Liam McMahons Stock Newsletter

Sponsored by Wright Time Capital Group

Volume 2 Issue 3 February 9, 2014

WRIGHT TIME CAPITAL GROUP February 9, 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 | 2/9/2014

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. The intent of this newsletter is not to encourage you to take every trade setup suggested the goal is to point out opportunities, both long and short, of varying durations. Always trade on your own due diligence and research. 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 | 2/9/2014

The Indexes
S&P 500 futures rallied aggressive from the support zone mentioned on Wednesday, and have erased a little over 50% of the recent decline over the past 3 trading sessions. Markets chose to interpret Fridays job report as good news, despite another disappointing headline number. The US economy added 113k new jobs last month against expectations of 185k new jobs. The unemployment rate did tick down unexpectedly, to 6.6%. The drop in the unemployment rate is actually pretty good news, considering the participation rate actually edged slightly higher last month, meaning that the unemployment rate didn t drop because more people have gotten discouraged and left the work force. Still, this makes back to back disappointing months for job creation in the United States. Markets may have rallied on the expectation that weaker jobs numbers will slow the progress of the ongoing taper under new Fed Chairwoman Janet Yellen, meaning more cheap liquidity going forward. Whether or not this plays out though remains to be seen. The unanimity of the last FOMC decision to taper suggests a certain determination to push toward a normalization of monetary policy over the coming months, perhaps regardless of softer US employment numbers. In any case, S&P futures held their key ascending trend-line dating back to June and may be looking to return to the 1825 level where significant resistance awaits. Futures are challenging the 50 day EMA at the open this week, a not insignificant technical level. While not quite the last stand for bears, it would be a good area to try and defend. A break above this level would open up a return to the bottom of the broken trend-line dating back to early October. Support is the recent low just above 1725.

Liam McMahons Stock Newsletter | 2/9/2014

S&P 500 Futures (Daily Chart) NASDAQ futures also held their key ascending trend-line on Wednesday with a very nice doji candle off the 100 day EMA before a strong rally on Thursday and Friday. Futures are now encountering resistance at the backside of the broken trend-line dating back to early November. The NASDAQ may actually give us some clues this week as it is the first US index to test major resistance, allowing us to get a good sense of the relative strength of bulls and bears. Below 3600 and the bears have the edge, but a move above that level

puts the bulls firmly back in control. Watch 3400 for support if we do move lower to start the week. There is also some micro support in the 3525 area to watch if youre looking for a place to buy.

NASDAQ Futures (Daily Chart) The Dow went from most bearish to most confusing at the end of last week as bears couldn t sustain the significant break of a long standing trend-line and key moving average. As a general rule, when the market has every reason to go in one direction (in this case, down) and it cant manage to do it, it doesnt bode well for that direction going forward. The break back above the 200 day EMA and that long standing trendline leaves bulls in good shape going forward. A general turn in market sentiment would of course hit the Dow hard again, but as long as futures remain above 15.5k (roughly) things look ok for industrials.

Dow Futures (Daily)

Liam McMahons Stock Newsletter | 2/9/2014

The same cant be said for the Nikkei though. The Japanese index continues to be a major concern for equity bulls despite the rally over the past few days. Futures have managed to regain their 200 day EMA, which is a good sign for bulls, but price now has to contend with the retest of the broken trend-line dating back to early June. Should this trend-line hold (it coincides roughly with the 15k level) it could easily prompt another round of intense selling this week and must be carefully watched. 14k provides first support if we see a move lower to start the week.

Nikkei Futures (Daily Chart)

Trade Idea Update

Liam McMahons Stock Newsletter | 2/9/2014

XLU longs got off to a good start, then faded a bit, but have since rallied. Price held cloud support and rallied back above the descending trend-line that sparked the initial call. This trade seems like its going to be a slow grind higher and may take some time, but considering XLU has a 3.75% yield, patience will probably be rewarded. XLE will be starting off the week testing key resistance as it retests the bottom of the broken wedge. The original setup and plan remains intact.

Materials
With the bounce weve seen in the indexes the past few days, Im looking to keep a more balanced portfolio, with both some shorts and some longs. The markets could really go either direction this week, so I want to be prepared for more upside and a resumption of selling. Materials have been pretty hard hit lately, and a major part of that has been weakness in Monsanto (MON). After missing the consensus on its earnings report in the beginning in January, the stock has on the back foot, until about a week ago, where price held at 105.00 and the stock rallied with markets. MON is back near resistance at 112.50 a retest of the broken neckline in the potential head and shoulders topping pattern. Shorts from here offer a terrific risk reward ratio thanks to the very real possibility that the 117.5 high in MON is a major top.

MON CALL: SELL ENTRY: 110.75 112.50 TARGET 1: 105.00 TARGET 2: 97.50 TIME FRAME: 1-3 MONTHS INVALIDATION: DAILY CLOSE ABOVE 114.00 Gold (GLD) may finally be starting its corrective phase higher after a significant sell-off over the past 4 months. Concerns that the disappointing jobs data may slow the pace of the Fed taper should help provide gold with a boost over the next couple weeks as inflationary fears increase and combined with a nice technical setup GLD offers a nice long opportunity over the next couple weeks. GLD has broken the descending trend-line that has capped price since August and is quickly approaching the top of the cloud, a break above would really confirm upward momentum.

Liam McMahons Stock Newsletter | 2/9/2014

GLD CALL: BUY ENTRY: 122.17 120.50 TARGET 1: 125.00 TARGET 2: 127.50 TIME FRAME: 1-3 WEEKS INVALIDATION: DAILY CLOSE BELOW 119.50

Conglomerates
Our GE short paid off nicely, but now I think its time to try a long on the stock. GE tested and a held a major trend-line dating back to June of 2012 and a good sized bounce seems likely. After all, GEs earning report was better than a lot of people expected and the company seems to be optimistic about its prospects going forward. So long as that trend-line holds, bulls have the edge. This is absolutely a near-term long as price remains well capped by the cloud above 26.00.

Liam McMahons Stock Newsletter | 2/9/2014

GE

CALL: BUY ENTRY: 25.19 24.60 TARGET 1: 26.11 TARGET 2: 26.59 TIME FRAME: 1-2 WEEKS INVALIDATION: DAILY CLOSE BELOW 24.30

Conclusion
The major indexes are split now the bears have control in some, and the bulls seem to have found their footing in others. Keeping a balanced portfolio is a good idea at these potential turns, if we see the market gain ground and start to rally here, well begin scaling out of our existing (in the money) shorts and youll notice fewer and fewer short setups being issued while our open long trades will ideally start to move toward their targets and more and more stocks will begin to repair the damage that has been done during this sell-off. On the other hand, should the selling resume, long trades will be fewer and further between and our open shorts will move toward their targets. This is a challenging period for bulls and bears, and sometimes damage control is the only option. Markets will be keyed on Janet Yellens first testimony as head of the Fed on Tuesday this week, and traders will be looking for clues about how (if at all) the recent poor jobs numbers will affect Fed policy. I dont expect her to admit that any changes will be made due to one (or two) bad reports. Thanks for reading, see you on Wednesday.

Liam McMahons Stock Newsletter | 2/9/2014