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Erick Stern
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Erick Stern-Loinaz is a professional civil engineer who owns and manages a general contractor firm. He and his partner Vilena Comas founded and oversee an investment partnership in the Dominican Republic. He is a former teacher for both the architecture and computer science departments at the... More
My company:
Stern & Comas
My blog:
Erick Stern Trading Ideas
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  • A brief chat-based stage analysis

    As the markets climbed from September, the Index Options put/call ratio kept going down until mid December when a shift in direction took place. A divergence between the market direction and the put/call ratio started around December 21. Are more professionals hedging against a market decline?

     

     Since the last month the Dollar is stuck in a trendless trading range. From the Dec 1 close (1206.07) to the Jan 12 close (1285.96), the SP500 has a 6.6% gain, the bullish Dollar index fund (UUP) is stuck in a 3% channel.

     

    A well defined divergence exists between the New Highs – New Lows and the markets.

     

    According to data found at moneychimp.com, the SP500 January average is up a 0.95% for the last 50 years since 1950 to 2009. For 36 years January had a positive return and in 24 years it went down. It means a 72% of the last 50 years January increased.

     Since the close at 1257.64 on December 31 to the close at 1285.96 on Jan 12 2011, the SP500 have returned a 2.25%, way above the last 50 years monthly average for January.

     According to data I read in Stan Weinstein’s “Secrets for profiting in bulls and bear markets”, a study by Arthur A. Merrill for 80 years since 1897 to 1983 shows that January was an up month 64% of those years.

     This January has lived its expectative but it may be approaching a blow-off stage. Be very careful with new long positions made from now on and remember your Gerald Appel’s.




    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Additional disclosure: Out of positions but considering going short.
    Tags: UUP
    Jan 13 7:05 AM | Link | Comment!
  • Rex Energy Corp
    On August 31, Rex Energy Corporation (REXX) announced the following:

    “Rex Energy will sell and transfer interests in its Marcellus Shale assets located in the Commonwealth of Pennsylvania, in a transaction valued at approximately $140.4 million. Under the transaction, Sumitomo will pay approximately $88.4 million in cash upon closing and an additional $52.0 million in the form of a drilling carry. “

    REXX also presented us with the announcement that its present value of future cash flows before income taxes and asset retirement obligations (PV-10) grew approximately 87% to $357.2 million,.from the December 31, 2009, estimated of $190.5 million.

    The market liked the transaction and announcement to the tune of a 10.2% increase in the stock price; also the volume that day was six times REXX average daily volume.

    REXX share price kept climbing closing at 13.01 last Friday, which is an additional 15% rise since the August 31 close. In 29 trading days REXX climbed from 10.26 to 13.01, a 27% increase. That makes us wonder if REXX price appreciation is done for now, or if the high volume and price climbing is just the ignition to future gains.

    REXX on balance volume climbed above the 50 day ma after August 31.


    Since July 19 the SP500 has gained an 8.77%, in the same period energy stocks represented by the XLE Etf climbed 12.62% making energy one of the leading sectors of the market. REXX appreciated 25% since July 19.

    What is not to like about REXX ?

    The Nasdaq website reports almost 6 million REXX short shares, with a 11 days to cover ratio and a 18% of the float shorted, Big short sellers are very refined, informed and researched people, could they be wrong?

    From Feb 2 to Aug 30 REXX short interest went from 3,018,696 to 4,385,470, an increase of more than 1,300,000 shares. In the same lapse the average price of REXX declined from 14 to 10 giving the short sellers great benefits.

    But an interesting situation is developing since August 30, REXX short interest continued increasing to a Nasdaq-reported 5,985,076 short interest at Sep 15. At the same time the average price for REXX had gone from 10.90 to 12.70, more than 1 million short sales are losing money as of last Friday.



    We will soon know the September 30 short interest, REXX is set to report on November 3, we have until then to speculate.


    Tags: XLE, REXX
    Oct 10 6:12 PM | Link | Comment!
  • Cellcom Israel
    On late May 2010, MSCI a leading provider of investment tools for investors globally, including asset managers, banks, hedge funds and pension funds, announced the reclassification of its MSCI Israel Index to the MSCI World Index, coming from the Emerging Markets Index.

    With that classification is expected that Israel Stocks attract more institutional investor since the MSCI International Equity Indices are the most widely used global benchmarks in the industry and a number of funds and ETF include MSCI indexes in their investing.

    The process at MSCI to reclassify the Israel Stocks started in July 2008, with MSCI analyzing and verifying that Israel complied with the following among other criteria:

    The country Gross national Income per capita is 25% above the World Bank high income threshold for three consecutive years.
    High securities liquidity of 20% or more than the calculated annualized traded value ratio.
    Market accessibility criteria rated very high in the following:
    Openness to foreign ownership
    Ease of capital inflows / outflows
    Efficiency of the operational framework
    Stability of institutional framework




    It is no surprise then that Israel stocks are outperforming the market as you can see in this graph showing the relative strength of the Israel market represented by the iShares MSCI Israel Cap Invest Mkt Index (EIS), measured against the benchmark S&P 500.



    I started to look for dual traded Israelis Stocks and decided on Cellcom Israel Ltd. (CEL), a matured more or less monopoly with a 10% plus dividend yield.

    Cellcom shows strong relative strength against the EIS Benchmark, meaning that EIS is set to outperform the markets and CEL is in line to do better than the EIS index.




    CEL is not far from its ideal entry point around 28, target is at 32 for a quick 10% gain, consider closing your position below 27.75 for a 5% loss, that is a 2:1 risk / reward ratio.








    Disclosure: long cel
    Tags: CEL, EIS
    Sep 26 11:52 AM | Link | Comment!
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