Netflix Expands to South America

By Raghu Gullapalli


This morning news came out, courtesy of All Things Digital, that Netflix (NFLX) was expanding its operations into Latin America.

Once the news broke, the stock gapped up in the pre-market and looked ready to launch its booster rockets once again in attempt to break the $300 barrier.


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This is a prototypical example of a long gap trade.

• Netflix gapped above a long-term resistance level, in this case the all time highs of $277.70.
• The premarket volume in the stock exceeded 500,000 shares, ensuring liquidity.
• The stock gapped up more than 3%
• Netflix gapped on a strong catalyst that did not involve earnings, i.e., the news of its impending expansion into the Mexican, Caribbean and South American markets.

This expansion into these markets gives credence to Netflix’s foreign expansion plans and lends credibility to the company’s overall strategy. If you will recall, just last fall the company expanded into the Canadian market and in just a few quarters of operations it has emerged as the market leader.

With the equity markets reacting well to the news of the Greek bailout and the strong surge over the past week, I have little doubt that the tailwinds from the market could be enough to push the stock into the hallowed $300 territory -- an area occupied by precious few technology companies.

If all that wasn’t enough, how about a cherry on top? The cherry takes the form of an “F” for Facebook, the social media behemoth, which has been considering a joint venture with Netflix. Facebook recently added Reed Hastings, the CEO of Netflix to its board of directors.

But a word to the wise: In this dynamic market landscape, today’s darling could well become tomorrow’s dud, as is well represented by the misfortunes of Research in Motion (RIMM). Market sentiment could change very quickly and could become headwinds blowing in the face of upward momentum.

Smartstops has the short-term and long-term stop for Netflix at $239.64.


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The Bubble Has Popped -- Now What?

A rare halt in oil trading Wednesday triggered a sharp selloff in commodities and equities in markets afraid of an encore of last week’s commodity plunge. The last halt in oil trading occurred in September 2008, a week after the collapse of Lehman Brothers.

Sliver lost 9% in the selloff, erasing gains in the previous couple days and was down another 6% as of this writing. It has yet to find a bottom -- or as Bob Barker of "The Price is Right" might say, “Down, down it goes -- where it stops no one knows.”

Now with the increased margin requirements driving a number of speculators out of the market, the precious metal may seek out price levels more in keeping with historical norms. Those prices are calculated by seeing how many ounces of silver are needed to buy an ounce of gold. Over the past 10 years the ratio has been roughly 60:1. If silver were to return to a similar ratio, it could go down as far as $25 an ounce. iShares Silver Trust(SLV), the proxy we use in lieu of silver at Smartstops.net, has the short-term stop at $31.97 and the long-term stop at $29.37.

If that wasn’t enough to make you reconsider being long commodities, the Powershares DB Commodity Index Tracking ETF (DBC) has formed a head-and-shoulders. A pattern associated with a change in trend direction. The neckline/support of the pattern coincides with the Smartstops.net short-term stop at $28.16 and the long-term stop at $27.30.

SmartStops provides effective, easy-to-implement risk monitoring for investment professionals and individual investors to optimize profits and minimize losses.

Is the Rare Earth Bubble Ready to Pop?

The weakening dollar has helped erase some of last week’s weakness in commodities.

Silver lost nearly 30% and gold 10% of their respective values, leading many experts to believe the commodity bubble has popped. But after a rather tumultuous week, the precious metals have started their upward trend again. Many could argue that the gold bubble has been building for nearly 10 years now and that silver’s explosive recent growth was a result of the high cost of gold and the strong industrial implications of the metal.

This leads us to ask if the bubble includes all commodities. The rare earths sector has seen incredible growth over the past year.  Molycorp (MCP), which has earnings after the close today, has gone from $15 to as high $79 all in the past year. Many investors are no doubt wary of entering such an extended and possibly overbought company, especially given the drubbing many people took with silver (SLV) in the past week. It's good to be cautious but try not to let your fear override your ability to make sound judgments. MCP has had several strong run ups over the past year and then pulled back, allowing the stock to rest before its next surge up. If you take into account the measured move, it could possibly rise another $20 in the next surge.

If you keep yourself protected, you can always take on higher-risk stocks. Now that MCP has enough history, my firm has added it. We have the short-term stop for MCP at $62.98 and the long-term stop at $57.58. Make sure to always keep your exit strategy in play even if you aren't yet ready to set proactive stops.
Editor's Note: This content was originally posted on SmartStops.net.

Russian Roulette Anyone?

By Raghu Gullapalli 



After an extremely volatile week, what can we expect from silver in the week ahead? If you’ve read some of the same reports in the blogosphere as I have, you may want to try your chances at Russian Roulette -- your odds of success are higher.

There are a couple of metaphors I especially enjoyed:

• “Dead Cat Bounce”
• “Gap and Crap”
• “Silver takes the stairs up and the elevator down”

At the end of its move up, silver was on a rocket. The entire world was in a frenzy, from the taxi drivers to my mother. That was the big clue.

“Sell on excitement”

That’s exactly what George Soros and Carlos Slim -- among the most notable -- did. They started exiting their silver position when it made new all time highs. In some ways the death of Osama bin Laden may have been the catalyst many experienced investors sought. One last spark to bring the market to a fever pitch.

Now what?

Well after a week where silver lost almost 25% of its value, it's hard not to take the value of Risk Management seriously.

This morning Silver Wheaton (SLW), the miner, came out with its quarterly earnings. According to SmartStops.net, the short-term stop is $33.81 and the long-term stop is $31.73.

iShares Silver Trust (SLV) may experience the aforementioned “Dead Cat Bounce” wherein the price bounces up from last week’s lows, making a woeful attempt to break the downtrend and then continue downward.

Editor's Note: This content was originally posted on SmartStops.net.

Silver? To Buy or Not to Buy, That is the Question

By Raghu Gullapalli 


In the past four trading sessions silver has come off more than 20%, leading some to believe that silver’s bullish run is over. After all, some of the world’s savviest investors, like George Soros and Carlos Slim, have been selling their stakes in silver.

Why the sudden reversal? Part of the reason is the new margin requirements instituted last week, and the other part is silver’s correlation to crude prices and the larger market.

I tend to think of this pullback as a long overdue correction for an investment that was getting a little too vertical for comfort. Or to be technical, overbought.

This correction and the new margin requirements should drive the pretenders and speculators out of the market. This sharp move down will no doubt cause substantial panic among those who bought near the top, allowing value investors an opportunity to take advantage. Silver is not just a precious metal but an industrial one as well. It's the top choice of solar companies -- like JinkoSolar Holding (JKS), First Solar (FSLR) and Trina Solar(TSL) -- for use as conductors.

A value investor could look to possibly invest in silver in the days to come after the correction ends. But make sure it begins to trend upwards again before you enter the trade. We never want to try to pick the bottom or the top, that is almost always a lose-lose strategy.

That’s why its always important to have an intelligently adjusting risk strategy to protect your profits and minimize your losses. According to the charts at SmartStops.net, the short-term exit alert came on May 2, 2011 at $43.60 for SLV. Given today its trading at $35.78, that’s already a $7.82 per share protection of profits. If one were to see the trend starting to reverse and wanted to play this bounce, it would be paramount to have stops in place . SmartStops is showing that the optimized exit point for today’s market (it adjusts daily) for SLV in the short term is $36.69, and long term $33.53 dependent on one's investment horizon.

Editor's Note: This content was originally posted on SmartStops.net.

Is It Too Late To Buy Gold?

By Raghu Gullapalli

Is it too late to buy gold? 
This is a question that everyone asks me as soon as they find out I’m a trader. Of course the question comes in many forms…

Have I missed the move?

Is it too expensive now?

In fact even my mother asked me that question just this past weekend. And my mother-in law asks, should we sell?

My answer to everyone is the same. 

Gold and silver have had a remarkable run. Iinvest and trade in both commodities through their respective ETFs (SPDR Gold Trust(GLD), iShares Silver Trust (SLV)) and the companies that mine them (Barrick Gold Corp (ABX), Goldcorp (GG), Silver Wheaton(SLW)). Gold in my opinion is the better trade now for those investors like me who wish to clearly define their risk. And it's still very much a BUY.

GLD has trended up strongly over the past year and I believe it will continue to do so. It has been in a strong upward channel since August and is now trading strongly above the 55, 110 and 210 period moving averages. Chairman Bernanke’s lack of desire to support the dollar should continue to push the dollar lower and gold higher. Hence, my continued belief in the GLD investment.

Rather than outright selling, look at your profit targets to make your decision. Most important though, define for yourself now an intelligent exit strategy to keep those profits protected. SmartStops.net shows the current tighter short-term exit point at $147.73 and the wider, long term at $140.61. As it is optimized daily, SmartStops can bring real time risk awareness to a very fluid market environment.

Editor's Note: This content was originally posted on SmartStops.net.