THE ARORA REPORT
HIGHER REWARDS, LOWER RISKS

No Verbosity,
Just Clear Actionable Information
ZYX BUY CHANGE ALERT
April 24, 2011  Issue: YIVZYXXIVZYXIZ40F 
ALL AROUND ALERTS

An All Around Alerts  issue tracks every open position from cradle to grave and  every recommendation that has not yet filled.  It provides Immediate Alerts for urgent actions needed on existing positions and provides one new idea  in detail or revisits an existing idea in detail. On Our Radar Alerts discuss ideas that do not satisfy all six screens of the ZYX Change Method but can still be lucrative.

New subscribers: Please see ZYX Change Method Trade Management Guidelines for terminology.
IMMEDIATE ALERTS
TIME TO BE ON THE DEFENSIVE

Two recent excerpts from the Real Time Feed are worth repeating here.

Twenty years of historical data shows that when technical factors confluence in a similar manner to the present confluence, there is a 67% probability of at least a shallow correction. The fundamental backdrop is not any better; please see the earlier entry tiled: WHAT TO WATCH FOR THIS WEEK.

Our long term subscribers are sitting on immense unrealized profits, we do not want to see these profits evaporate. The prudent course of action is to take partial profits. This will position us to take advantage of the bargains if there is a correction. If there is no correction, we will continue to participate on the upside with our partial positions.

The new subscribers may consider not committing all of their capital here; it may be prudent to keep some powder dry to take advantage of the lower prices. We are neither advocating selling everything nor are we suggesting that new positions not be selectively initiated here. It is best to keep the quantity of new positions small at this juncture.

It is human psyche that we naturally want to buy when the markets are going up and sell when markets are going down.  Successful investors do the opposite–they sell when the markets are going up and buy when the markets are going down.  Buy low, sell high– is easier said than done.   One of our purposes is to help our subscribers emulate the behavior of successful investors.

Now we will review specific open positions that deserve your immediate attention.

ADOBE SYSTEMS (ADBE)

We are long  25% of the full core position size with an average price of $25.66.

What to do now?

Those in the stock  may consider realizing profits on all but 25% of the full core position size.

Those  not in the stock may  want to wait for a pullback to the Buy Zone of $28.11 to $29.35 and a signal in the Real Time Feed to enter a position.

The long term prospects of the stock remain bright -- we are simply interested in taking advantage of the volatility in the markets to maximize profits and reduce our risk.

AMERIGROUP CORPORATION (AGP)

We are long with an average price of $22.05.  We are holding 100% of the full core position size. Our target remains at $73. 

What to do now?

Those in the stock  may consider realizing profits on all but 75% of the full core position size.

Those  not in the stock should not consider buying this stock at this juncture.  

The long term prospects of this stock are uncertain.  This is a Medicaid HMO, and the future direction of the stock is highly dependent on the whims of politicians in Washington.  It is not clear which way the wind is going to blow.  It is best to reduce risk at this point.

APPLE (AAPL)

We are long with an average price of $131.00.  Now the stock is at $351.54.   We are holding 50% of the full core position size. Our target remains at $425.

What to do now?

Those in the stock  may consider taking profits on all but 50% of the full core position size.

Those  not in the stock may have an opportunity to enter this stock either on pull backs or on excitement related to the iPhone 5.  There may also be a scenario related to a potential security breach in Android phones that may trigger a buy.  Please stay tuned to the Real Time Feed.

CHESAPEAKE ENERGY CORPORATION (CHK)

We are long with an average price of $18.52.  We are holding 100% of the full core position size.  Our target remains at $50.

What to do now?

Those in the stock  may consider holding on to 100% of the core position.  Subscribers may consider taking profits on any trade around positions, i.e., any position quantities in excess of the full core size.  

Those  not in the stock should wait for a pull back and a signal on the Real Time Feed to purchase this stock.    This is a natural gas producer and long term prospects remain bright.

COEUR D`ALENE MINES CORPORATION (CDE)

We are long with an average price of $15.46.  Now the stock is at $34.54.  We are holding 100% of the full core position size. Our target remains at $50 subject to a favorable resolution of the situation in Bolivia.

What to do now?

Those in the stock  may consider reducing the risk by taking profits on all but 50% of the full core position size.  This silver miner has large operations in the country of Bolivia.  On May 1, the government of Bolivia is likely to make a statement regarding nationalization of mines in the country.  CDE is in bed with a powerful union and may escape nationalization, but there is no way to be sure at this point.  Our solution is simple--reduce the risk.

Those  not in the stock should wait until the news from Bolivia has some certainty to it.  If the stock gets hit on bad news from Bolivia, there may be an opportunity to buy.  We will keep you informed on the Real Time Feed.

HERCULES OFFSHORE (HERO)

We previously took profits on 50% of the position at $6.00.  We are long from $2.25.  The stock has almost tripled with the recent move attributable to Hercules buying assets of a bankrupt competitor on the cheap. 

Previously, we suggested exiting 50% of the remaining position around $6.85.  Although several data services show that the stock traded as high as $6.99, our data shows that the trades over $6.80 were either erroneous or were not available to most of our subscribers.  The stock traded quite a bit around $6.80.  Unfortunately, our subscribers who had limit orders at $6.85 may not have received a fill. 

What to do now?

Those in the stock  may hold their present position, which should be 50% of the full core position size.  

Those  not in the stock may have an opportunity to buy this stock if it dips on adverse headlines related to an ongoing government probe.  Please stay tuned to the Real Time Feed.  

HORNBECK OFFSHORE SERVICES (HOS)

We took profits on 50% of the position at $29.67.  We are long from $13.00. 

What to do now?

Those in the stock  may lock in profits right here with the exception of 50% of the full core  position size.

Those  not in the stock may have an opportunity to take advantage of high short interest and high volatility.  This is a strong buy on any pull back in the range of $22.00 to $25.00 and a buy signal on the Real Time Feed.  Our target remains at $38.00.

NETFLIX (NFLX)

We are long on  Netflix from $102.00. Now the stock is at $252.50. We are holding 5% of the full core position size. Our target remains at $273.

During the last retracement, our stop proved to be well placed.  The stock reversed to the upside without hitting our stop.

What to do now?

Those in the stock  may wait for the upcoming earnings.  The stock has a very high short interest; in a short squeeze, it can easily exceed our target.

This is the riskiest stock in our portfolio.  We have managed the risk by taking profits along the way.  We have reduced our  position to 5% of the full core position size.  Those holding a larger position size may consider taking profits prior to the earnings. 

We are raising our stop to $234.00.

Those  not in the stock should not consider buying this stock.

OMNIVISION TECHNOLOGIES INC. (OVTI)

We are long with an average price of $12.50.  Now the stock is at $32.54. We are holding 100% of the full core position size.  Our target remains at $45. 

What to do now?

Those in the stock  should hold 100% of the full core position size.  In addition, on the dips subscribers may consider adding a trade around position for a short term trade to enhance returns. 

Those  not in the stock should be alert to the news of Sony getting Apple's camera business.  The stock should dip on such news.  Our analysis already assumes that Apple will split its business between Sony and Omnivision.  As long as Omnivision retains at least half of Apple's business, a dip will be an opportunity to buy.   Please stay tuned to the Real Time Feed.

SILICON IMAGE, INC. (SIMG)

We are long with an average price of $2.55.  Now the stock is at $7.29. Inclusion of a HDMI connector in Apple's iPad 2 should continue to generate positive sentiment for this stock. We are holding 100% of the full core position size.  Our target remains at $14.00, but the fund flows in the stock are not encouraging. 

What to do now?

Those in the stock  may realize profits on all but 50% of the full core position size.

Those  not in the stock should not consider this stock at this juncture.

 

NEW RECOMMENDATIONS

iSHARES MSCI TURKEY INVEST MKT INDEX (TUR): A LOW RISK WAY TO PROFIT FROM THE MIDDLE EAST, RISE OF RUSSIA, BOOMING COMMODITIES, STABILIZATION IN IRAQ, AND STRENGTH IN GERMANY

 

Potential Reward:                  High
Potential Risk:                       Medium Low
Probable Holding Period:     Long-term

The famed investor John Templeton said, "Buy when there is blood in the streets." Our subscribers see blood in the streets of  Libya, Egypt, Bahrain., Syria, and Yemen. Our investors are clearly very astute to consider allocating to these countries with the hope of buying on the cheap. At this point, investments in these countries are fraught with risk for the following reasons:

  • Leading economic indicators, when adjusted for oil prices, are not supportive.
  • There may be blood in the streets, but the stock prices have not bled enough.
  • Although demographics in terms of the younger population are favorable, demographics in terms of skill sets are not favorable.
  • The two major denominations of Islam, Sunni and Shia, have been fighting for centuries, and we do not see a reconciliation on the horizon.
  • Shia Iran appears to be dead set on destabilizing Arab countries with sizable Shia populations ruled by Sunnis.
  • It is not clear what roles radical  Islamists will play in future governments in the region.

 

The low risk way to play the Middle East is through Turkey. Turkey geographically straddles Europe and the Middle East.

 

  •  CHANGE SCREEN

    If the Middle East goes in the right direction, Turkey will benefit. On the other hand, if the Middle East deteriorates, Turkey is not likely to get hurt. At present, the economy of Turkey is highly dependent on Europe and not on the Middle East.

    The Middle East is 50 years behind the rest of the developing world. Now the masses have woken -- they want the economic success and freedom the rest of the world is enjoying. Even if repressive regimes prevail, the Middle East will no longer stay in the dark age. Turkey will benefit.

    We do a lot of on the ground research to supplement our analytical research.  Recently, standing at Istanbul harbor, it was quite a sight to see dozens of Russian cargo ships full of raw materials heading towards Europe. 

    Russia is rising as a major supplier of commodities, and Turkey is becoming an important portal. 

    When President Bush attacked Iraq, initially he highlighted that oil output in Iraq could be increased.  Now Iraq is stabilizing, which will lead to increasing oil output in Iraq.  An easy way for this oil to make its way to Europe is through existing and new pipelines through Turkey.

    Ever since the financial crisis, Germany has been the strongest economy in the developed world.  Germany has faced chronic labor shortages.  One of the biggest suppliers of additional labor to Germany is Turkey.  Turkey has forged close economic ties with Germany.  Strength in Germany's export oriented economy is likely to continue.  German stocks have become very expensive.  Turkey is an inexpensive back door to play the strength in Germany.
  • GLOBAL FUND FLOW ANALYSIS SCREEN

    At The Arora Report, our computers have been monitoring fund flows in the Turkish market and feeding the data to our proprietary algorithms. The smart money is buying Turkey.

  • THEORY ZYX CHANGE SCREEN

    Here we make a determination - what is the probability of  Turkey benefiting from the changes described above. Detailed Theory ZYX analysis is supportive of buying this stock.

  • QUANTITATIVE ANALYSIS SCREEN

    Stocks in Turkey are also comparatively cheap.  The Turkish market is liquid, whereas Middle Eastern markets are mostly illiquid making it difficult to take large positions. It appears that if allocation to Turkey  is heads we win, tails we win.

  • TRIGGER EVENT SCREEN

    There are multiple triggers here, and that is very positive. The triggers are uprisings in the Middle East, stabilization in Iraq, economic strength in Germany, rise of Russia, and increase in commodity prices.

  • TECHNICAL ANALYSIS SCREEN

    This screen is supportive of a purchase, provided there is patience to follow the ZYX Change Method Trade Management Guidelines.

Trade Management

We will adhere to  the  discipline imposed by the ZYX Change Method Trade Management Guidelines Small accounts should consider purchasing the stock in at least five tranches.  Large accounts should accumulate in 20 tranches.  This is a long-term position; there is no reason to rush into it.  Our goal is to take advantage of the inevitable pull backs.  Subscribers may consider putting in Good Till Cancelled (GTC) limit orders with their brokers at $62.76, $61.26, $60.11, and $58.51.

Buy Zone:             $58.51 - $62.76
Target Zone:         $135.00 - $150.00
Stop Zone:            $47.73 - $49.73
ON OUR RADAR SCREEN

NEW COMPELLING BREAKTHROUGH IN BIOTECHNOLOGY

Over a period of time, we have made a lot of money by properly understanding the impact of new breakthroughs in biotechnology.

At times, investors have not fully understood the importance of a breakthrough, thus giving us an opportunity to build large positions before the relevant stocks moved up. 

At other times, the sharp Wall Street analysts immediately recognized  the importance of the breakthrough, and the key to making money became waiting to enter at the appropriate pull back. 

The data released by Biogen Idec (BIIB) on its BG-12 drug for multiple sclerosis is a compelling new breakthrough.  The companies affected in addition to Biogen are Teva (TEVA), Elan (ELN), and Novartis (NVS).  Stay tuned to the Real Time Feed.

POWER-ONE (PWER)

In our last issue, we highlighted  Power-One as the second largest manufacturer of inverters, primarily for solar power.  The stock has been hit with bad earnings.  Our analysis shows that long-term prospects remain bright. 

With the nuclear disaster in Japan, our prediction is that we will not see a new nuclear power plant built in the United States in our life time, and the growth overseas will come to a screeching halt. This development is a boost for solar power. Power-One is a low risk way to play solar power.

We expect the next earnings report to be bad.  If we are right, the stock will gap down giving us a great buy price.  We are patiently waiting for all six screens of the ZYX Change Method to be satisfied before issuing a buy signal. 
 RECOMMENDATIONS NOT YET FILLED
EXELON (EXE)

Exelon has the largest fleet of nuclear power plants in the country.  If this stock gets hit, there will be a once in a life time opportunity to buy it on the cheap.  

Buy Zone:        $24.00 - $27.00
Target Zone:    $38.00 - $45.00
Stop Zone:       $18.00 - $19.00


FINISAR (FNSR)

Because of the market movements,  we are removing this recommendation.

iSHARES MSCI TURKEY INVEST MKT INDEX (TUR)

Please see above.

MAKITA ( MKTAY, 6586.T)

Makita is a large producer of power tools.  Most of our subscribers have probably seen Makita tools at Home Depot.  Since entering the US market in 1970, Makita has become a leading tool provider in 30 countries.  Makita has been shifting production away from Japan, but it will be a major beneficiary of reconstruction in Japan.

Buy Zone:            $37.00 - $40.00
Target Zone:        $58.00 - $60.00
Stop Zone:           $33.73 - $34.73


NEOPHOTONICS (NPTN)

We highlighted this stock in a Quick Alert. This stock may turn out to be the best optical component play, especially if we can get our buy price in the range of $5.50 to $7.31 with an average around $6.30. Currently, only three of the six ZYX  Change Method screens are positive.

Buy Zone:           $5.50 - $7.31
Target Zone:       $15.0 - $16.90
Stop Zone:          $4.45 - $4.95


NUANCE (NUAN)

Because of the market movements,  we are removing this recommendation.

SHAW GROUP (SHAW)

Shaw Group is the largest service provider to nuclear power plants all over the world.  Fortunately, most of the Shaw Group's business is not nuclear.  Shaw may benefit from remedial work at nuclear power plants. 

The stock traded within $0.61 of our Buy Zone. Those who took a slight  liberty with the Buy Zone had over $8.00 in profits. We are sticking to the previously stated zones.

Buy towards the lower end only if the stock gets hit hard.

Buy Zone:      $24.00 - $27.00
Target Zone:  $34.00 - $36.00
Stop Zone:     $18.00 - $19.00


SOUTHWESTERN ENERGY (SWN)

This is our favorite natural gas name.  On March 13, 2011, we issued a buy on the stock at $36.90. The stock has moved up to $43.49. Unfortunately, the price did not enter our Buy Zone.  The stock is overbought right now.  We will patiently wait for the price to enter our Buy Zone.

Buy Zone:      $30.50 - $32.60
Target Zone:  $85.00 - $100.00
Stop Zone:     $27.00 - $28.00

TEVA (TEVA)

Teva is the largest generic drug maker in the world.  Teva also has an MS drug.  The stock is being hit on concerns of a potential drop in the sales of its MS drug due to the advent of competing drugs.  For long-term investors, any significant dip will be a buying opportunity. 

We highlighted the exact buy points in the Real Time Feed on April 21, 2011. 

Buy Zone:      $38.00 - $43.11
Target Zone:  $73.00 - $80.00
Stop Zone:     $33.48 - $34.69
NEW POSITIONS

COMMUNITY HEALTH SYSTEMS (CYH)

Most of our subscriber's purchase price for CYH  is $26.00.  We had 32.69% profit in three days or 3977.28% annualized.  Most of our subscribers took partial profits around $34.00 and $30.00. 

What to do now?

Those in the stock  may consider  holding for our profit target of $39.00 to $45.00.   We are now holding only 10% of the full core position size.   Consider scaling in additional quantities in the range of $24.00 to $26.00. 

Those  not in the stock may consider scaling in a new position in the buy zone.

Buy Zone:                              $24.00 - $26.00
Target Zone:                         $39.00 - $45.00
Stop Zone:                             $17.73 - $18.69


JDS UNIPHASE (JDSU)

We are long from $17.90.  This is a profit of 11.73% in two days or 2140.72% annualized. 

What to do now?

Those in the stock  should protect the profits as first order of business.  We are raising the stop zone for this tranche only to $19.43 to $19.69.  Please also be alert to realized profits on exhaustion on any up spikes in the target zone of $21.00 to $24.00.

Those  not in the stock may consider waiting patiently to scale in a buy position in the buy zone.

Buy Zone:                             $15.20 - $18.00
Target Zone:                         $21.00 - $24.00
Stop Zone:                            $13.45 - $13.95

PROSHARES ULTRASHORT SILVER (ZSL)

This is a very long-term, high risk, high reward trade.   We are long 5% of the full core position size from $16.00. 

This is an inverse ETF, and we benefit from silver going lower.   

What to do now?

Those in the stock  may consider scaling in 5% increments in the range of $12.75 to $15.10.  Consider not exceeding the total position size more than 25% of the full core position size at this juncture.

Those not in the stock may consider scaling 5% increments in the buy zone.  Please be cautious to not exceed the total position size more than 25% of the full core position size at this juncture.

Buy Zone:                              $12.75 - $16.00
Target Zone:                         $24.00 - $40.00
Stop Zone:                             $9.73 - $12.73

POSITIONS CLOSED
ENZON PHARMACEUTICALS (ENZN)

We closed this position basically at breakeven. 

KV PHARMACEUTICAL (KV.A)

This has been a very successful position.  We were long with an average price of $1.61.  Most of our subscribers took partial profits around $13.00.  Our protective stop took us out on the remaining position at $8.11. 

We correctly forecasted the FDA would approve its drug Hydroxyprogesterone Caproate, popularly known as Makena.  This drug is used to prevent premature births.

UNITED CONTINENTAL HOLDINGS (UAL)

Most of our subscribers purchased it at $19.26.  We took profits at $21.85  in about one week's time.
EXISTING POSITION UPDATES
 Please see ZYX Change Method Trade Management Guidelines for explanations.
ADOBE SYSTEMS (ADBE)

Please see above.

AEROVIRONMENT (AVAV)

We are holding 25% of the full core position size from an average price of $28.20.  We are changing the zones.

What to do now?

Those in the stock  may consider scaling in additional quantities in the buy zone.

Those not in the stock  may consider scaling in a new position in the buy zone.

Buy Zone:                              $21.00 - $23.60
Target Zone:                          $42.00 - $44.00
Stop Zone:                             $18.43 - $19.43

AMERIGROUP CORPORATION (AGP)

Please see above.

APPLE (AAPL)

Please see above.

CHESAPEAKE ENERGY CORPORATION (CHK)

Please see above.

COEUR D`ALENE MINES CORPORATION (CDE)

Please see above.

ENERNOC (ENOC)

We now hold 5% of the full core size from $20.30. 

What to do now?

Those in the stock  may consider adding to the position at the low end of the buy zone.  

Those not in the stock may consider entering at the low end of the buy zone.

Buy Zone:                               $14.00 - $16.00
Long-Term Target Zone:      $35.00 - $50.00
Stop Zone:                              $13.40 - $14.90

HERCULES OFFSHORE (HERO)

Please see above.

HORNBECK OFFSHORE SERVICES (HOS)

Please see above.

ISHARES MSCI UNITED KINGDOM INDEX ETF (EWU)

We are long with an average price of $14.62.  Now the stock is at $17.80.   We are holding 75% of the full core position size . Our target remains at $30.

What to do now?

Those in the stock should hold on for the target to be achieved.  This is a very long-term position.  

Those not in the stock can consider scaling in the range of $15.00 to $16.00.

LAWSON SOFTWARER (LWSN)

We are holding 5% of the full core position size from $11.75.

What to do now?

Those in the stock  may hold on for our target to be met.

Those not in the stock should not enter the stock at this juncture.

MARATHON OIL CORPORATION (MRO)

We are long with an average price of $46.70.  Now the stock is at $51.69.  We are holding 20% of the full core position size.  Our target remains at $64.

Those not already in the stock can scale in buys on the dips.

NETFLIX (NFLX)

Please see above.


OMNIVISION TECHNOLOGIES INC. (OVTI)

Please see above.

PROSHARES ULTRASHORT  LEHMAN 20+ TREASURY BONDS (TBT)

This ETF was highlighted in a Quick Alert. We are now long 30% of the core position  from an average price of $35.75. The ETF is now at $37.42. Here are the new zones. 

What to do now?

Those in the stock  may consider adding to the position at the low end of the buy zone.  

Those not in the stock may consider entering in the buy zone.

Buy Zone:                              $31.00 - $35.75
Long-Term Target Zone:     $48.00 - $50.00
Short-Term Target Zone:     $38.90 - $41.90
Stop Zone:                              $28.00 - $28.90


We are effectively short U.S. Treasury bonds. We will benefit as interest rates rise due to global growth and inflation. The impetus behind this buy was various crises in the world affording us a good buy price as investors rushed into the safety of treasuries.

RED HAT (RHT)

We are long from $43.75.  We took partial profits at $47.00.  Now we are holding 25% of the full core position size.

What to do now?

Those in the stock  may hold on to the present position and look to add on dips in the range of $38.00 to $42.00.

Those  not in the stock may consider scaling in the range of $38.00 to $42.00.

SILICON IMAGE, INC. (SIMG)

Please see above.

THE ST. JOE COMPANY  (JOE)

We are long with an average price of $18.00.  Now the stock is at $25.07. We are holding 100% of the full core position size. Our target remains at $38. There is no other change from the last update. Our long-term target stays at $40.  We will carefully watch the actions of Bruce Berkovitz.  His fund owns almost 30% of the stock.

What to do now?

Those in the stock  may hold on to the present position.

Those not in the stock may consider scaling in the range of $20.00 to $22.00.

 

Please make adjustments, as you see fit to suit your risk tolerance, your experience, and market conditions. You  must make your own judgments with the help of your own  personal advisor independent of the content herein. The content herein may not be suitable for your purposes and your situation. Nigam Arora or The Arora Report,  Ltd, its directors, its officers,  its employees, and its affiliates  are not your advisors.

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