Think Big, Invest Little

Nanotechnology companies are comparable to biotechnology companies; unpredictable, risky, and able to spend billions of dollars with no end result. Don’t get me wrong, these sciences do create breakthroughs that are priceless to advancement in all areas of life, but the odds are usually against them.

You can double your money on a flip of a coin, but the odds are 50%. You can earn 50 times your money on a nanotech, but the odds are 1/20. Why not own all of the nanotechs, and forget about which one makes you the money? That’s exactly what the ETF PowerShares Lux Nanotech (PXN) does. By owning a basket of nanotechs, you can allow more than half of them to flop, and as long as just one makes a breakthrough, odds are you’ll profit with less risk. (Keep in mind the odds from the example were arbitrary)

Here is the list of PowerShares Lux Nanotech’s Top 10 holdings

Although I like PXN and I continue to watch nanotech companies with interest, I refuse to suggest buying either. When investing you can’t lose sight of the bigger picture, and I am adamant that we are too high on the DJIA. Unfortunately, nanotech companies will trade in sympathy with the market.

There are plenty of bulls right now who disagree that the market will take a hit; if you’re in that camp, go straight ahead and buy PXN. As for me, I’ll stick with my gut and wait until the “all clear”.

With the end of this months trading one day away, I am in the bear camp, believing that the strength in the past few days was mostly due to window dressing. Keep in mind skepticism is almost never a bad thing.

Here are some random articles on nanotech companies that I found of interest. Fool1 Fool2 Yahoo Forbes

Splish Splash

I’m decidedly negative on the market, but I always have a positive bias when looking for stocks. After seeing an odd upgrade on a company I’ve been tracking for a few years, I took a closer look. Buy Aqua America (WTR) (around 21 if possible) if you want a good solid long term stock.

Why buy the largest water utilities company? UBS initiated WTR at a buy on September 22^nd, making five consecutive analysts buy signals since the stock dropped to its low this May.

Here is a map from the UN website showing projections for future clean water.
When the two most populated countries in the world have a hard time finding clean water, you have an opportunity to profit.

But wait, Aqua America is only in the U.S. so how can they supply India? This is true, and it gives me more reason to suggest the highest market cap water company. WTR will have enough capital to be able to grow into other countries when the time comes.

This all seems so far in the future, but to an investor’s retirement account 15-20 years is just right. Again I am suggesting this stock as a long term buy.

Lets take a look at the charts:

• Daily-The stock price remains at 21.5 while the MACD has risen near the 0 line. A trend with the Slow STO is telling the stock to bounce at levels below 20.
  

• Weekly- WTR has a 200 week MA at 18.5. This support level is too strong for WTR to fall below.

So what’s the drawback? The problem with most water companies are that they look overvalued. WTR has a PEG ratio over 2. Ouch. It seems investors have already come to the conclusion that water is a good investment. If you think that WTR needs to pull back before you buy, believe me when I say that this baby will bounce on its 200Week MA (if it actually drops to that level).

Lazy Stocks

Can you smell the recession? Maybe a few more rally days, maybe not, either way things are turning sour and there is no denying it. A few traders are calling Amaranth the canary in the coal mine. (Amaranth is the hedge fund which announced this week that they lost investors 6 billion dollars)

Today I'll pick a company that has nowhere to go but down. It's been awhile since my last pick, so I've done some research on a nice short. On monday short sell La-Z-Boy Inc. (LZB).

Not only have they missed earnings estimates for a second quarter, they've gotten downgraded by a few analysts lately, and the charts look bad.

• The stock has crossed below both of its DMA lines
• MACD is crossing downward
• RSI and Slow STO has room to move downward

Simple pick here folks, furniture is not going to suddenly start selling with americans on tighter and tighter budgets.

Good luck on Monday

Quickie

Here we are, at that point where the double top is at its pinnacle. The high for the Dow in May was 11,675 and the equally crucial candlestick high was 11,642. Let the Dow hit these highs and let the reversal begin.

I’m sorry that today has little to do with the market, but I thought I would put out a quick F.Y.I. as I have been bogged down with homework, I have sold a couple of my positions, NBR & STP.

Both have excellent opportunities and I would still be in them if I could, but I needed to free some cash to purchase a tablet PC for school and business. I looked critically for a few weeks and finally picked the T4210 Tablet from Fujitsu.

I dropped NBR and STP because they were my longer term picks and I plan on staying more liquid. I still own NTDOY, DXD, AMGN, and SIRI.

Don't Take My Word For It

With the talking heads beginning their countdown of the DJIA nearing record highs, I thought I would elaborate on my conviction of a drop in the market.

Here is a chart of the personal savings rate as recorded by the U.S. Department of Commerce. Granted, we have had a negative savings rate since mid-2005, but one has to wonder how long this can continue without affecting the market.
http://bea.gov/briefrm/saving.htm

Here is a chart showing the rise of non-mortgage household debt. Does it bother anybody else that the rise is parabolic?
St.LouisFed.Org

Here is the outlook of consumer spending (in the context of the housing market) courtesy of Comstock Partners Inc.
Comstockfunds.com

There is also some interesting talk about the VIX and its relatively recent (2 year) correlation with the DJIA. I’ve created a chart to show the inverse relationship. If this association continues, the DJIA is getting ready for a drop.

If you don’t plan on buying SDS or DXD to hedge against a possible drop, I would at least pull some consumer discretionary stocks off the table.

Have a great week.

Hello opportunity, my name is Chris

As I wrote on my August 16th post referring to the DJIA , "We could be setting ourselves up for a double top." Feel free to look at this next picture and tell me what you see...

We couldn't have asked for a better setup,

• A double top has formed
• The MACD has a decidedly negative correlation
• Volume is drying up as the stock keeps going higher
  

Using my three rules for trading from the post “Keep It Simple Stupid”

1. We have a great reason for buying the DXD; technicals show amazing potential, and fundamentals show a slowing economy with a flat yield curve.
2. I see no conflicts that aren’t already priced in.
3. Timeframe is short to medium term.

Finally oil can easily become the monkey wrench. Give us any kind of oil disruption: hurricanes, pipeline breaks, international disputes, etc. and we will see the DJIA get a kick in the teeth.

I plan on selling half of my position in NBR, and pushing two-thirds of my margin into DXD Tomorrow.

*Edit* Today I did just that, selling some NBR and picking up some DXD.

I love Gooooold!

Gold is a commodity that everybody in the investment world seems to have an opinion about. Today I am giving out two excellent gold stocks. For those of you who like gold as an investment, buy Liberty Star Gold Corp (LBTS) and/or buy Glencairn Gold Corporation (GLE).

Both companies are small, risky, and full of opportunity. These two are smaller than any of my previous recommendations; they are micro-cap stocks. I will not be posting them onto the “picks section" (Yahoo quotes), as I am simply posting these two for the aggressive investor.

The time horizon for these two can be anywhere from short-term to long-term.

Here are the Charts for LBTS and GLE:

Time to Cover

Halliburton (HAL) got the thrashing it deserved today, and saved my reader picks from a bad day. Time to cover, as this may be a double bottom, and it's daily MACD is not coorelating with its weekly anymore. If you shorted this stock where I suggested it about a month ago, you would have made a cool 11%.

Now that we've consolidated these past few days, I'm eagerly waiting for one last push out of the bulls, to 11,600 on the Dow Jones Industrail Average. If we keep going sideways or down, the pattern that has developed for the past four months may become useless. Let's hope for a bounce in the next day or two.

Money Where My Mouth Is

Today I took the initiative to buy NTDOY. I suggested this stock on August 9th when it was at 23 and I'm buying now around 25. The stock could come back to 24, but waiting for it to come down a point didn't help in the last round, so why try now? The stock recently hit 26.5, and now it's back to a level where I feel safe getting in.

Again I will reiterate to Buy NTDOY, it has the future of gaming in it's pocket.

My positions are getting kicked around a bit, but if you positioned youself with enough DXD, as I keep suggesting, you should be doing just fine.
(Full disclosure: I bought shares of NTDOY on 09/07/06)

*edit* I found this article on SIRI that should tempt even the non-believers.

Getting Ready for Next Week

Ready to add to my DXD position. I will double down on my DXD position today IF the DJIA breaks even, or better yet, goes positive. I believe the DJIA will make a correction soon enough that it seems pointless for me to wait and possibly miss out on the first day of cliff diving. The anniversary of September 11 is coming up and I wouldn't be surprised if we get a market shocking event. I hope I am wrong, but I wouldn't bet on it.

Always frustrating when a company takes a 13% gain the day you decide to buy it. As mentioned yesterday, I was doing my due diligence on LBTS. I take a break to grab a bite around two O'’clock, get back, and see it has hopped above .85! I'’ll have to take a rain check.

Here'’s an update on my current positions:
NBR
STP
SIRI
DXD
AMGN

I recently sold UNH and NSRGY this week.

Tuesday E-mails

Welcome back to the party, Hope you all had a great Labor Day.

An analysis on Boeing Co. (BA) was asked for. Either I keep getting some very unpredictable charts, or this market is getting troubling, my guess is a little bit of both. BA is showing the same symptoms of VLO. A consistent bounce when the weekly RSI touches 50, yet a terrible MACD correlation. I have no need to research further to tell you stay away, or if you trade options, make a straddle. I have an inclination that the stock will bounce but I'm not buying on a whim, nor should you.

Readers should know that if you bought Comstock Homebuilding Cos. Inc. (CHCI) on my recommendation I would suggest taking the money. Although I gave a long term view, recent facts on homebuilders are surfacing that tell me to change my mind. You would have a 35% profit if you bought after earnings or you would have broke even if you bought before.

Finally there is a small stock that I have my eyes on called Liberty Star Gold Corp. (LBTS) I still have some work to do on this one, but I just thought I'd throw it out there. It's uranium projects look promising.

Now that Labor Day is over, get ready for better volume.