Tuesday, December 20, 2005

Quick note

I'm going to take it easy for the rest of the year and not trade. I remember from previous Christmases that the volume is very spotty and the trading is very choppy (one day up, next day down). Based on the action we have seen lately, I wouldn't be surprised if this pattern repeats itself.

If you plan on trading, good luck to you. Otherwise, merry Christmas and have a wonderful holiday!

Thursday, December 15, 2005

Stock picks

Because I think the markets are on a verge of a breakout to the upside, I did a stock scan to find stocks that have been performing well. Since I am an options trader, part of my stock scanning criteria was that the stock had to have a large market cap, a high share price and a high beta.

Here are the results:

1. MRVL: Price today: 58.82, Target: 66

2. AAPL: Price today: 72.18, Target: 82

3. YHOO: Price today: 41.75, Target: 45

4. UBB: Price today: 61.03, Target: 76

5. EBAY: Price today: 46.02, Target: 53

6. ISRG: Price today: 115.12, Target: 145

Please note that all the targets are short term targets (1 month approx). Also, this is mainly just an experiment, so I am very interested to see how well the targets are met.

Monday, December 12, 2005

Sector watch

Nasdaq



I really don't know whether the nasdaq will go up or down. Looking at the charts, the Nasdaq just broke out of a perfect contracting triangle pattern. If it fulfills this pattern, the Nasdaq will go past 3000 at least. But the fundamentals of the American economy is so bad (mainly due to the large amounts of debt that they borrow), that it is very hard for me to be converted into a bull. Because of this, I think I will stick to my niche (which are commodity stocks) to play this impending rise.

Gold



The attention gold is getting is amazing. Six months ago, gold was almost invisible. Now, everybody is following gold, and I bet that not many of these people know the true fundamental reasons as to why gold is rising. Because of this, I am going to call a short term top right here. However, after a 6 month consolidation, I expect gold to continue marching upwards to 800 in maybe 3 years time.

Crude oil



Crude oil just hit a major bottom trendline. Given the fact that crude oil is still in short supply, and that the charts are not suffering any technical damange at all, I think crude oil will now resume its advance to 80 in the near future. By the way, oil stocks are still extremely cheap; the reason why they are so lowly priced is because all the "analysts" expect oil to go back to 40. When these "analysts" realize they are wrong, oil stocks will lead crude oil into new all time highs.

Copper



Copper has been on a bit of a parabolic rise. Back in August, I predicted that copper would top at $2/pound. Currently, it is at that level. Although it is very hard to determine where the exact top is, I think the end is near given the almost vertical ascent it has enjoyed recently. However, after the consolidation that will follow (lasting 8 months?), I do think that copper will go higher.

Thursday, December 08, 2005

Bought Cameco (CCO/CCJ) again



Shown above is a 3 year chart of Cameco. Noticed that during the last 8 months, Cameco hit the bottom trendline, formed a nice strong base and just recently broke out of that base. Eight months ago, the price of uranium was $20/pound. Today, it is over $35/pound and counting.

I really think Cameco will hit the top trendline in 6 to 12 months, giving it a price target of 100 CAD, or 86 USD. Because of this, I have repurchased a call option on Cameco which expires in January, because any weakness is an opportunity to buy from now on.

About the general markets, I maintain the stance that we will be in a trading range for a few weeks. I really do not see the markets plunging without some fight from the bulls.

Wednesday, December 07, 2005

Thoughts

Currently, I do not have any trading positions. I sold my Cameco call position for a gain of 144%. I will probably buy Cameco again at some point, but on a short term basis, the stock appears overbought and in need of a rest. By the way, this trade has allowed me to withdraw enough money to make all the money in my brokerage accounts free. This feels really good because it had been my goal since the beginning of the year.

The markets are locked in a sideways trading pattern for the moment. Although I have a bearish bias on the markets, I do not feel comfortable owning any positions. The reason is because the seasonality is too strong to go short, and my bearish views prevent me from going long.

Also, I would like to thank The Kirk Report for linking my blog today. It was fun to watch my blog's traffic jump from an average of 30 unique visitors to over 300. Thanks Charles!

Monday, December 05, 2005

My 3 favorite stocks

Here are my three favorite stocks for the next decade. The reason why I like them is because I strongly believe that we are in a 2 decade commodities bull market. Right now, even though commodity stocks have risen a lot, they are still very cheap (P/E ratios less than 10), meaning the public does not appreciate them. Before this bull market ends, I believe that commodity stocks will be driven to sky high levels, much like the internet stocks of 2000.

Favorite stock # 1: Cameco (TSX: CCO, NYSE: CCJ)



Cameco is an uranium stock. Currently, the demand for uranium exceeds supply by 100%. The demand is expected to increase further as countries from all over the world are opening new nuclear power plants. Although new uranium mines will open in the coming years, the increased production is expected to fall short of demand. What this means is that uranium prices will continue to go up. Since Cameco is the only large cap uranium company in the world, the demand for its shares will remain high as instituition managers will pour money into it.

Disclosure: I bought CCO for my parents at 22 CDN split adjusted. I currently hold call options on this stock.

Favorite stock # 2: Canadian Oil Sands (TSX: COS.UN)



The Canadian oil sands hold the second largest reserves of crude oil in the world, next to Saudi Arabia. As oil runs out in the middle east (Kuwait's oil fields are already running dry), Canadian Oil Sands will literally fuel the world. Since they only have a 10 B CDN market cap today (which is really small), their upside potential is tremendous. The only risk regarding COS.UN is that the cost of extracting oil from the sands is high. But the combined prospects of high energy prices plus improved technology will make it feasible for extraction of the oil to take place. Besides, COS.UN pays a 3.5% dividend, while reinvesting a lot of its cash flow into increasing production.

Disclosure: I bought COS.UN for my parents when it was trading at 110 CDN.


Favorite stock # 3: Fording Coal (TSX: FDG.UN, NYSE: FDG)



Fording coal produces met coal, which is used to create steel. With the booming economies of China and India, and the future booming of the economies from Africa, steel will become a very expensive commodity. Since met coal is finite, and since FDG.UN produces one of the highest quality met coals in the world, the price of met coal will continue to soar. What this means is that FDG.UN will continue to make more money and raise its dividend, which already stands at 15% today.

Disclosure: I bought FDG.UN for my parents at 38 CDN, and I bought it for myself at 45 CDN.