Trading the Yin and Yang of the “Seeking Alpha Effect”: CXDC

You may already be familiar with what I call the “SeekingAlpha Effect.” That’s when a SeekingAlpha author gets a story published about a stock. If the story is positive, it tends to lift the subject issue’s share price. If it’s negative, however, a stock’s price can absolutely crater in a single session. Unfortunately for anyone who owned shares of China XD Plastics, Inc. (CXDC) on July 9, that’s exactly what happened. Prior to the publication of a bearish SeekingAlpha article on July 10, this stock was one of the biggest gainers of 2014. In fact, CXDC shares had been absolutely en fuego since the end of March, after the company released its Q4 and full year earnings. For the specialty chemical company’s fourth quarter, management reported revenue of $384.6 million, an increase of 128.1%, from $168.6 million in Q4 2012, while net income increased to $57.5 million from $17.3 million over the same period.  For the full year, total revenues were $1.05 billion and net income was $133.8 million, compared to $599.8 million and $85.9 million, respectively in 2012. At the time of that announcement, Jie Han, Chairman and Chief Executive Officer, said, “The accelerated growth reflected China XD’s strong…

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Dow Chemical Company (DOW) shares on the rise, Pepsico (PEP) announces a strong quarter and Boeing (BA) reports rise in aircraft deliveries

Markets wavered on Wednesday, as shares of The Dow Chemical Company (DOW) were on the rise after they outperformed expectations. Dow posted profits that beat out analysts’ expectations due to higher prices and a strong control on costs. The company posted profits of $882 million, or 73 cents per share. Estimates for the quarter came in at 72 cents per share. Despite the seemingly positive results, they still took a drastic fall of 62% from this time last year when the company reported profits of $2.34 billion, or $1.87 per share. Revenue came in 2.3% higher at $14.92 million. This also surpassed analysts’ expectations of $14.82 billion. A senior analyst at Key Private Bank, Stephen Hoedt, said, “It was a solid quarter all around and I think it caught some people by surprise because of the leverage they saw to commodity prices.” The company is known for making all types of products from insecticides to plastics. They also noted that sales were up across all fronts of their six businesses. Shares of Pepsico, Inc. (PEP) were trading up over 2.9% after the company announced that they would be raising their profit forecast for the year and posted a strong quarter….

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NABE report shows increase in hiring and sales for second quarter, Yum! Brands (YUM) face safety scare and Hasbro (HAS) reports strong second-quarter

Markets were heading slightly lower on Monday morning after U.S. companies reported an increase in employment and sales during the second-quarter, a report released by the National Association for Business Economics showed. The report said that of the 85 companies that took the survey, 57% of them said that sales were up during the quarter running from April through June. This is up 53% from the first quarter and up over 35% during this time last year. The report also showed that 59% of the companies surveyed are expecting a steady third-quarter. There was also a strong response in the hiring section of the survey with 36% saying they hired more workers in the second-quarter. This is up from 28% in the first-quarter and up 29% from this time last year. Outlook for the third-quarter was also strong with 37% of the companies surveyed saying they expect hiring to grow. Shares of Yum! Brands, Inc. (YUM) were falling after a new safety scare surfaced in China. The parent company of both McDonald’s and KFC had apologized to their customers after Chinese regulators shut down a local meat supplier. There was a television report that showed workers at the factory picking…

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To the Risky Go the Spoils (IBB, MSFT, INTC)

A number of you have written or called recently regarding our open pairs trade of June 16th, that matched tech giants Microsoft (NASDAQ:MSFT) and Intel (NASDAQ:INTC). The reason for your worry, apparently, was that Intel bucked our initial negative assessment, continuing to rise even as we claimed that her top was already in. And there, we can make no argument. A fact is a fact and a rise is a rise. But we have to add that MSFT, too, has risen beyond our initial prognostications, meaning the (paper) loss on the trade is still minimal, and judging by the relative technical merits of the two, we believe it’s premature to initiate any kind of repair on the trade or to close it down altogether, as some have suggested. A look at the two charts will explain our thinking. Here’s Intel for the last six months, to begin – The strength in the stock is apparent. But after a better than 50% rise over the last half year that was punctuated by two gaps on strong volume, we believe the shares are now vulnerable. That is, it would surprise us in the extreme if the move still had any significant strength…

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Oil up, General Motors (GE) shares up on higher profits and AbbVie (ABBV) to buy Shire.

Markets were heading slightly higher on Friday as worries intensified over rising global political tensions after a Malaysian plane was shot down over the Ukraine. Oil has risen nearly 2% following the news of new U.S. sanctions against Russia. The Ukraine is accusing pro-Russian separatists of shooting down the flight that was carrying 298 people. Ric Spooner, chief market analyst at CMC, said, “While initial trader reaction has been to sell first and ask questions later, the more considered approach will involve waiting for further insight into the likelihood of this tragic even triggering as escalation of the situation in Ukraine.” Shares of General Electric (GE) were on the rise after the company reported a 13% rise in profits for the second-quarter. The company said that an increase in sales of their jet engine and oil equipment were partially attributed to rise. GE also said that they are expecting the initial public offering of their private-label credit-card business to launch at the end of this month. Their plans for the partial IPO of their retail finance business as a way to exit the business and cut down their overall GE Capital unit. The name of the new business will be…

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Against the Grain – Shorting Rules for Individual Investors (TYL)

Short sellers are a rare breed. And during a bull market, those who make a living from the short side are an even rarer commodity. A Rising Tide Lifts all Boats Fighting the overall trend is a mug’s game if you’re an amateur. The general swell of a bull market means even unworthy stocks will move higher with the crowd and that’s a certain death for the ham and egger who believes he can pull off a quick score with a short sale. The best shorts are, rather, those who have forensic accounting abilities and industry connections. The ability to navigate the guts of a quarterly report is a tremendous advantage, but knowing what’s happening on the inside of a sector is equally important – and rare. Consider – some of the best information available on Chevron comes to us from Exxon executives. From them, we learn about key management people who are leaving the company or jumping to a competitor. Or about new technologies or initiatives that are shortly to come to the market’s attention. Or about internal project cost overruns that could jeopardize a company’s quarterly earnings and send the stock swooning. In short, those who know the…

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Two Pullback Breakout Stocks that Could Run Again (RDNT, GRH)

In the stock market, there’s no such thing as a sure thing — an adage that proves true every trading day. There are, however, some tried-and-true trading approaches that tend to work year-after-year. One of my favorites is playing breakout stocks that have pulled back significantly after making parabolic moves. That’s because these “former runners” usually make their breakout moves for good reason — generally good company-specific news that will have a positive impact on their bottom lines. Today I want to bring your attention to two such issues that have recently broken out to new 52-week highs, then experienced a significant price pullback from those levels — with all three having the potential to find more buying interest in the months ahead. Greenhunter Resources, Inc. (GRH) GreenHunter Resources, Inc., provides water management solutions in the United States. It offers Total Water Management Solutions to the oilfield, including unconventional oil and natural gas shale resource plays. The company offers hydraulic fracturing services, as well as fluids handling, hauling, and barging services. In addition, it provides Frac-Cycle water treatment services and remote access management compliance asset tracking for remote activity observation via a Web-based portal for management of well-head fluids. Greenhunter…

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Producer Price Index up in June, Bank of America (BAC) takes a $4 billion hit and BMW places major recall

Markets were heading slightly higher after news was released the Producer Price Index for June came in slightly above expectations. June’s final PPI reading was up 0.4% last month, a report from the U.S. Bureau of Labor Statistics said. This was up from a 0.2% drop in May. Economists had been expecting a 0.2% increase for June. The year-over-year data was up at annualized rate of 1.9%. The core producer price index was up 0.2%. From an analyst’s perspective, core prices are a better reading for longer-term inflationary pressure due to the fact that this reading subtracts volatile food and energy categories. Shares of Bank of America (BAC) were falling slightly after the company announced that second-quarter results would be taking a hit due to a $4 billion litigation expense. The bank reported that their second-quarter earnings came in at $2 billion, or 19 cents per share, when compared with the $3.6 billion, or 32 cents per share, this time last year. The $4 billion litigation hit ended up costing the bank earnings of 22 cents per share. Revenue was down 4% to $21.9 billion from last quarter’s $22.9 billion. The banking giant’s chief executive, Brian T. Moynihan, said, “The economy…

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Citigroup (C) fined $7 billion, Volkswagen to build new SUV and Aecom (ACM) to buy URS Corp. (URS)

Markets were heading higher on Monday as news was released that Citigroup (C) has agreed to pay $7 billion in a step to settle a U.S. investigation against them. This settlement will go on record as the largest penalty delivered by the U.S. Justice Department. The probe was diving into whether or not the company sold faulty mortgage-backed securities during the financial crisis. The total nearly doubled what many analysts were predicting. Citigroup said that they would be paying $4.5 billion in cash and give $2.5 billion in help to low-income tenants and those struggling with their homes. U.S. Attorney General, Eric Holder, said, “The penalty is appropriate, given the strength of the evidence of the wrongdoing committed by Citi. Despite the fact that Citigroup learned of serious and widespread defects among the increasingly risky loans they were securitizing, the bank and its employees concealed these defects.” Volkswagen reported that they have plans to begin building SUV’s in Chattanooga, TN. This will bring an additional 2,000 jobs to their factory. The German based company said they will invest $600 million in efforts to expand the factory. They have also announced their plans to employ 200 new engineers that will work…

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Economists lower growth forecast for the US, Whirlpool (WHR) take controlling stake in Indesit and Chrysler announces new recall

Markets were heading lower on Friday after news was released that economists have lowered their forecast for U.S. growth for the second-quarter. Growth expectations for the second-quarter were dropped from their previous 3.5% down to 3%, in a report released from the National Association for Business Economics. They have projected the growth for the entire year to come in around 1.6%, which is a sharp drop from the previously reported 2.5%. If this does ring true, it will mark the lowest growth on record since 2008. The reason behind the drop in forecast is partially attributed to expectations that consumers will be spending at a modest pace. Spending is expected to grow at a 2.3% annual rate, which is down from the 2.9% estimate last month. Kip Tindell, chief executive of The Container Store, said, “We are experiencing a retail ‘funk.’ While consumers are buying homes and automobiles and even high ticket furniture, most segments of retail are, like us, seeing more challenging sales than we had hoped early in 2014.” Shares of Whirlpool Corp. (WHR) were trading slightly higher after the company reported that they would be paying nearly $1 billion for a controlling stake in Indesit. Whirlpool will take 66.8% of…

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