Canadian Traders' Stock Picks

Top Stock Picks for the TSX and TSX Venture

Archived Traders' Notes from October 26, 2008 to December 7, 2008

	December 15 - January 10, 2009, It's time to enjoy the holiday season.

	December 7, Weekend Stock/ETF Update for Members 12:35 PM EDT
	The TSX, 8117 ( chart ) lost 12.44% or the week. The low of the week, 7802 was the sell off Friday morning. Oil and energy stocks continue to weigh on the market but did not correlate to a 25% drop in crude for the week. Banks and Insurance companies are showing positive technicals indicating a short term trend higher. West Texas oil ( chart ) closed the week at $40.81, down 25% for the week. A near term support level dating back to 2000-2004 at $40 is in place. At this point we do not see a further drop based on the technicals alone. If oil were to bottom at this point, we could see a rally in oil and energy off the bottom ? If we do overshoot below $40, strong support exists at $25. In the short term, it is more probable $40 is the near term support. The HorizonsBeta Crude Bear HOD $50, ( chart ) could have just put in a major top. For HOD, at the top of the chart is a "shooting star" candlestick pattern which could forecast a reversal. Diversified trading We suggest you trade in several sectors. A 20% position in one sector will keep you out of trouble should it not work out as planned. If you do own Suncor, try holding another non-oil sector play. It does not matter what you have in your portfolio today. Modify your trading and "stop doing the same old thing". If you have followed stop-loss rules you would be in fairly good shape in this bear market. It is time to either start using rules or stop trading period. Suncor , S, $21.86 ( chart ) is at the low of a trading range between $30 and $18.80. Last week we suggested a move above $30-31.50 could be a reversal signal. As the move higher did not occur and oil dropped 25% on the week, the trade could be to buy and place a stop-loss at $19.50. If oil bounces off a long term $40 support level, the near term target could be $30 or a 37% gain. If Suncor drops, the downside would be $19.50 or 10.7% loss. A trader should have some risk/reward rules to stay in this market. As mentioned last week, discipline and stop-loss rules are needed. Horizon BetaPro Financials HFU, $5.70 ( chart ) up 5.17% Friday. HFU is now in sideways bottoming motion with support at $5.22-5.29. The trade could be to enter at $5.30 to $5.50 and place a suggested stop at $5.20. $7 would be the first near term target. Horizon BetaPro NYMEX Crude Oil ETF, HOU , $2.85 ( chart ). Are we near the bottom for crude ? If you are bullish on the chance for a rebound in crude, HOD could have bottomed at $2.50 down from $48.51. This almost sounds like Nortel in the tech wreck of 2001. The ETF has 2X leverage and lost 43% last week. The volumes are off the chart and could signal a reversal. A similar chart is the USO $34.25 , ( chart ) with a spike in volume and candlestick "hammer" low of $34.08. Play HOU with a suggested stop-loss at $2.60. Before entering the trade, you should have a ballpark exit price. $7 ? OPEC has indicated they will pull 2 million barrels of crude off the market. OPEC will meet December 17th.
	November 30, Weekend Stock/ETF Update for Members 11:00 AM EDT
	Trader Discipline Please use stop-losses as some of our new members need to become better traders. A stop-loss does not need to be programmed into a trading platform, just write the number down on a piece of paper in a traders log. If the trade closes below your stop, sell the next day at the best price you can. To become a better trader, you need to use strict discipline in this market. It is not the stock/ETF you are in competition with, it is top traders who seek fast money and your losses are their gains. The Canadian Banks made a big move Friday. Insurance companies moved up with the financials. Will this last ? CIBC up 12% to 49.88 ( chart ) is nearing the 20 day moving average. The move Friday was a small break-out from the $45 area. If the S&P500 were to rally next week, some follow-up in buying could result. Volume is needed to continue this climb. The most optimistic short term target is $54-55 with a US rally starting Monday ? If we see no rally next week, more selling pressure and consolidation is expected. Great West Lifeco $28 ( Chart ) up 33% for the week. The $28 range is the old resistance point. We review this fast 33% move in terms of technicals. Fridays' move of 21% was on high volumes. Can this last ? Unless we have a follow-up surge this next week, the pop could retrace and fall back 10%. Stock/ETF Picks Horizons BetaPro Gold Bull HGU $9.44 ( chart ) gained 21.6% for the week million shares or record volume. We have reached last weeks' upside targets $9.50-10.00 and raise these targets to $12.50. If the Fed drops rates in December, the USD could be under pressure. A new suggested stop-loss is 8-8.25. Goldcorp, G, $35, has gained 12% from last week and met our short term target. A new stop-loss between $29.50-30 is suggested. Short term, if G can move higher than $36 ( the 200 day moving average ) we could see higher targets. Suncor , S, $28.60 ( chart ) has moved up from a triple bottom. A move above $30-31.50 could be a reversal signal. Wait for a buy signal ( volume uptrend ) and place a stop-loss under the the move near $27.50 assuming we are trading at $30-31.50.
	November 23, Weekend Update 10:55 AM EDT
	The TSX 8155 ( chart ) was down 9.94% or the week. Volumes were above average on the downside move. The Canadian banks have finally broken down this week. As a whole, the technicals on the big banks are very weak breaking down below technical support. Further selling pressure on the banks is expected short term. The TSX has closed below technical support at 8530. What's next ? Expect either a fast bounce or the next leg down. The past 6 weeks were a consolidation period ranging from 10,500 to 9000. The interdependency with the US Market could stop the fall. As the TSX mirrors the S&P 500 most of the time, a rally in the US could stop-short the fall in the TSX. If this were the case, the TSX in free fall to the 5678 support ( 2002 ) may be reduced by a global rally ? Proshares Ultra Short China FXP FTSE/Xinhua China ( chart ), $64.50, down 30% for the week. As economies around the globe are heading into a slow down. Can we learn anything from our view of China. Near term support is at $58-59. This technical support is still holding which is positive on a global scale. If China were to dramatically slow down, demand for raw materials would further push down commodities. Capitulation or a downward plunge driven on fear from the unknown could be the bottom. We have not seen this fear. The average volumes for the TSX are approximately 1.2 billion shares/week. This past week was the 3rd largest volume on record for 2008 at 1.7 billion. The bottom could be coming, and would need to be 2.0-3 billion shares trading hands with a big spike down and reversal. Horizon BetaPro TSX 60 Bear HXD, $36.65 closed up 17.36% on the week. Next week - A close over $38-39 would be a new break-out for HXD. Keep a close watch for a reversal. Use stop-loss points if you are entering this trade. The final market capitulation discussed above may rocket HXD into the $45-$60 range ? Gold stocks have moved higher Friday, one of the best performing sectors on the TSX. Horizons BetaPro Gold Bull HGU $7.76 ( chart ) jumped 50% Friday on 11.9 million shares or record volume. The move above $7.50 was a local breakout above a possible base. Possible upside targets $9.50-10.00. A suggested stop-loss is 7-7.25. The alternative view could be a trading range between $8-3.90. If we were in a trading range, the drop back in the gold stocks would occur in the next 2 weeks. Goldcorp, G, $31.04, a triple top breakout from a trading range ? We could have a short term price target of $34-36. Watch for more follow through buying next week. A stop-loss between $26-26.50 is suggested.
	November 15, Weekend Update 5:45 PM EDT
	The TSX 9,055 ( chart ) was down 5.6% or the week. Volumes were above average on the downside move. For the TSX, technical support is at 8530. The low of the week came in at 8572 and was a mirror image of the S&P500's movements. Similar to the US Market, Thursday's rally was a bounce off technical support. Unlike the US market, the TSX could drop a substantial distance to technical support if a new wave down started. The level of 5678 from 2002's lows would put the TSX down an eye opening -37%. Could this happen ? The US Market is nearing the 2002 lows and is taking on world leadership in the market's direction. If the TSX can hold the level of 8500 for another few weeks, a grid higher could be in the cards. Oil, gold, and the financials will need to move upward for a bottom to form. For oil to return to the fear of shortages, world demand would need to pick up fast with speculators joining the frenzy. This sounds to good to be true. Horizon BetaPro TSX 60 Bear HXD, $31.22 closed up 11.26% on the week. For next week, if the key support for the S&P500 holds, we suggest taking some money of the short side of the market. Or (2) the market crashes below support and it's time to hold on again.
	November 8, Weekend Update 9:55 PM EDT
	The TSX 9,596 ( chart ) down 1.71% or the week. Volumes were below average on the upside moves and suggest we still have a move lower ahead. You could stay in cash if you are still unsure of what direction this market is headed. The commodities continue to weaken across world markets. Demand from China is slowing, and world oil may not rebound anytime soon. The US Dollar Index 85.92 ( chart ) has been in a steady climb for weeks. Short term, the current pattern looks like some consolidation is taking place. The current symmetrical triangle shape would be bullish for the USD if a break-out to above 87-88 were to occur. With any gains in the $USD, West Texas WTIC $61.04 (chart ) could break below current support. West Texas broke above $70 early in the week. As the selling increased on world markets Wednesday and Thursday, oil closed the week on technical support. If we do not see a rebound soon, WTIC could break below the $60 level. Bearish TSX momentum Horizon BetaPro TSX 60 Bear HXD, $28.06 up 2.71% on the week. Volumes on Thursday November 6 were high as the TSX sold off. Friday the volumes were 50% average on the -2.2% downside move. Volumes and price are key to the direction. Increase your stop-loss to $26.50-27. Defensive Stock Pick of the Week Metro Inc. MRU $31.67 ( chart ) up 4.35% on the week. The move up from the lows of March 2008 has been a slow grid higher. This is the only company on the TSX which has resulted in a bullish stock scan. A near term target of $34 could be reached if the $32.50 resistance is broken. Metro is a leader in Food and Pharmacy. Watch for increased volumes on any move above $32.50 A suggested stop-loss could be set $30.75-$31.
	November 2, Weekend Update 11:45 AM EDT
	The TSX 9,762 ( chart ) gained 5.04% or the week. Volumes were below average near the end of the week. In the last 4 weeks, the TSX has made lower lows. The index has rallied last week to close above the 20 day moving average of 9620. On the upside, a 10,500 target would be optimistic short term. A re-test of the 8500 area is most likely heading into the Mid-December 2008 time frame. As with our US outlook, we provide two cases, a TSX rally or resumed selling. West Texas WTIC (chart ) gained 5.7% for the week to close at $67.81 USD. Upper resistance is near $70 and support at $61.30. A period of consolidation could last for weeks. On longer term charts, $50-$55 could be the level of support for 2009. Short term, if a global stock market rally were to materialize, oil could move above $70 with a potential target of $80. Gold $718.20 ( chart ), lost 1.6% for the week. Short term, gold will need to break-out above $775 to reverse direction. Longer term charts have gold support between $650-675 from early 2007. Research in Motion, RIM $61.02 (chart), is one of the technology leaders on the TSX. For the week, RIM gained 4.5% in choppy trading. At this point, a near term target is $70. On the more cautious side, longer term support is near $50. Natural Gas NYMX, $7.05 ( graph ) has re-tested a low of $6.51 and $6.54 in the past month. The drop in natural gas has slowed and a positive signal would be a break above the 50 day moving average of $7.43. November 6 is the US Natural gas report at 10:35 ET. TSX Bear Market Rally, case 1 ishares TSX 60 index ETF, XIU $14.91 (chart ) gained 5.8% for the week. Volume was 116 million shares or approximately 2X average. Last week we suggested a rally was due. On the chance this is near the end of a bear rally, increase your stop-loss to the $14.25 - $14.50 range. If world markets do rally, $16 is the near term target. Horizon Betapro Bull Oil and Gas, HEU, ( chart ), $7.18 gained 26.1% for the week. A global rally could push the oil prices higher to a potential target of $80. A HEU break-out above $7.90-$8 on high volume would be a reversal signal for a short term target of $8.60. Bearish TSX momentum, case 2 If the TSX were to move lower in a continued sell-off, watch Horizon BetaPro TSX 60 Bear HXD, $27.32. The technicals for the TSX to retest the 8500 area are in place before mid-December. A re-test of these lows would put HXD near $37-$38 for a near term target. A 37% increase.
	October 26, Weekend Update 11:45 AM EDT
	The TSX 9,294 ( chart ) ended down 2.81% or the week. Volumes were above average with 1.4 billion shares traded. Last week we suggested the market was near a rally point. Monday kicked the week off with a surge of nearly 7%. The follow-through did not happen and the remainder of the week declined. Friday morning marked the lowest point of the year at 8633. Friday's close could have marked a turning point for October ? The sharp sell-off was met with buyers moving in and a strong close. West Texas dropped 11.6% for the week to close at $64.15 USD (chart ). The drop from $147 to $62 is a record decline of $85 in under 4 months. Technical support levels continue to fail; indicating world oil demand for 2009 is factoring in a major recession. At some point, a technical bounce will occur. The CRB commodity index 256, ( chart ) is down 9.26% for the week. Technical support near 292 failed and the next support is near 240. If 240 fails, 181 or the 1999, and 2001 lows could be re-visited. The speed of this sharp decline has not been witnessed for 30+ years. In the last 4 months, the CRB index has fallen 46% from a high of 474. The index is trading well below the 30 week moving average in a sharp sell-off. Similar declines to lesser extent have occurred in 1980-1982, 1985-1986, 1992, 1998-1999, 2002. Why the magnitude of the sharp sell-off ? Another charting location for the CRB index, bigcharts ( link ), use symbol us:crb, can graph back to 1957. The TSX is heavily weighted to commodities and does correlate to the CRB index. Last week we commented on the ETF XIU $14.09 (chart ). We see no change to a buy strategy for this ETF. If XIU dropped to below $13, wait for another bottom formation to form.
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