Tuesday, April 28, 2009
NTRS capital raise today
We will look back next week and realize that the capital raise by NTRS today was brilliant! They are using the proceeds to pay back the TARP that they did not need in the first place. The reason why it was a brilliant move is they now move out of underneath the gubment, which will allow them to be a share taker going forward as they don't have to put up with a bunch of bunk (can pay people what they want, can run their business and take risks how they see fit and they can hire people whereever in the world they want). Secondly since they are not part of the stress test they did not have a disclosure hurdle that needed to be made before this capital raise, like BAC or C would have since they currently know the results of the stress test. Next week it will come out that the banks need to raise capital and there will be a lot of supply on the market. You tell me which hedge fund or private equity fund will step up and buy a crappy bank on the bank's terms. Didn't work too well for TPG with Wamu last year and that was on TPG's terms. Net I continue expect this to be a negative catalyst for the entire market. Solwold would love to talk to you on your shorts of JPM, BIDU and AMZN. BIDU and AMZN have high multiples fo shizzle, but investors are paying up for growth right now so how do you know when that party will stop (BIDU's fundamentals last night actually made me less negative on them given that I thought they would have a few quarter hickey from having to take advertisers off of their site).
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Good thoughts on NTRS. I'll add them to my long list for action after the expected pullback.
ReplyDeleteIt would seem that we won't have to wait until next week for all of the stress test data. It has been leaked that as many as 6 will need to raise capital with BAC and C in the worst shape. It was no surprise BAC got clobbered yesterday.
As far as JPM, BIDU and AMZN it is purely a play on their charts. The fundamentals might be excellent, but as you know stocks do not go straight up in a bear market.
Let's start with BIDU.
http://2.bp.blogspot.com/_goypolxEFd4/SfPz-y8xA5I/AAAAAAAAAmQ/5qgL8nAymkg/s1600-h/Bidu+daily.png
As you can see on the chart, BIDU has traced out 5 clear waves off the bottom. The momentum indicators also show decreasing momentum. In EWT after tracing out a 5 wave pattern, a 3 wave correction will take place. Most corrections take back anywhere from 38.2% to 100% of the previous 5 wave gains. In this case since the move up was off a bottom, one could expect closer to 50%-62.8%. However if the fundies are strong, 38.2% could be all. So I would recommend a short position over $215. Covering half near the 38.2% retrace (176) and the rest near the 50% (162). If a clear 3 wave structure is seen prior to 162 than cover all remaining positions.
AMZN has the same idea behind that play.
http://www.screencast.com/users/J-So/folders/Default/media/438389fe-be7d-412e-9578-add96863eecb
As you can see on the weekly chart the stock almost got back 100% off what it lost since its high last summer. It had no significant retrace. The indicators on the bottom of the screen indicate that AMZN has run out of steam. It needs to retrace a significant portion of its move in order to reload its juice for another run up. I would short over $80 and cover half at the 38.2% retrace (67) and the other half at the 50% (61).
JPM is also due for a pullback.
http://www.screencast.com/users/J-So/folders/Default/media/43bac852-8803-406f-b61e-5fd0c0ac35f7
As you can see JPM has been up against significant resistance for three weeks. The technicals are also rolling over suggesting a pullback is in order. Because this stock is a financial it could pull back further as it is more volatile. I would short here and cover half near $25, its 50% retrace and let the other half ride to the 68.2% mark (22.50).
I took a quick look at NTRS just now and liked what I saw.
NTRS Daily
http://www.screencast.com/users/J-So/folders/Default/media/200bc60a-3aa6-4fc6-ace3-3a48dbcd9ca9
NTRS Weekly
http://www.screencast.com/users/J-So/folders/Default/media/463b5a0f-a2ab-4976-bb52-4d22a42925fa
The charts show that NTRS has not had the steep recovery that the others I listed above did. Hence the momentum indicators are not in overbought territory. Also there is a strong line of support that NTRS is just below. It is quite possible that it bounces off this support and touches the top (near $75). The line of support should also give us a place to put stop orders. If the price drops beneath the support by more than a few cents, cut your losses as the prices could drop significantly.
Stains. Excellent insights from a technical perspective. I'll continue to put in ideas I have and would love to get your feedback.
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