Liam McMahons Stock Newsletter

Sponsored by Wright Time Capital Group

Volume 1 Issue 3 January 19, 2014

WRIGHT TIME CAPITAL GROUP January 19, 2014 Authored by: Liam McMahon

Liam McMahons Stock Newsletter

Sponsored by Wright Time Capital Group

Introduction
Welcome to my stock newsletter. For those of you that dont know me, my name is Liam McMahon and I am a strategist at GlobalFxClub.com, a subsidiary of Wright Time Capital Group. While my work over at GlobalFxClub.com is mostly dedicated to forex, I have been trading stocks since 2008 and though I share a lot of my stock setups on twitter (@Duke0777), Ive decided to formalize the process in an effort to provide more in-depth fundamental and technical analysis. I will be focusing primarily on US equities, though I will also discuss some foreign indexes, especially the major European markets and the Japanese Nikkei. The goal of this newsletter is to provide in-depth analysis and point out both longer and shorter term trading and investing opportunities in the US stock market. I will be rating stocks as buy, hold, or sell and I will provide possible targets for the setups that I see. I will also be providing time frames to consider on all the stocks I analyze. The newsletter will focus on the clearest opportunities out there, not necessarily the most popular stocks. If I dont see a clean setup on Apple, I wont be talking about Apple, regardless of how many people love talking about it. I will be releasing the newsletter twice a week, on the Sunday before the trading week starts and then on Wednesday morning before the US session begins. Thanks for joining me on this exciting new venture; I look forward to communicating with you throughout the coming weeks, months and years. You can contact me on twitter (@Duke0777) or at LMcMahon@wrightinv.com

Liam McMahons Stock Newsletter | 1/19/2014

Disclaimer
Liam McMahon and Wright Time Capital Group LLC are not paid to promote these stocks. Investing in the stock market is a challenging venture and entails a substantial amount of financial risk. Investing in stocks may cause you to lose some or all of your investment and should only be done with risk capital. Always trade on your analysis and within your own risk parameters. Wright Time Capital Group and Liam McMahon are not responsible for any loss you sustain based on any advice distributed through this newsletter or through any of our various social media outlets, email, and any other type of communication, electronic or otherwise. All analysis and recommendations are solely the opinion of Liam McMahon and Wright Time Capital Group team, we can be wrong like anyone else. Please understand and accept the risk involved when investing. These recommendations are intended for educational purposes, to help you understand different types of technical and fundamental analysis. Only trade with money you can afford to lose.

Liam McMahons Stock Newsletter | 1/19/2014

The Indexes
There has been no material change in the outlook for the S&P 500 since Wednesdays update. Price has continued to consolidate below the record highs of 1846.5 after the strong bounce off the 200 period EMA on the four hour chart. There is a possible bull flag forming however, and the 100 period EMA on the four hour chart (at 1827.73) could provide the first support level. A break of 1840.00 should accelerate gains. So long as 1814 holds, bulls are firmly in control.

S&P 500 Futures (4 hour chart) NASDAQ futures continue to trade in their upward channel, and actually broke to a new record high on Wednesday. Since making that new high at 3610.25, price has corrected slightly, but dip buyers were seen on Friday afternoon as the NASDAQ managed to erase about half its losses during the afternoon session. Bulls should be looking to buy a break above 3600 while bears need price to break 3550 and 3521.81 (that all important 200 EMA) if theres to be any downside. Upside targets of 3650 remain intact.
Liam McMahons Stock Newsletter | 1/19/2014

NASDAQ Futures (4 hour chart)

Dow Futures continue to look very constructive here to start the new week. After that false break out of the bullish pennant pattern, the Dow has rallied up to the resistance zone at 16.4k. A break and hold above that level opens up new record highs, and could lead to a rally that extends well beyond 16.6k. The Dow may offer the best opportunity for bulls the rest of this month, especially if the 16.2k level holds. Look for a break of 16.4k early in the week for an opportunity to buy.

Dow Futures (4 Hour Chart)

Trade Idea Update

SO continues to consolidate below the key breakout level the long setup mentioned two issues ago has yet to trigger, but I remain very interested in this stock going forward. See Issue 1 for more. GE reported earning in-line with expectations on Friday, but the stock was still sold heavily during the trading session. A late day rally helped cut losses down to 2.28% on the day, but the stock looks bearish heading forward. Our short is active, out first target remains 26.10. See the first issue for more details.

Liam McMahons Stock Newsletter | 1/19/2014

UPS disappointed markets with their quarterly report on Friday, and the stock gapped down significantly at the open. Unfortunately for our short, the stock rallied through the day, limiting the damage to a 0.58% drop by the close of trading. With that said, our short call from last issue remains active, and still looks to be in good shape. 101.93 is now resistance and our first target sits down at 95.00. If youre not in this trade already, look for opportunities to join in early this upcoming week. F lost 1.26% on Friday, after rallying near the top of our sell zone from last issue. Price is currently capped by the cloud bottom, and the 61.8% fib level of the drop from the 18.02 highs. Ford also filled its gap down, and looks susceptible to further losses. 15.50 stands as our first downside target. See the previous issue for more details on this short. TSLA never came back to our buy levels, but has been very constructive since its massive day on Tuesday. I mentioned on Twitter that the gap fill level would provide a good entry, and so it has, twice. The stock looks poised to continue to rally toward 194.5, and while Im not confident price will fall back to our entry levels, the setup remains valid. WFC continues to look extremely bullish. Our long strategy triggered at the open on Wednesday and is currently in the money. First target is 47.00, and right now we have an open second target. 46.00, 45.50 and 45.00 stand as the major support levels longs at these areas should be well supported.

Retail
XRT, the retail ETF from the first issue, is now offering another attractive trading opportunity. After our long on XRT failed, I mentioned in the last issue that the ETF now looked more like a short and now Im making that call official. As major retailers like BBY (Best Buy) take a beating (Best Buy has lost over 1/3 of its value in the last two trading days) retail ETFs also suffer. Price has broken below the cloud and below the major trend-line dating back to June. Resistance now comes in at 84.38. Shorter term traders can get aggressive with their profit taking near the first target, but this stock also has some longer term short potential.
Liam McMahons Stock Newsletter | 1/19/2014

XRT CALL: SELL ENTRY: BETWEEN MARKET-84.40 (DEPENDING IN RISK TOLERANCE) TARGET 1: 81.15 TARGET 2: 74.00

TIME FRAME: 5 DAYS 3 MONTHS INVALIDATION: DAILY CLOSE ABOVE 85.50

Overstock.com (OVSK) and Macys (M) are both part of the XRT ETF, and both offer long opportunities to help hedge an XRT short. OVSK announces their earnings results on Monday, so keep an eye out for that. Ill be tweeting updates on the stock after the results are released, but right now the stock is well supported by the cloud and a rising trend-line dating back to early November. Price recently broke back above the cloud, and has been behaving quite constructively. The 3% loss on Friday put price right back in a nice support zone, and as long as price remains above 27.00 after its earnings report, it may offer a nice long. Keep an eye on my twitter feed for updates on that. Overstock also offers a good opportunity to get long online retails, which look poised to seriously outperform big box retails over the coming quarter (and years). I prefer Overstock to Amazon (AMZN) here for technical reasons.

OSTK CALL: BUY ENTRY: DEPENDENT ON EARNINGS REPORT WATCH TWITTER TARGET 1: 32.00 TARGET 2: 35.60 TIME FRAME: 2-4 MONTHS INVALIDATION: DAILY CLOSE ABOVE 26.75 Ive talked about Macys (M) before, in the first issue where I was hoping for a gap fill long opportunity. So far it doesnt look like M is inclined to fill that gap however, so Im adding another setup to help off-set some of
the risk of that XRT short. Im initiating a long M call at market price at the open as price has formed a nice bullish consolidation pattern. This is another stock with both short and long-term potential, and entry at this level is more suitable for longer-term investors. Manage your risk accordingly. Shorter term traders should use the 58 target as their primary target, and should considering exiting on a move below 55.25, and possibility then re-initiating around the 54.00 level.

Liam McMahons Stock Newsletter | 1/19/2014

M CALL: BUY ENTRY: MARKET 54.00 TARGET 1: 58.00 TARGET 2: OPEN TIME FRAME: 2 WEEKS - ? INVALIDATION: DAILY CLOSE BELOW 54.00 (FOR SHORT TERM TRADERS) AND DAILY CLOSE BELOW 51.00 FOR LONG TERM INVESTORS

Financials
Liam McMahons Stock Newsletter | 1/19/2014

Last week was a major week for banks, with several key banks reporting earnings, including Bank of America (BAC), Wells Fargo (WFC), Morgan Stanley (MS) JP Morgan (JPM), and Citigroup (C). Ive discussed the JP Morgan, Bank of American and Wells Fargo results in depth in previous issues, so well focus on Morgan Stanley and Citigroup for today. MS gained over 4% on Friday after the bank reported earnings of $0.50 per share on $8.2 billion in revenue. Analysts were expecting profits of $0.45 per share on $8.01billion in revenue. Morgan Stanley made good on their promises to increase the profitability of their wealth management and retail brokerage divisions as the bank looks to shift their focus away from the riskier investment banking side of things. The stock looks poised for further gains, but as there is no clean setup right now, I remain neutral on MS. Citigroup (C) on the other hand, disappointed markets with their quarterly earnings, and the stock suffered, falling over 4% on Thursday, and dipping another 0.6% on Friday. Citigroup reported earnings of $0.82 per share against expectations of $0.95. Revenue also dipped 1% from last quarter. Poor trading hurt Citigroup as their revenue from trading bonds, commodities and currencies dropped 15% from last year,

and 16% from Q3, overshadowing decent gains in their equity trading division which pulled in $539m, a 16% increase from Q4 of last year. High legal costs remain a concern for the bank going forward, but so long as equity markets look strong (and they do here early in the year) I see no reason to be anything but bullish on banks. The higher interest rate environment that were entering should help boost bank profits, and the restructuring and refocusing weve seen the major investment banks go through since the financial crisis appears to be helping their bottom line. With that in mind, Im bullish C and looking to buy.

C CALL: BUY ENTRY: MARKET 51.64 TARGET 1: 55.28 TARGET 2: 60.00 TIME FRAME: 3 WEEKS TO 4 MONTHS INVALIDATION: DAILY CLOSE BELOW 51.00

Conclusion
Sideways chop has been the name of the game so far this earnings season, with mixed reports leading to mixed trading. In general the major indexes looks very well supported here, and I suspect well see the Dow and S&P 500 follow the NASDAQ to new record highs sooner rather than later. With that said, Im not afraid to find short opportunities as some sectors have really underperformed. Im comfortable with the F, UPS, GE, and XRT short calls, especially when their risk is offset by longs in WFC, C, TSLA, OSTK and M. Im continuing to carefully watch the Utilities for opportunities there as any major rebalancing should be bullish for those stocks that have long underperformed. Monday is a holiday, so markets are closed until Tuesday. Generally speaking, this is a slow week for US data (though there is a lot of foreign market risk this week) so the earnings parade will likely take center stage. Good luck this week, and Ill be talking to you on Wednesday.

Liam McMahons Stock Newsletter | 1/19/2014