Trade Setups: Stick With The Momentum

Referencing the weekly homework and stock radar, I am highlighting a few of the charts below for potential trades in undervalued stocks.

After the first 90 minutes of action Tuesday morning, the enthusiasm was quickly sucked out of the market for the rest of the day. We gapped-up on the “Greece is saved” continuing theme only for volume to fall off a cliff and the action become very boring to watch/trade.

The bears had a prime opportunity to catch the bulls off-guard with the gap-up. They had an opportunity to try to punish them. All they were able to do was bring us back to even on the day. With that being said, the momentum is still to the upside, so we must be cautious of a pullback, but still stick with the trend that continues to work.

Oil stocks have been outperforming lately as oil prices continue to rise. Even the most speculative of oil stocks are catching on fire. These can be very profitable and enticing to the individual investor, but you must know how to trade them correctly to keep risk minimal. Holding large speculative positions overnight could turn very profitable with the right amount of luck. However, they can turn very bearish in the blink of an eye teaching you a hard lesson on how to manage portfolio risk. As long as oil stocks continue to work, I will stay highly leveraged to the sector while keeping a tight leash on any positions in case we finally receive the long-overdue pullback. What goes up must come down, but that doesn't mean it will come down just yet.

The momentum may still be to the upside, but you may want to think twice about recklessly buying just any stock that seems to be hot. The pullback will come when we least expect it and I believe that for many, it is no longer expected.

—

KEG)">Key Energy Services (KEG)

Yahoo Finance Profile:

Key Energy Services, Inc. operates as an onshore rig-based well servicing contractor in the United States and internationally. The company offers rig-based services, including the maintenance, workover, and recompletion of existing oil and gas wells; completion of newly-drilled wells; and plugging and abandonment of wells at the end of their lives, as well as specialty drilling services to oil and natural gas producers. It also provides fluid management services, such as vacuum truck services, fluid transportation services, and disposal services for operators, whose wells produce saltwater or other non-hydrocarbon fluids; and equipment trucks that are used to move large equipment from one well site to the next, as well as supplies frac tanks, which are used for temporary storage of fluids associated with fluid hauling operations. In addition, the company operates a fleet of hot oilers for pumping heated fluids that are used to clear soluble restrictions in a well bore; and offers coiled tubing services, such as logging and perforating conveyance, packer and plug milling, specialized drilling, frac placement, and pre-and post-frac well preparation, as well as early and late cycle high pressure live well intervention services. Further, it provides fishing services that involve recovering lost or stuck equipment in the wellbore utilizing an array of fishing tools; rental equipment comprising drill pipe, production tubulars, pressure-control equipment, power swivels, foam air units, and handling tools comprising Hydra-Walk pipe-handling units and services; specialty pumping services; oilfield service equipment controls, data acquisition, and digital information flow services; and drilling, project management, consulting, and reservoir engineering services. The company was formerly known as Key Energy Group, Inc. and changed its name to Key Energy Services, Inc. in December 1998. Key Energy Services, Inc. was founded in 1977 and is based in Houston, Texas.

Notes On Yahoo Finance Fundamentals:

KEG has a forward P/E of only 8, but has significant debt-to-cash of $773 million debt to only $35 million in cash. However, they are currently turning a profit and are expected to increase the yearly EPS by 79% this year. As of January 31, the short percentage of the float is just under 10% with a short ratio of over 3. That is a fair amount of short activity. Of the 16 analysts, the mean price target is $19.25, about an 18% increase from the current stock price with the most recent analyst price target upgrade on Tuesday to $19. I anticipate favorable odds of more price upgrades in the near future.

Annotated Chart and Trade Details:

GLUU)">GLU Mobile (GLUU)

Yahoo Finance Profile:

Glu Mobile Inc. engages in the design, marketing, and sale of casual and traditional mobile games worldwide. The company creates games and related applications based on its own original brands and intellectual property, as well as third-party licensed brands. Its original games based on its own intellectual property include Beat It!, Bonsai Blast, Brain Genius, Glyder, Gun Bros, Hero Project, Jump O Clock, Magic Life, Stranded, Super K.O. Boxing, Toyshop Adventures, and Zombie Isle. The companys games based on licensed intellectual property include Build-a-lot, Call of Duty, Deer Hunter, Diner Dash, DJ Hero, Guitar Hero, Family Feud, Family Guy, Lord of the Rings, Paperboy, The Price Is Right, Transformers, Wedding Dash, Who Wants to Be a Millionaire?, and World Series of Poker. It develops and publishes games for the users of smart phones and tablet devices who purchase those games through direct-to-consumer digital storefronts, as well as for the users of feature phones served by wireless carriers and other distributors. The company was formerly known as Sorrent, Inc. and changed its name to Glu Mobile Inc. in May 2005. Glu Mobile Inc. was incorporated in 2001 and is headquartered in San Francisco, California.

Notes On Yahoo Finance Fundamentals:

GLUU has a forward P/E of 20 with strong cash of $32 million to zero debt. They have consistently beat EPS expectations by 70-80% over the past four earnings reports, implying the possibility of future earnings will continue to be impressive when compared to analyst expectations. As of January 31, the short percentage of the float is 16% with a short ratio of over 5, so they have plenty of shorts in this battle. Of the five analysts, the mean price target is $6.20, over a 50% increase from the current price.

Annotated Chart and Trade Details:

You can follow my real-time trades and market commentary alongside the 36,000 plus market players who follow me on SeekingAlpha (Shameless promotion). As always, do your own homework to see if you agree. Good luck out there.

Mike

At the time of publication, Kudrna had no positions in mentioned stocks but may initiate positions within 72 hours. Positions may change at any time.

Get Our Top Trade Ideas Delivered Daily - 65% Off Now

Get Our Top Trade Ideas Delivered Daily - 65% Off Now

Trade Setups: Stick With The Momentum

Similar Posts:

Comments