Weekend Update - Strategy for Next Week

The game plan this week is rather simple, go back to RF basics. The plan will go back to keeping high cash levels and buy cash rich firms, on scale. I don’t want to be short commercial real estate anymore, only a select few will it work. The short squeeze that went down in CRE on Friday was something I have never seen before and I got caught in the middle. My overall portfolio was in the green but I could have DRILLED FRIDAY if I would’ve stayed away from the Leveraged ETFs. I still own FAZ and some SRS and I wouldn’t be surprised to see both of them to print $2 this week but for some reason, I just don’t care. I might buy calls on the URE or FAS to hege myself. In addition, a big meeting is Wednesday to reinstate the uptick rule (and it will be passed).

Now let me say something on these ETFs, particularly the FAZ. FAZ is technically a ETF but it’s really not in my view. FAZ is a market sentiment indicator in my personal opinion, similar to the VIX. When the market is doing badly, the FAZ explodes, and of course vice versa. However, timing is really the key because I think we are due for a pullback. The VIX is rather interesting right now. It’s below $40 and if that holds, we can see another round of buying very soon. Some VIX future traders say the trade is manipulated and the VIX futures show we are going back to 6800 but I don’t know about that. If you are a Jim Cramer lover (I’m not) he said Friday on the Street.com that the market will pullback 50% and recommends staying on the sidelines. Q1 Earnings come this week and that will tell a lot. The ones I am watching are: Tues – AA, Weds – FDO, and Thurs – JOSB. I took a position in FDO because I think their earnings will beat estimates because they will thrive in this type of environment. $0.60 is the EPS estimate, about 35% growth from a year ago, however, I think they can drill it with the economic slowdown. Hedge funds have been trying to short this and DLTR since 20% ago and just can’t take them down. No lie, I have heard $70 price targets for DLTR, lol. If they miss, it will be ugly because the bear short raids will invade this bad boy aggressively. From a chart standpoint, the stock doesn’t look great but the fundamentals are there and they are hiring for jobs, plus this is the only pullback I have seen in the stock because I have wanted to buy it for a while now. Here is a link to research some analyst views on the FDO (http://finance.yahoo.com/news/Analysts-bullish-on-Family-apf-14830861.html) . Lastly, I am contemplating JOSB. As dumb as it sounds, people are probably buying suits now because they are going on job interviews. JOSB had a 40%+ short interest but that has been reduced because the shorts have been covering, from $19 in early March to about $30 now. The chart on this stock looks incredible, however, I currently have no position.

I am hoping for a JAVA bid as well. I think they can get bought at $9.50-$11. They have about a $1 in net cash per share, so IBM may go $10+ but the problem will be pushing it through antitrust committees. I will be out by then, just doing a trade and boom, I am out. If IBM walks away, the stock is going to $5. I bought some April puts as protection, just in case the deal falls through.

Lastly, I will bring back a Stock Under $10 for tomorrow, my third. The first pick was, TTWO was mentioned and is up 35-40% since then. TIE was the second pick mentioned and is up 25-30%. I will introduce a third tomorrow and hopefully the streak can continue!