Nearly two years ago on our last trip to Negril, Jamaica, we spoke extensively with many of the locals who are extremely poor and always so happy to see tourists that do not stay in the All-Inclusives, rather booking the local hotels and eating in the local restaurants. Our friends there always ask us what we think it will take to help spur the Jamaican economy, particularly for the residents and not just the already rich owners of the super club hotels.
Without hesitation, we told them that once the US legalizes marijuana, the picture for them will change. After the midterm elections, that trend is clear. US now has 4 states with full legalization plus Washington D.C. Yet, besides a few penny stocks, nothing tangible exists for traders to invest in to capitalize on the growing popularity (and inevitability) here to legalize it.
Sure, you can try to get a license to grow-but talk about your red (green) tape! I’ve traded in and out of the Philip Morris (PM) stock several times in the last 2 years, but none of the tobacco companies have announced any developments in the pot business yet. Furthermore, the stores that sell Recreational pot are small businesses, nothing that is publicly traded.
What investors need to wait for: 1. Any tobacco or other huge companies with money for large distribution to make or even hint at turning towards the pot business (warehousing, manufacturing or distributing) 2. A conglomerate of small businesses that will join together cooperatively to form a publicly owned corporation. 3. Any hints from companies that sell and distribute equipment for the purpose of growing pot to emerge. 4. Food store chains that will carry and sell-Whole Foods-your stock went up over 11% Thursday-you game?
We told our Jamaican friends back in February 2013, that full legalization was 2-3 years away. Just in time for the next major election.
S&P 500 (SPY) New highs, lots of hype on the twitter stream about buyers of 215 calls last couple of days-no surprise given the shooting stars been writing about-unless this cracks 200. Subscribers: Positive Pivots in all except QQQs
Russell 2000 (IWM) Still consolidating, a bit sobering yet could also be flagging
Dow (DIA) Hello new highs again
Nasdaq (QQQ) Holding the runaway gap, but needs to runaway soon-for now, consolidating
XLF (Financials) Inside day at the highs-probably waiting for the jobs report
KRE (Regional Banks) 40.43 to clear now
SMH (Semiconductors) 52.68 the 2014 high with 52.00 pivotal, if breaks that a bit of warning.
IYT (Transportation) New highs here too
IBB (Biotechnology) Inside day which means has to clear 296.42 or still vulnerable
XRT (Retail) Money flowed here today after it held the 88.00 pivotal number I told you all about
IYR (Real Estate) If rates continue to firm, this could take a further rest
ITB (US Home Construction) Gave us the close over 24.26 we have been waiting for
GLD (Gold Trust) Pretty sick here but looking at SLV, a gap above 15.00 could get interesting
OIH (Oil Services) Could be trying to form a bottom
XOP (Oil and Gas Exploration) Hasn’t done that much yet, but inside day so worth watching
FCG (First Trust ISE Reserve NatGas) UNG was where it was at
TAN (Guggenheim Solar Energy) Subscribers: Inside day but now, all solars have reported so if this clears 38.08 could be worth jumping back in
TBT (Ultrashort Lehman 20+ Year Treasuries) TLTs if this begins to break further below 117.75, could be fate sealed for rates
UUP (Dollar Bull) Europe, here we Americans come!
Longs: On categories: Gap higher days we go to all categories and choose ones with lowest risk that break the opening range. On weaker days, we look at Category 3, especially if the picks hold S1, previous day lows or a major moving average and have a good risk on the reversal. The difference between Category 1 and 2 is the stock condition-a Condition 1 is strongest stock and more likely to make a parabolic move.
Note: Anything that is on this list is a candidate for a swing trade-(of course market condition is a factor) -use the max risk mentioned along with an opening range stop using fudge factor and time confirms. I suggest you decide on 1 or 2 that have a risk you like and then position size accordingly
Category 1: (Aloha) Positive Phase, Condition 1, 2 days under the FTPs, Risk to Previous Day low, Can buy ½ over FTP and ½ over R1, Target- Day to at least 3 ATRs from entry:
ABBV Had the runaway gap now corrected for 4 days with an inside day. Like ½ over the 62.85 and the rest over R1 63.23 for a mini
PAY Still watching if holds 36.30 the 10 DMA if clears today’s high and R1 for swing
BRCM If holds 40.90 and clears 41.77 looks better for mini to swing
CENX Good comeback but hasn’t closed over R1 since 10/30-now over 28.28 clears R1 with risk to today’s low for a swing
Category 2: (Pipeline) Positive Phase, Condition 2-3, 2 days under the FTPs, Risk to Previous day low, Can buy ½ over FTP and ½ over R1, Target- Day to at least 3 ATRs from entry:
XPO The 10, today’s high and R1 all line up-risk is good to the low of today if goes for swing
Category 3: (Double Up) Positive Phase, Condition 1 through 4, Positive Pivots which means can either buy an opening range breakout or candidate for Opening Range Reversal, with Risk S1 or previous day low, whichever is lower unless noted differently, Target- Day to at least 3 ATRs from entry: (Opening range reversals are good on anything above S1)
TSO Inside day needs to clear R1 73.38 for a miniswing risk
NWL Improved condition and phase. Now, if holds 33.92 and clears 35.00 could see another leg up for a swing
LGF Reported well-if comes in over 32.75 takes out the 10 DMA and risk to the 50 DMA or around 32.00 is good for a swing
Category 4: N/A
Phase Change:
LULU We are long looking for 44, the 200 DMA and beyond if good
DAN Needs to take out 20.84 then the 200 DMA is in its midst. 20.08 good risk for swing
OC Confirmed phase change now can look for an ORR to control risk
GE AN ORR would work better here now
EXPE Long provided it holds the 50 DMA
HPQ Reports 11/25 Like this much better now over 36.40 risk 35.50 area
Shorts:
Category 5: Titanic-Bear Phase, Negative pivots, not oversold, Risk R1 or previous day high. Target: Day to swing
BA confirmed phase change to Bearish-should not clear todays highs 125.32 and the 10 DMA needs to break 124.05
AMZN If cannot clear 298.00 and under 292 looks weak
Category 6: N/A
Best Best wishes for your trading,
Michele Schneider
