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1. BEAR MARKET RALLIES
2. 1998 UPDATE #3/4 STOCK SELECTION
3. TRADING IDEAS
4. LETTERS
Perfect trading last week with our 8700 target reached. Once the summer starts, we will issue our final (?) INVESTOR WARNINGS. Our asset allocation model is NOW 50% CASH. Fall survivors may regretfully note that once again there were too few lifeboats for this Titanic market.
Next Week: Market Pivot 8800.
Bear market rallies like this past Friday are often sharp and quick. (Yes, I believe we are in the EARLY stages of a bear market). TRADING ALERT 29A covered at DJIA 8700 and proposed a fresh hedge of long Motorola, short Compaq. We expect Wednesday/Thursday to be a classic option expiration flip - most likely reverse day trading. Possibly as soon as Friday the 19th, but more likely the Summer Solstice the week after, we begin recommending selected September Puts and increased positional trading vs hedging.
Key Dates: June 17, 18
DJIA: S1 8700 S2 8540 S3 8400 R1 8888 R2 8960 R3 9150
2. Having my Moon in Libra, my Stock Selection is both:
TOP DOWN: Country/Currency, bourse/sector, individual stock and
BOTTOM UP: with very strong indications.
I like to begin with one or more of the following 3 criteria:
A. NEAR 52 WEEK LOW (a preference for fallen angels)
B. CASH RICH, not stock rich especially from Fall 1998 on
C. GOOD HOROSCOPE OR STOCK IN UPCOMING COSMIC SECTOR THEMES
1) Saturn/Neptune
2) Eclipses 1998/1999/2000
3) Jupiter/Saturn 2000
FAVORITE STRATEGY HEDGING:
BUYING STRONG STOCKS/MARKETS and SELLING WEAK STOCKS/MARKETS
See my May UIT for suggested summer stock purchases. This was issued for our May seminar; target only 10% -12% within 12 months and of course, out performing benchmark indexes.
As to the Netherlands, our favorite 2000 country, the top 5 stocks are dominated by Shell. The Dutch talk about the index with and without Shell. I prefer without SHELL this year.
Unilever: UL - Good "Defensive" stock and a better value than PG - PE 13 vs 32.
ABNAmro: AAN - We now prefer over our old favorite ING Bank.
Philips - A turnaround story and will out perform in the tough electronics field.
Reed Elsevier Less positive indications here, wait until focus shift next year.
We are slowly accumulating construction sector stocks and selected Reits (more of the latter in 1999). Watch Catapillar (CAT), Kubota (KUB) or International Hi-Tech Industries (IHITF). And what REIT has more class than my namesake Weingarten Realty (WRI)?
TECHNOLOGY
BIG LOSERS: AOL, AMAZON: AMZ and HEWLETT-PACKARD: HWP.
Good Companies, but fully valued: ORACLE: ORCL, IBM, and SUN:SUNW.
INTEL: INTC - accumulate this summer or 58-62.
COMPAQ: CPQ: Short till 25, then reverse 18-22 and long term buy.
Motorola: MOT - VERY positive out performer and not because of Siemens (but new management focus AND horoscope). Another Novell story.
Lucent: LU - Example of Roth rule 1. Great company - silly price; Market neutral.
3. TRADING IDEAS: EWH, INTEL, MO, YEN
We are expecting a good rally in Hong Kong in July (Buy HK/Sell USA). Hong Kong Webb: EWH ideally 7500 OB. However, we do forecast a HK$ devaluation at the same time (Remember Greece). So unless you are hedged with the currency, wait for the currency, then buy, if still at an attractive price. Target 8500-9000.
Intel reached our first P1 sell target of 65 where we suggested covering shorts. Remember, shortly, we plan to reverse and begin BUYING Intel. We are not in a rush, however. While the time is almost right, our P2 target is 58, P3: 55 1/2.
Motorola hit our P1 target for buying at 52 and P2 at 50. So naturally we were delighted for the bargain price of $49 (MOTGJ 2 1/8) on Friday,
Yen--144 entry was better than expected. However, its dangerous and we are closely stopping this one. Nonetheless, it begins to make Japan Inc (Sony, AMJ, EWJ, JEQ and KUB) interesting and high on our watch list.
4. First of all, well done on CPQ. Unfortunately, I didn't have time to participate. :( When do you expect DJIA to drop to 6500? Your warning for March/April period did not happened. However, do you think the record of 92xx (can't remember the exact figure) is the year top, and we are head down currently? I understand your prediction cannot be 100% accurate. However, I am still amazed with most of your brilliant prediction. :)
HW: I believe the 9200 area will hold and unlike most, I am starting to look to September shorts. The question for me is whether we see 9000 before 8000 before July 20. BTW: Jury still out on whether April was the top for US and European markets.
Are you serious about your latest forecast for IHI? According to my screen the price is only $1.00. The stock has done this many times over the past six months without going any higher, usually only falling back to the eighties and nineties. This stock wont give any real confirmation of a break out until it breaks through $1.70 on increased volume. I didn't dump all my shares but I still have a lot of reservations about the long term picture of this company? It is one thing to have great product, but it is a completely different thing to become a successful and profitable company.
HW: Yes I am serious and most buy alerts on IHI returned more than 50% short term profit to traders. I personally have NOT sold my stock, and continue to accumulate each time as many shares as my wife will let me buy.
Q: Do you think the Hong Kong market becomes attractive now? Any suggestion for the time to enter? In my opinion, I won't be surprised if Heng Seng Index tumble as low as 7000. With the current level, some stocks become attractive. However, I think it's still early to buy. I would rather wait for say 2 more weeks for the index approaches 7000 before I place my order. However, I am pessimistic on Real Estate companies. Stock like Hutchison Wham is certain a good choice.
A: Yes at least wait for June 26-28 and under 7700 if possible. Of course property stocks will remain sore losers regardless.
Q: What is the first trade for your new corporate astrology client Inspiration Mining (V. IMQ) ?
A: May 09, 1996 11:18 am Vancouver B.C. BTW: Despite a few road bumps, on first glance, it look quite good.
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Author: INVESTING BY THE STARS McGraw Hill, TRADING BY THE STARS (99)
May 15, 1998 Sixth Annual Astrology & Stock Market Conference NYC