Stock Duel!

Within the next week, Razvan and I are going to reorganize stockduel. The new plan is to pick a small set of stocks and form something like a virtual ETF. We will be long and short stocks. Performance will be regularly tracked and this duel will be against the broad market indices. We would hold stocks for at least two weeks and stock/market coverage will be regular and consistent. More details will following within the next day or two.

The last two days have seen bullish sentiment on the US Dollar.  Is it oversold for the medium term?  As a fan of UJ I see the next major resistance at the 114 area at which case i’ll be watching fundamental news carefully to see if there will be another leg down.  Technically it is definitely oversold and due for a 2-3% retrace.  However this past week it’s already recovered 1.19%.  A change in speculation of change in fundamentals and a change in long/short-interest along with timing will determine a retrace or reversal.

Here is an article that just popped up on my screen.  I’ve been trend-trading the USD.JPY (or UJ for short).  Selling the Dollar (and buying Yen) at the upper resistance and covering half of the position halfway through the trend and the other half toward the bottom of the trend.  Shorting the Dollar is a nice bet because even if you mess up the entry the broad trend will “save” you as long as it doesn’t become oversold.  In this case a major move has been completed and we are still looking for direction.  The article above will explain further.

Options expiration on Friday; keep an eye on your positions and for pinning.  I’ve sold some DIA calls and those are well out of the money now.  That was a good call.  CPI and PPI are released as well as housing starts and building permits.  These all have the potential to influence but overall I get the feeling that this will be a whiplash week.  In fact, for the last week the $vix was up 22% where the majority of the move was Friday’s move of +13.6%.  The last move like this was in January and was followed by a week of solid gains.  The $indu is still sitting atop the previous high of 11335.0 and the $compq is sitting at it’s thrice reconfirmed support of mid 2200’s.  Currently the USD.JPY is trading at 109.51 which is a support level from August and September of last year.  This level provides for significant psychological importance.  Gold is also at 714.0 trading slightly lower than previous close.  $gold formed a doji and streetTRACKS ETF GLD formed double black candlesticks on Thursday and Friday after a gap open over the upper bollinger band.  I can’t help but feel this is technically overbought situation for commodities.

I received a request for a brief analysis on Cameco Corp. Cameco is the world’s largest uranium producer which stems from its controlling ownership of the world’s largest high-grade reserves and low-cost operations. The company operates in Canada and also trades on the Toronto Stock Exchange. The ticker for trading Cameco in America/NYSE is CCJ. You can find many details here.  Coneco operates and generates revenue by operating in 4 segments: Uranium, fuel services, Nuclear energy generation and gold.
Key Points to keep in mind and selected statements from the 6-K:

In short: Watch the respective commodities markets.  They don’t hedge gold yet, but seems they are hedging U3O8 (Uranium).

“Strong results from our uranium business boosted our earnings in the first quarter,” said Jerry Grandey, Cameco’s president and CEO. “Current uranium market prices are increasing our realized prices in the short term and providing the opportunity to lock in long-term contracts at prices higher than at any time in the company’s history.”

In the first quarter of 2006, our net earnings were $117 million, $91 million higher than in 2005, due to improved results in the uranium business, which were driven by a 29% increase in the realized price and higher volumes. Higher earnings in the quarter were also attributable to improved results from the Bruce Power Limited Partnership (BPLP). The higher earnings were partially offset by higher expenses for administration and income taxes. Due to the uneven timing of uranium and conversion deliveries as well as scheduled outages at BPLP, quarterly results are not a good indicator of Cameco’s annual results.

Outlook for Second Quarter 2006

We expect consolidated earnings for the second quarter of 2006 to be considerably lower than those of the first quarter of 2006, reflecting reduced uranium sales volume. In the second quarter, we expect uranium deliveries to be about half of what they were in the first quarter due to timing of customer requirements.

Cameco sells most of its uranium and fuel services in US dollars while most of its uranium and fuel services are produced in Canada. As such, these revenues are denominated mostly in US dollars, while production costs are denominated primarily in Canadian dollars. Here is a chart of the past few years of the foreign exchange activity between the USD and Canadian Dollar (CAD). The company does hedge for currency fluctuations.  You may find more details in the recent May Form 6-K

In 2006, Cameco expects consolidated revenue to grow by about 50% over 2005 due to improved uranium markets and the proportionate consolidation of BPLP revenue. On a consolidated basis, our gross profit margin is projected to improve to 32% from 23% reported in 2005.

It was an unusual first quarter, with uranium deliveries in the first quarter of 2006 more than double the level of the first quarter of 2005. Revenue is driven by deliveries in our uranium and fuel services businesses, and tends to be higher in the fourth quarter. Net earnings do not trend directly with revenue because past results are significantly influenced by results from BPLP.

In the end the chart tells me a lot.  Here is the 10 year, 1 year, and 6month chart. Simply put, I am bullish and would use the moving averages (and exponential) as times to add more shares but I would keep a solid stop.  I’m hoping this breakout of consolidation/ascending triangle will see some nice volume.  One triangle has been broken, reconfirmed and continued upward but the next triangle is also waiting to be properly pierced (with volume) and continue upward.  I like the diversification the business has and I see it prospering in the future as long as commodities remain bullish.

Have you ever been jittery about your positions?  On our journey to be better and better traders we learn by the mistakes we make.  As such I was speaking with a friend of mine known as croc and he explained a philosophy he’s followed and that he passes along.  It’s not difficult to do but in terms of capital preservation and responsibility it will go leaps and bounds to protect our investing/trading capability.
It goes as follows: Once I read, if a position scares you, scale it down until it no longer scares you. Sell 700 of your longs and 8 of your options, this means you lose most likely on your position, but you might sleep better. If your play is correct, you are already in and can add after earnings, if it goes against you, you lose a hand now and the other tomorrow, but otherwise it’s 2 arms you lose.

Well the time has come.  Viropharma reports Thursday morning 9AM EST.  We’ve seen a long consolidation and in my opinion Maribavir is discounted and free.  Plenty of cash available for business development activities and a solid pipeline.  Will I need tramadol? We shall see…

I’ve received a comment regarding the original positions from the stock duel. I’ll do a brief overview of my feelings.

YHOO: It’s been sitting sideways for quite some time on the long term chart. The range is tradeable but these recent island gaps are keeping me unsure of direction. I’m not one to play on hopes for gaps but a series of higher highs and higher lows is nice to see.

SIM: wonderful movement. I will continue to trade it at its range. As I stated in my previous post, i’ll be a seller up here and a buyer at 7.15 area. However if consolidation continues it may be another buy in a few days at this higher price level. Watch the volume for key indication of moves. Use the past as reference. I like using these and this as guidelines.

I will post an opinion on the rest later.  in short: long WLP since 70.0 (i own shares); PAL is a metals play; we know how that works.  look for volume on a white candlestick as a clue to a break from consolidation.  I can see this go up more.  HRAY: bullish but…watch out for a bearish H&S pattern; too early to tell right now though.  MCD: slow mover.  More of an investment instead of a trade.  Bullish wolfewave it comes to 33.1 or lower very soon w/ a target of over 35.  HANS: When will it stop?  I love trading the trend but under pressure the stock may become gappy; careful with those stops.

Many presentations on trading, investing and cash-related activities that I have attended have stressed the idea of not falling in love with a particular security.  I believe this to be bad.  Love is what makes the world go ’round.  Of course, greed and fear are the primary movers of day to day activity but love is what drives us in life.  As a trader today I reissued my vows to Simec.  I believe the primary reason we’re told as a general populous to not fall in love with financial instruments is because most of the time we become greedy and refuse to accept any downside.  We become overweight in our allocation and biased in our reasoning.  Put together this sets the stage for a harsh brush with reality.  However, as I’ve gained experience in trading i’ve let my emotions run wild but confined them into a tiny cell where they wouldn’t affect my reasoning.  This little cell remains an important indicator when I trade.  If i’m feeling ecstatic, so must others.  If i’m feeling red, others must be on fire.  I sold half my position of SIM today.  True love is letting go.  If it comes back then it was meant to be; if not, i’ve got half left to let go when i’m sure it’s finally over.  SIM; you’ve been great, let the good times roll.