.  But they generally have to come quickly. In this case, prices have now been below all of this support for several weeks. Not good.
This next chart is a little bit of a close-up to what’s happening here. I included momentum down below to show how the recent oversold conditions are confirming the new lows. We’re using a 14-period RSI which remains in a bearish range and has not put in any divergences that could point to a possible reversal:
9-2-2015 12-58-34 PM kTUR w 2
Price target-wise I’m looking at just above $27 which represents the 161.8% Fibonacci extension of the most recent rally last year. This was the last bounce off that key $40 support level first mentioned above. I think that’s where we’re headed and where we want to be covering tactical short positions. This represents another 25% decline from current levels. That’s a lot.
Risk management-wise, I see no reason to be short Turkey if prices are above that former support since 2011 near $40. But I would be an aggressive seller into any strength near that level as former support turns into overhead supply. We recently saw this happen in the S&P500
I think Turkey is in a lot of trouble.
Please share this article

Trade of the Day: SouthWest LUV Stock Should Soar Into Year End

Southwest Airlines Co (LUV) — This airline is known for its discounted fares on shorter-haul, point-to-point flights. Following consolidation in the industry, it is the fourth largest airline in the United States.
The company’s conservative financial policies, including low debt, have led to 41 consecutive years of profitability. Southwest has also delivered steady revenue growth, with Capital IQ expecting a 4% increase in 2015 and another 6% in 2016.
Its analysts laud the airline for having the “healthiest balance sheet among the major U.S. airlines.” And they note its new frequent flyer program and a more sophisticated revenue management system should boost profit margins.
Lower fuel costs could benefit earnings, but LUV has an effective hedging program, which has had a long-term favorable impact on earnings along with an active share repurchase program. Capital IQ estimates earnings will increase 67% in 2015 to $3.35 per share. Its analysts have a “strong buy” on LUV stock with a 12-month price target of $55.
Between September 2013 and late January 2015, LUV stock rose from under $15 per share to over $47. Since then, this year has been spent consolidating those gains. As part of that consolidation, LUV stock appears to have formed a deep “V” bottom in early July with a low at about $32.
The recent market sell-off led to a short-term top at the 200-day moving average at just over $40. But a new buy signal from my proprietary indicator, the Collins-Bollinger Reversal (CBR), near $36 is encouraging.
Buy LUV stock at $36 for a trading target of $46 by year end. If successful, this trade would result in a gain of 28% in four months.

Anadarko Petroleum Corporation (NYSE: APC)

Anadarko Petroleum Corporation engages in the exploration, development, production, and marketing of oil and gas properties. It operates through three segments: Oil and Gas Exploration and Production; Midstream; and Marketing. The Oil and Gas Exploration and Production segment explores for and produces natural gas, oil, condensate, and natural gas liquids (NGLs). The Midstream segment provides gathering, processing, treating, and transportation services to Anadarko and third-party oil, natural-gas, and NGLs producers, as well as owns and operates gathering, processing, treating, and transportation systems in the United States. The Marketing segment markets oil, natural gas, and NGLs in the United States; oil and NGLs internationally; and anticipated liquefied natural gas production from Mozambique.

Take a look at the 1-year chart of Anadarko (NYSE: APC) below with my added notations:
1-year chart of Anadarko (NYSE: APC)
After APC’s decline into December, the stock started a rally from its $70 December low. Ultimately, the rally ended at the same $95 level that stalled the stock back in October and November. In July, APC bounced on the same $70 level (red) that provided support for the stock back in December. The break of the $70 support led to a drop, as one would expect, and after a brief fake-out last week, APC now sits just below the $70 resistance again.

The Tale of the Tape: APC has a key level of resistance at $70. A long trade could be entered on a break through that level. However, if you are bearish on the stock, a short trade could be made on any rallies up to $70.