New Year Stock Picks

Happy New Year to all traders and investors !!!

Using a strong fundamental formula I have listed 25 stocks that may be good movers for 2010. As always please ensure that you carry out further investigation. I have provided the web address of all the companies.

The stockslisted are companies that are registered in the UK.

As always make sure that you look at the spreads when buying the penny stocks as the spreads can limit your profiatblity. As always its all about the price at which you buy the investment that ultimately will lead to profitability.

I will be doing some live analysis of the stocks listed below. You can follow me on YouTube and also Twitter

You Tube: Search for FXDojiStar

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Click here:
Stocks%20Shortlist%20for%202010.xml

Is it a good time for Equities?

Is there room for further gains?

I have been following Bloomberg & CNN since the last post. The views of the various analysts/commentators seem to vary from a bear outlook, bull outlook to minor pull back then a continuation of the bull run. So who do we believe as the private investor? In truth I listen to all of them then look at the markets and do my own analysis, since its your money so you can manage it better than them.

If we look at the global economy we can see that governments are intervening extensively to reduce the possibility of returning to recession and prevent a depression. USA, Europe and Asia are all using fiscal stimulus packages to aid recovery.

If we look at the government figures it points to better numbers indicating that the Fiscal Stimulus is working, however what it does not show is the cost of such extensive action. The main drawbacks being the huge levels of borrowing/debt that will take at least 20 to 30 years to clear and secondly there is no guarantee that it has actually worked.

From a technical analyst point of view it can be observed that the global markets have been in a retracement bull run, which can mean a return to a bear market that may well go past previous lows of March 2009. We can all hope that this is not the case however we need to be prepared to take advantage of any sustained down move.

If you have a SIPP and are looking to safeguard your pension it may be more useful to look at ETF (Exchange Traded Funds), Staples (food, beverages, tobacco etc), Gold and Precious Metals and Cash. Obviously it is essential that you investigate the best options for you and if needed ask a Financial Advisor.

FTSE100

The market is currently at an exhaustion level which means there is a higher probability of a retracement in the current uptrend to the 4920 or 4650 levels.

The Bull target levels are 5335 & 5770. These levels are key down swing Fibonacci retracement levels. The market may test these levels number of times if the resistance holds, there is a good possibility that the market may start heading south again.

If you have any long positions on the FTSE then it may be a good time to lock in some profits.


Dow Jones DJ30

The Dow has been in a bull run since March 2009. However it is at exhaustion level at 9900. There is a good probability of a pull-back to the 9100 level. If the market pulls back to this level and finds support it may resume its uptrend and start moving to the 11,000 level.

10350 and 11,000 levels are key Fibonacci retracement levels and resistance levels of the major down swing. If the market is unable to close above the 11,000 level and start falling it may start heading for the previous lows of March.

As with the FTSE If you have long positions on equities or index, it may be prudent to lock in some profits as we may well experience some pull back.


US Stocks

Wait until DJ30 has pulled back and the Santa Claus rally starts (usually 3rd week of October).

These are technically good stocks that may be worth investigating.

• CA Inc, symbol CA, priced around ($22.17)
• D R Horton, symbol DHI, priced around ($11.80)
• Good Year, symbol GT, priced around ($16.50)
• Texas Instruments, symbol TXN, priced around ($16.50)

Bull or Bear Market?

Where are we?

Since my last post so much movement has taken place in the markets. Sentiment has moved from very bearish to cautiously optimistic. Fundamental indicators are showing increases in house prices, higher levels of mortgage approvals, better than expected figures from manufacturing.

Analysts are predicting that we have reached the worst of recession and will be heading for slow growth during 2010.

Since March the FTSE100 has moved from 3500 to 4950 area an astonishing increase of over 1500. Such a large move under a weak economy raises several questions, how strong is this move? and how long is it going to last?

There are some key areas that can cause major return to a renewed down move, unemployment and if interest rates are going to go up in the near future.

If Bank Of England increase interest rates the economy can suffer as its recovering from the recession, failing to raise the interest rates can make the economy grow too quickly. The minutes of the Bank Of England Monterey Policy Committee when its published usually gives details of what the members were thinking and an indication of when the interest rates may go up.

Best Time to Buy Stocks?

Historically September and the first three weeks of October are generally very weak periods for the markets. So its worth waiting for a pull-back of the stocks that you are interested in before entering . During 2008 the Santa Clause rally did not occur but 2009 may be better.


FTSE100

The FTSE has been in an uptrend since March. The uptrend is a retracement in a down-swing. The low of 17/7/2008 of 5071 is a key level resistance for the Bulls. The FTSE has a potential bull move of around 200 points. Once it reaches the 5071 look for a possible pull-back to 4690, 4475. If the market holds at these levels then the market is likely to head towards the 5350 then 5655. The encouraging sign for the Bulls is the market has moved above the 200sma and 50sma indicating the market has legs to go further north.

UK Stocks

The stocks listed below have potential to give reasonable returns in medium to long term. Fundamentally above average and technically indicating that there may be a pull-back before heading north

• YULE Catto & Co PLC(YULC) suggested buy price around 120p
• International Power PLC (IPR) suggested buy 260p to 280p
  
• Thorntons (THT) buy around 80p
• Fenner PLC Industrial Engineering buy around 100p
• Carillion PLC (CLLN) buy around 280p
• BATM Advanced Communication Technology Hardware & Equipment (BVC) buy around 40p

Where is the economy heading?

The Budget

The budget should have been a forward thinking, bold and must have provided a roadmap of how the UK will survive the recession and come out at the other end. Unfortunately there was very little substance and little or no effort undertaken to help small and medium size businesses.

The key points that stick in my mind are:

• £2000 to be provided to scrap cars that are over 10 years old. This was meant to help the car industry. Alistair Darlings advisorss must have failed to use the WEB,as a simple search would have shown cars that can be purchased through brokers at much larger discount than £2000 the government is willing to stamp up. The main reason this scheme worked in Germany is due to the way in which cars are purchased. In Germany people pay for cars in full without the need to get finance. As finance is the main bottleneck the £2000 gesture is ill conceived.

• 50% Tax on the 2% high income earners. High earners are vitel for the economy. The entrepreneurs of the country are essential since they provide employment to many people and more importantly are aspirational figures that encourage people to aim higher. This is again a very short sighted decision to divert attention from the crazy levels of borrowing the government have to undertake.

• £600billion borrowing. This is the most serious aspect of the governments failings. The figure is so large its hard to comprehend. This simply means that the UK will be debt for at least 20 to 30 years and future generations will have to pay for this. Unfortunately the media did not highlight the debt crisis instead concentrated on the 50% tax policy for high earners.

UK GDP -1.9

The GDP has confirmed the rate at which the UK economy has shrunk. The only positive news is that the rate of decline has been slower than analysts expected. This does not necessarily mean that the UK will reach the bottom by the end of 2009 as indicated by the government but the decline may not be as harsh as had previously been thought.

Mortgage Approvals

Mortgage approvals figures released indicated that there was a slight increase in March 2009. In reality this is a blip in a downtrend. Leading economists have pridicted that house prices may start rising in 2011/2012 and may only reach figures reached in 2007 by 2015.


Major Indexes

If one were to look at the FTSE100 or Dow Jones Industrial Average it will show that the markets have risen around 30% from the low. This is great news for investors. However the main problem is that the increase has been reached on lower volume, meaning that the indexes have risen due to smaller investors entering the markets. A true recovery can only be confirmed once the volume increase accordingly.


Where is the FTSE100 & DJ30 Heading?




FTSE100 has crossed over the Mid Term Trend Line and is making its way to the Long Term Trend Line. It has come across a lot of resistance at the 200 day SMA(simple moving average). In order for the Bulls to remain in charge there is more likely to be a retracement to the 4125 area then the bulls are likely to attempt to break the 200 SMA. If the market breaks the 200SMA then market will go for the Bull Targets as shown on the chart above. The FTSE is entering a very critical period, as failure to break through the 200 SMA can make the market fall to 2785 level.

If the bulls do break and sustain a rally above the 200 SMA, the market is likely to see institutional investors coming back into the equity market and confirm a possible end to the bear run that had been experienced for almost 2 years.

Dow Jones Industrial Average (DJ30)



The DJ30 has been in a short term uptrend, similar to the FTSE100. From a low of around 6500 it has risen to 8500. The bulls have taken the market through the mid term trend line and through the 50 day SMA. The bulls have also taken out Target 1. The market is likely to retrace encountering resistance on the medium term trend line. For the bulls to remain in control they have to break through the 200 SMA and take out the Target Levels on the graph. Failure to take out the 200 day SMA can result in the market going to the March lows and possibly head towards the 5000 level.

Historically May through to October the markets tend to fall. The degree of the fall can be the key to a full recovery in the markets.


Other useful blogs worth reading


Those of you who are novice traders and are interested in financial markets should take time to view Michael Thompson blog. He works for Worden Brothers and has great insight into using and getting the best from Telechart 2007 charting software. CLICK here for Michael's Blog

£325bn Insurance of Toxic Assets or £650k?

During February 2009 RBS have reported loss of £25bn. The biggest loss of any organisation in corporate history in the UK.

As mentioned in previous posts the debt the government has burdened each and every individual is truly astronomical. Not only have they provided taxpayers funds to banks without filly carrying out due diligence instead they are continuing to do so without thoroughly understanding where it has gone wrong.

Injection of £13bn has been provided to RBS in February and the UK taxpayer is insuring the Toxic Assets to sum of £325bn. Alistair Darling highlighted that this is a great deal over the long term
and the taxpayer is likely to gain when RBS becomes profitable. Unfortunately there was no indication of time frame for such an event to take place.

The NEWS has overlooked the real issue and focused on Sir Fred Goodwin s, £650,000 annual pension.

Sir Goodwin's pension is clearly excessive however it helps the government to deflect the public on the true issue of the £325bn toxic assets that the UK taxpayer is acting as insurers for. If £325bn is broken down it equates to £30,000 to every single, man, women and child. It is almost 40% of GDP.

The UK taxpayer are not aware of what the toxic assets are and most importantly the true risk around these assets.


Markets


Dow Jones

Dow Jones Industrial Average is still on a very strong down trend. The stimulus package
has had little affect in bringing confidence into the markets.

The DJ30 first target for the Bears is 6800 and second target is 5015. Before proceeding to theses lows there may be a bullish rally towards the 7900 to 9400 mark after which the down trend is likely to resume and heads towards the 5000 level.





US Stocks

The following stocks have been selected using Elliot Wave Analysis. The stocks have a higher probability , not guarantee, of making gains during the next quarter.

Symbol	Name	Close
ALZ	ALABAMA PWR SR NT	23.98
ARST	Arc Sight, Inc.	8.99
BFZ	BLACKROCK CA MUN INC	11.61
BIIB	Biogen Idec Inc	47.69
DRI	DARDEN RESTAURANTS	26.34
IDCC	InterDigital, Inc.	29.25
RHT	RED HAT INC	13.95
TDG	TRANSDIGM GRP INC	34.86
TIVO	TiVo Inc.	7.12
TSO	TESORO CORP	15.37
VAZ	DEL INV ARIZ MUNI FD	10.06
WEN	WENDYS/ARBY'S GRP	4.89
WYE	WYETH	41.14

FTSE 100


The FTSE100 is in a down trend and may break out of the lows of the range between 4630 and 3800. The first target for the bears is 3395 and the longer term target is 2778. In order to reach the targets the strong support area around the 3800 mark needs to be broken and retested to ensure that short positions can be taken on the FTSE100 index. If the support holds then there will be a move up to the 4600 level.





UK Stocks

The following stocks are fundamentally strong under the current economic climate and may be a good long term investment.

Symbol	Name	Close
GBO	Globo PLC	7.75p
TIK	Tikit Group PLC	118p
CRYO	Cryo-Save Group N.V	32.5p
NARS	National Accident Repair Services PLC	107.5p

Please ensure that the you undertake further research of the above mentioned stock before proceeding to invest.

Where to look during Recession

Global Recession

National Statistics office (http://www.statistics.gov.uk/default.asp) confirmed last week that UK economy is in recession. This is little comfort to many small businesses and households that have felt the pinch for the past 6 months.


The immediate question on everyone's mind at the moment is how long will this recession last and when will we be able to spot "green shoots"?

Depending on who you ask it is ranging from 1 to 5 years. No one has a crystal ball to predict the severity of the recession, 5 years may seem excessive, however it is a true reflection of the time taken for the housing market to recover after previous recessions.


The stock markets will start showing signs of recovery before the housing market. Simple things to look out for are higher Consumer Confidence in the USA, fewer housing repossession (foreclosures) and most importantly stability of the banks and increased lending/liquidity.


By following the GDP (Gross Domestic Product) of the leading economies, USA, UK, Japan, Germany, China etc. the long term private investors can keep abreast of the global economic conditions.


Nationalisation

RBS will not be the only organisation that the government will have to nationalise during 2009. They may proceed to nationalise manufacturing companies in order to keep unemployment at bay and and to ensure money flow into the economy.


The main setback for private investors who have shares in nationalised companies is the lack of dividends and the heavy decline in share price in the last 12 months. There are many investors and SIPP owners who did not sell in time resulting in areas of there portfolio that is almost worthless for the immediate future.


RBS traded at 800p in May 2007 and now its at around 15p that's around 53 times less than the peak. This highlights the importance of diversification in order to reduce the risk to your portfolio during draw downs.


Resilient Sectors During Recessions


The majority of sectors will contract during the economic downturn however consumer staples and utilities are normally considered to be defensive play and should buck the trend.


Companies that are in tobacco, pharmaceuticals, electricity, gas and food sectors can be added to your portfolio to reduce exposure to the downside.


Stocks in these sectors are unlikely to increase in value such as Google, Dell etc. however they will pay regular dividends and are most likely to survive the contraction in the economic cycle.


Tobacco (NMX3780)

Components

• British American Tobacco (BATS)
• Imperial Tobacco (IMT)

Pharmaceuticals & Biotechnology (NMX4570)

Components

• Hikma Pharmaceuticals (HIK)
• Glaxo Smith Kline (GSK)
• Shire (SHP)
• Aztrazeneca (AZN)

Electricity (NMX7530)

Components

• Scotish & Southern Energy (SSE)
• DRAX Group (DRX)
• BritishEnergy (BGY)
• International Power (IPR)

Gas Water & Multi utilities (NMX7570)

Components

• National Grid (NG)
• Severn Trent (SVT)
• Centrica (CNA)
• Pennon Group (PNN)
• Nortumbria Water (NWG)
• United Utilities Group (UU)

Oil & Gas (NMX0530)

Components

• BG Group (BG)
• British Petroleum (BP)
• Heritage Oil (HOIL)
• Melrose Resources (MRS)
• Premier Oil (PMO)
• Royal Dutch Shell-B (RDSB)
• Salamander Energy (SMDR)
• Tullow Oil (TLW)

Food & Drug Retailers (NMX5330)

Components

• Greggs (GRG)
• Morrisons Supermarket (MRM)
• Sainsbury (SBRY)
• Tesco (TSCO)

FTSE100


The FTSE has been in a large range from November 2008 until now. Key Resistance areas, marked as green lines have to be broken. Target 4, around the 5640 area will signal a bull market. Currently the bears are in charge and the market has a higher probability of going south towards the 2500 level.

Fundamental announcements that affect the economy will be the catalyst to determine the final push for the bulls or bears.

If you are trading the FTSE, take care and ensure that your money management rules are not violated.




Virtual Portfolio


If you are a novice investor its worth familiarising yourself with Yahoo Finance (http://uk.finance.yahoo.com/) and set-up a virtual portfolio.

You need to have a Yahoo Mail Account, which takes a few minutes to set-up then you simply goto Yahoo Finance and select My Portfolio.

Market View - What's happening to the economy in 2009?


As we start the new year the only NEWS that is broadcast seems to be either confirmation of the global economic crisis and the continuing trouble in the middle east. Unfortunately the same NEWS is reported many times and this can cause severe pessimism within the country as a whole. You can either start looking at the glass half full or half empty. I for one always look at things half full but am prepared for the worst.

As somebody ones said that "you make your money when you buy and not when you sell"

This is probably one of the best times for the private investors to start taking advantage of the markets in the UK & abroad.


Stocks are priced very competitively and the dividends paid can equate to a lot more than any interest paid by the cash strapped banks. Additionally there are three and five year bonds that are considered safer investment vehicle for the private investor.



Interest Rates Lowered to 1.5%


Last week Bank of England lowered interest rates to 1.5%, the lowest level in the banks history.


The purpose is to encourage the banks to lend money to business and consumers. As written previously this will have little or no affect. The dangerous reality is that banks do not have the money to lend through way of deposits.


When the government bailed out the banks they simply helped to clear the banks debts, and the banks have had not time to gain sufficient cash reserves to create the liquidity that the country needs.


The simplest way to improve the money flow is for the tax payers money to be loaned through banks or directly by government to businesses and consumers. Unfortunately the government may have to go further into debt in order to kick start the economy.


Gordon Brown has announced that there will be increased funds made available for businesses to start employing people. During a minor correction or slowdown this would be an effective strategy. The current economic climate requires liquidity so business can buy & sell there services to customers and this measure is not addressing this.



UK Recession


At the end of January, the GDP figure will be announced for the last quarter and is likely to confirm that the UK is in Recession.


Government expects the UK economy to contract to -2.6% (http://www.hm-treasury.gov.uk/d/200812forcomp.pdf). This figure is worse than the recession of 1980/1981.


In 1980/1981 the banks were able to function, they had deposits and the money markets were not leveraged as they are now. A figure of -2.6 can seem optimistic and it is an unfortunate reality that a negative GDP of -4.0% may be reached.



FOREX


Forex is the largest instrument ($2.5-$3.0 trillion) that is traded and without doubt the most liquid. In this weeks posting we will look at the GBP/USD and USD/JPY. The USD has performed strongly against the GBP from middle of 2008 and well against the JPY from August.


GBP/USD


The GBP is heading further down against the USD. 1st Target will be the lows of December 2008, at 1.4371. The second target will be 1.3250 area. If the market were to turnaround and then the target for the bulls will be 1.6673 and 1.8640+.


I will be looking to short the GBP against the USD.





USD/JPY


The USD is very strong against the JPY. The targets are the lows of December 2008, 87.06 followed by a longer term target of 72.55 and an intermediate target of 80.60.


I will be looking to short the JPY against the USD.




Indexes


FTSE100
No change from last posting.



DJ30 & SP500
No change from last posting.