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Trading Lessons

Wealthbuilder Quarterly Market Brief and Stock Pick

Stock-Markets / Stock Markets 2010 Jun 07, 2010 - 06:54 AM GMT

By: Christopher_Quigley

Stock-Markets

Best Financial Markets Analysis ArticleOn the 21st. May we wrote the following: “Due to lower highs and lower lows on both the Dow Industrials and Dow Transports there is now a change of trend in existence in the markets. How long this correction will continue no one can be sure. A bounce can be expected at any time due to the fact that the market is terribly oversold based on Stochastics and the McClennan Summation Index. However, I do not think we have seen support lows in place yet. What is the reason for this capitulation? As mentioned in my last brief I believed the “flash crash” of the 6th. May mortally wounded all indices from a technical pointy of view. It will take some time, probably the whole summer, before some degree of confidence is restored.”


Since this note was published nothing has changed to alter our view. In fact the market movement on Friday merely confirmed that there is a high probability that the market is now starting to price in a potential double dip recession. When you add to this mix a technical breakdown in the Chinese market and the possible breakup of the Euro zone the end result is a choppy jittery financial market with evolving fundamental risk.

For those interested in trading our advice is still to move on technical signals in bear momentum ETF’s such as “TZA” (small cap.) or “TYP” (technology). For those interested in a bullish momentum trade I would keep focused on the emerging market ETF “EDC” but this needs to break through the 24 dollar level before it will be a trading candidate in my books. These momentum products are for very active traders who have the time to closely monitor the market every day. While the task is difficult it is very very profitable at the moment due to the volatile nature of current market conditions.

For value traders there continues to be fabulous targets on our radar watch list. However, due to current bearishness few buy signals are coming through. This is ok. Patience is the key to long term investment success. It makes no sense to risk capital when mister market continues to hold secrets. When the buy signals speak they will be solid and clear. Remember when the Dow sell signal came through in the fall of 2007 it was over a year before a buy signal registered (March 2009 in fact). It was boring but clients avoided the devastation of 2008. I am not saying that there will be such a long wait this time but experience shows that in a lot of instances the optimum investment location is on the sidelines particularly if investors do not have the confidence and the knowledge to know when to enter shorts.

Dow Industrials: Weekly

Dow Transports: Weekly

Emerging Markets Bull x 3: Daily

Stock Pick Following a special request from a client this quarter I have chosen SCCO as our stock pick. The task I was given was to find a company that would meet the criteria of being in the “emerging market” arena but which also offered a solid dividend, was financially secure and could benefit from the bull trend in the metal monies. I think Southern Copper fits the bill.

Southern Copper Corp: SCCO
Company Fundamentals:
Financial Strength: A+
Return on Capital: 34%
PE Ratio: 17.4
Earnings Growth: 11%
Dividend Yield: 6.3%
Company Outline:

Southern Copper is a leading integrated producer of copper, molybdenum, zinc and silver with smelting and refining facilities in Peru and Mexico. Market conditions have continued to improve. Fourth quarter earnings maintained their positive trend, reflecting rising metal demand.

Capital spending plans have been stepped up which augurs well for earnings growth. The board recently approved a 2.8 billion dollar capacity expansion budget for the next 3 years. The company is not cheap based on our usual value criteria but this is balanced by its dividend yield and financial strength. The recent pullback in the general market provides a good entry point.

Southern Copper Corp: Daily

By Christopher M. Quigley
B.Sc., M.M.I.I. Grad., M.A.
http://www.wealthbuilder.ie

Mr. Quigley is 46 years of age and holds a Batchelor Degree in Management from Trinity College/College of Commerce, Dublin and is a graduate of the Marketing Institute of Ireland. He commenced investing in the Stock Market in San Francisco, California where he lived for 6 years. Now based in Dublin, Mr. Quigley actively trades utilising the principles set out in the modules above. This Wealthbuilder course has been developed over the last 9 years as a result of research, study, experience and successful application.

© 2010 Copyright Christopher M. Quigley - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

Christopher M. Quigley Archive

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