Tuesday, March 23, 2010

Sifting through Cramer’s Picks in Natural Gas

I caught Jim Cramer’s show (mad money on CNBC) last week where he talked about Devon Energy (DVN)- Buy!Buy!Buy! - Natural Gas in general http://www.cnbc.com/id/33509810/Cramer_s_Top_10_Natural_Gas_Stocks?slide=2.  It made me want to go to the Mad Money website and see what other Natural Gas stocks Cramer thinks will benefit from rising Natural Gas prices.  Seeking a way to pick the best of the 10 and generate a little yield, while Natural Gas prices hover in the $4 range, I loaded his 10 picks to see what would pop out (XTO, CHK, APC, DVN, UPL, EQT, RRC, HAL, CLNE, FSYS) for Option Yield and Performance Relative to the S&P 500.  I filtered for stocks that have underperformed the S&P 500 (given the decline of Natural Gas prices over the last year.  4 of Cramer’s picks outperformed the S&P 500 over the last 52 Weeks- CLNE, FSYS, HAL, APC).  Then I looked for Option Yield by indentifying the 2nd Out of the Money (OTM) Call in the 3rd Expiration Month (Far Term).  On the landscape below (Left Side), all the Green stocks have an option yield of at least 3.5% until June/July and have underperformed the S&P 500 over the last 52 Weeks.  I look for stocks that have recently underperformed as one of the criteria for initiating a buy write (the market has already given you the cheaper entry point). Option Yield Performance:  Green is higher yield (over 3.5%) and Red is lower yield (under 1.5%) and Tall buildings have higher 52 Week Price Performance Relative to the S&P 500.

Cramer's Picks 

One Month News Sentiment: Green Positive News Sentiment Score, Red Negative and Tall Buildings (Top of the horizon) More Positive Scores, Tall buildings (under the horizon) More Negative Scores.

On a yield/underperformance basis, CHK, UPL and RRC looked like the best of the group.  I decided to add one more indicator (News Sentiment Scores – Above Right) since I found that UPL was suffering from recent bad news (One Month Short Term Sentiment Score) and has yet to uptick (note the plunging red building, worst of the group in a poor environment for Natural Gas in general).  CHK (Chesapeake Energy Corp.) looked to have slightly improving News Sentiment (One Month Short Term News Score) of the Goldilocks Variety, not to hot, not to cold, and would best fit my strategy.  I included a two year price chart for CHK to see what the future might hold with a rise in Natural Gas Prices (CHK made a 5 year high at the top of the Natural Gas market in the early second quarter of 2008 ). While long term potential looks positive, it is nice to have some yield in the short term.

Created in AlphaVision with RavenPack News Sentiment Scores and option data from Hanweck and ACTIV

To use this view, download AlphaVision Professional, then download both views (Far Term OTM2 Call Yield and One Month News Score from our View Library.  Your AlphaVision subscription must include RavenPack data for the News Scores (call us for a free trial).

If you need assistance, just email support@aqumin.com or call 713-781-2121.

For more research on using News Sentiment Reversals for trading go to:  http://ravenpack.com/research/sentimentreversalspaperform.htm

Tuesday, March 16, 2010

Option Volatility Moving with News Sentiment

DNDN no HUD 3 14 09 (3)

Color- Highest Short Term News Sentiment - Dark Green

Sort-  Higher Sentiment Lower Left, Lower Sentiment Upper Right

Height- Taller Buildings have Higher Volatility

Look for: Tall stocks in the lower left hand corner (dark green) having the greatest One Week News Sentiment Score and the highest ATM Far Term Call Implied Volatility.  Shorter stocks in the lower left hand corner have lower volatility.  This View was filtered to  only display stocks with recent (1 week) positive news scores vs. long term (1 month) negative news scores.

Summary:  This View makes it is easy to see if any uptick in Sentiment is combined with high Volatility in option pricing.  A standout is DNDN (see price chart), where the News Sentiment, Stock Price and Volatility have all moved up.  With drug trial news coming, it might be good to take advantage of DNDN's current conditions and take profits now.

Created in AlphaVision with RavenPack News Sentiment Scores and Hanweck Option Data

To use this view, download AlphaVision Professional, then download and open the View from this link:  Hype Landscape.aqv.  Your AlphaVision subscription must include RavenPack  data (call us for a free trial).

If you need assistance, just email support@aqumin.com or call 713-781-2121.

For more research on using News Sentiment Reversals for trading go to:  http://ravenpack.com/research/sentimentreversalspaperform.htm

Tuesday, March 9, 2010

Finding Opportunity in News Sentiment Lows

WAG feb 13th

Color: 1 Month Short Term News Sentiment Score – Green High, Red Low (RavenPack News Sentiment)

Sort: 1 Month Short Term News Sentiment Score – Lower Left High, Upper Right Low

Height: 1 Month Short Term News Sentiment Score – Tall is Low

These views show relative News Sentiment Score Highs (in green) and Lows (in red).  Green Scores in the lower left hand corner of each subgroup are the highest for that group of equities.  Tall Red Scores in the upper right hand side of each subgroup are the absolute lows for the sub group.  The color score is relative to all equities that register a News Sentiment Number.  Very Green is a High (Positive) Sentiment Score and Very Red is low (negative) News Sentiment Score (relative to all scoring equities).

What to look for: Red stocks in the upper right corner of each sub group to identify an underperforming issue on two levels:  1. News Sentiment and 2. price performance.  Both need to be moving down to establish lows in these numbers. The next step is to identify early upticks.  The example here is Walgreens (WAG) on February 13th, 2010 (See 2/13 Landscape).  In a relatively benign News Sentiment climate for the Retail-Drugs Sub Group, WAG stood out with very low 1 Month Moving Average (1 Mo MA) News Sentiment Scores and a stock price which essentially erased the rally of the last 6 months (See WAG Stock Price Chart).  By February 20th the 1 Mo MA News Sentiment Score had improved to -1.6, the first News Sentiment Uptick and first buy signal.  With the current News Sentiment Score -.18, WAG is almost back to Neutral News Sentiment and the stock has bounced of off its lows (See 3/9 Landscape).

To use this view, download AlphaVision Professional, then download and open the One Month News Score View from this link:  One Month News Score.aqv.  Your AlphaVision subscription must include RavenPack  data (call us for a free trial).

If you need assistance, just email support@aqumin.com or call 713-781-2121.

For more research on using News Sentiment Reversals for trading go to:  http://ravenpack.com/research/sentimentreversalspaperform.htm

Wednesday, March 3, 2010

CATCHING A BOUNCE OFF OF THE 30 DAY LOW

30 day bounce  3 3 10 (2)

Color- Stocks closest to their 30 Day Lows in green, farthest from 30 Day Lows in red.

Sort- Stocks closest to their 30 Day Lows in the lower left-hand corner of each Global Industry Classification Standard (GICS) sub group.  Stocks closer to 30 Day Highs are in the upper right.

Height - Two (2) Day Pct Change (All Sessions) is positive and above the horizon, negative below.

Look for Green groups of stocks above the horizon, indicating that they have underperformed the market overall in the last 30 days, but are moving up over the last 2 days.  Green stocks in the lower left hand corners are close to their 30 Day Lows and trading higher on the last 2 days.  Red stocks in the upper right of each group are close to their 30 Day Highs and trading higher on the last 2 days.

These issues are starting to bounce off of their near term (30 Day) lows to catch up with other parts of the market.  Notice how the GICS sub group Electric Utilities is mostly green, with height indicating that they are inching up.

To use this view, download AV for Bloomberg, (you will need to request an activation key for a free trial) then download and open the Net Income Surprise from this link:  30 day Bounce.aqv

If you need assistance, just email support@aqumin.com or call 713-781-2121.