Three Stocks on My ‘BUY’ List

I like to read. But I read so much each day to get a handle on global markets that I struggle to read for pleasure. Oh, I also have five young children that I sometimes read to and always talk to.

By the end of the day, I’m just tired of all the words.

In case you are too, here are few words paired up with a few charts that’ll do the talking. Today I’d like to show you three stocks that you can add to your buy list. But one of these names is not a traditional "buy." Read on and you’ll see what I mean …

CF Industries (CF)

CF Industries makes and distributes nitrogen fertilizers and other nitrogen products worldwide.

Their share price has a pretty chart going for it. I mean, the last several months have not been pretty for shares of CF. But the setup bodes well for the future, it seems.

I’d think about buying now.

If you put a stop-loss somewhere beneath the recent daily low — or watch the behavior on a test of that low — then you’re looking at a pretty good risk-reward setup … based purely on what this chart says to me.

Here is a weekly chart to give you a bigger view, for what it’s worth.

A whopping 65% rally is not out of the question before the year is over. Admittedly, though, I’m not sure if broader-market risk appetite can hold up long enough to let CF make this move.

But I’d even be happy to walk away with 20% on CF in a rally over the next couple weeks.

Sibanye Gold (SBGL)

Sibanye Gold owns and operates underground and surface gold operations in South Africa. They’re also in the process of acquiring Stillwater Mining Co. (SWC). Stillwater has exposure to platinum and platinum group metals operations in North and South America.

A look at the chart is rather attractive — a three-wave impulse rally has given way to a sharp correction. And that sharp correction looks like a buying opportunity if I ever saw one.

If I am right, the next upswing will take the form of a third wave extension that could send shares of Sibanye higher by roughly 59% or more. And that would still be in the context of a countertrend rally (a correction) in the grand scheme of things.

Here is the weekly chart again to help you visualize that:

You know, even catching a retracement of the recent selloff could make you a nice quick profit of 10% or so.

Alcoa Corp. (AA)

Alcoa produces and sells bauxite, alumina and aluminum products.

This stock is NOT on my BUY list. Rather, it’s on my SELL list. I can, however, tell you what you can buy if you want into this trade … but you don’t want to sell short.

First, let me tell you that this is good trade idea if you’re worried about buying any stocks at current levels, considered by many to be nosebleed overvaluations.

Related story: When U.S. Stocks are Expensive and Volatile

Second, a chart setup suggests this is a good time to exit shares of Alcoa.

I expect a sell-off would drag shares of Alcoa lower by at least 20%, based on the wave of selling earlier this year.

The sharp climb seen in recent days is the result of Alcoa’s earnings announcement beating expectations. What I’ve noticed, though, is that Alcoa tends to reverse its earnings price action each quarter. Not always, but often enough to get my attention.

This time, I think it’s ripe to do just that.

Again, if you don’t want to sell short shares of Alcoa, you have another "option." You can instead buy put options on Alcoa.

Put options essentially provide the buyer with short exposure to the underlying stock. The value of put options will increase as the underlying share price decreases. There are a couple other variables in valuing options, but this is generally a good strategy of getting short a stock without having to sell short.

WHAT IF I ALREADY OWN SHARES OF ALCOA — WHAT SHOULD I DO?

If you hold shares of Alcoa, and you’re worried that the price is going to fall, you can do one of two things:

1. You can sell your shares to just get out altogether. Or …

2. You can hedge the value of your shares by selling covered call options.

In the latter scenario, if the value of Alcoa’s shares drops, you would collect cash with the sale of call options. That cash would help compensate for the loss of value in the shares you hold. You would sell one covered call option contract for every 100 shares you own that you wish to hedge.

Note: If the price of Alcoa does not drop, and the options you sold are exercised, you’d be required to part with your shares of Alcoa at the strike price of the options you sold. That may result in a gain or a loss when you sell those shares, depending of course on what you originally paid for them.

If using options is something you’re interested in doing, but you’re not quite sure how to get started, I’m already helping subscribers use these strategies to bolster their trading performance.

Discover how we are using simple options strategies to go for double-, triple-, even quadruple-digit gains … no matter whether stocks and commodities are going up or down. You can find out more here.

Do right,
JR Crooks

Your thoughts on “Three Stocks on My ‘BUY’ List”

  1. “Sibanye Gold (SBGL)
    A look at the chart is rather attractive — a three-wave impulse rally has given way to a sharp correction. And that sharp correction looks like a buying opportunity if I ever saw one.”

    Excellent, today – 32 %. ;-D

Comments are closed.

“JR” specializes in trading commodities, currencies and options. He has spent nearly 10 years analyzing financial markets and writing about global economics. JR honed his trading techniques and global-macro worldview alongside his father, Jack Crooks, at Black Swan Capital. JR also…