The dying black gold is coming back

I’m talking about coal, used to be the major source of energy, and probably still is one of the major energy sources used for generating power in the US. In the other parts of the world where oil is expensive and scarce, coal continues to be almost the only economic energy source. But in the past few years, coal has been slaughtered to almost death in the US and most of coal mining companies are either already bankrupt or struggling to survive. For one reason, oil and natural gas have become increasingly cheaper and are certainly much cleaner for the environment. So the demand for coal has been substantially cut back. On top of that, the more devastating force to kill the coal industry is probably the regulations from the previous administration. OB in generally was very much against business as a whole and for coal, he virtually wanted to kill it outright. There have been many very stringent regulations issued by OB that basically would not allow the coal companies to be able to economically survive. The thing is, coal is still a vital energy commodity. Like it or not, the demand is still there. When the sector reached the abyss point, it will become too cheap to ignore. So silently coal has started to come back. Looking at the 10 year chart of the ETF for coal companies (KOL), it has doubled without much attention last year. While it sounds a lot and too late to get in, it still has a lot of room to go up, I think, considering how much beaten down this sector has been.  If anything, I believe KOL’s next leg up may be accelerated in the next few years. One main reason is what Trump is doing: kill the business unfriendly regulations. The impact is almost immediate as I have seen reports telling the stories of re-opening of coal mines throughout the US. I think the trend will continue with accelerating pace with less and less regulations for the business along with more friendly corporate tax moving forwards. The sentiment for the coal industry has been substantially improved, so will be for the coal mining stocks. This is probably another multi-year long-term uptrend in brewing!

It is the time again to buy

Early this year, I was talking about buying uranium stocks (URA). Almost immediately URA shot upmassively over 30% within a couple of weeks. This was clearly too much too soon, a kind of euphoria developed. Euphoric moves never end up well, no exception for uranium. After it peaked in Feb, it has given back all its gains since Nov last year, basically trading where it was 6 months ago around $12. I think now it is the time to go long with URA again. You see, the fundamental bullish force is still there for uranium. After a decade long of bear market for uranium, a lot of uranium companies went bankrupt. Per the report I have seen, now first time in a decade the demand is higher than supply. In this kind of environment, the uranium prices will not likely fall much further when the prices have already been extremely low but demand is increasing. Now the technical pattern for URA seems to have curved out a bottom. I think we are seeing a very similar setup for URA now as it was in Dec 2016. Buying URA now has limited downside risk but a great upside potential, I think. Of course, this is still a speculative call with no guarantee. Mindful of your risk if you are interested to get in.

Has the brutal correction of oil ended?

As predicted before, oil has declined substantially in the past month towards low $40s at the moment. The obvious question is whether we have seen the bottom of oil? The short answer is that I don’t believe so. Fundamentally oil is fighting with a big headwind: abundant supplies much more outweigh paled demands. I don’t see this will end any time soon! The technical indicators also point towards a longer term weakness for the months ahead. I think there is a good chance oil will go below $40 and the worst case scenario it may go down to $20s before its final bottom. In other words, we may not see oil really touch its bottom until a time when there is kind of end of world outcry with a lot of oil companies out of business due to bankruptcy.

Having said that, nothing goes in a straight line, either up or down. Currently the herd mood is very depressing for oil and I have seen a lot of talks that oil will go down further from here. Considering oil is drastically oversold with depressing sentiment at the moment, a rebound is much likely than an immediate big leg down. But any meaningful bounce should be short lived. Don’t be fooled by the dead cat bounce!

Good start with the GW token

 A quick update on the GW token I have talked about a couple of weeks ago. It appears the company is indeed moving ahead according to its token launch plan. As it was initially announced, the token has a limited supply to be issued and the whole launch period will last for about 2 months. The initial price for the token is $1 each for the first two weeks and the price will then increase gradually towards $1.2 by the end of the launch. In other words, this is similar to buying new houses for which usually the early birds have favorable purchasing prices. Same here for the GW token that provides incentives to the early investors. I just checked and now its price has been increased to $1.05 each. If you would like to explore different  income opportunities, this unique rental business for cryptocurrency mining may be considered. The early the better!. Here is the link that you can open youraccount to start.    

A ugly picture for Nvidia

Nvidia (NVDA) has been the Street darling for a couple of years and is still very much so. Of course, by no means I doubt about its business and you can count me to agree that this is a great company that has very bright future. But it does not mean its stock is a good buy at any time. More often than not, momentum stocks will go way ahead of itself and the risk of buying may significantly increase if you chase such stocks at the wrong time. Nvidia is at such a moment. Almost from all angels, NVDA may likely experience some sort of crash in the near term. Fundamentally, with a P/E over 50, it is kind of nose-bleeding expensive. But more worrisome is its very ugly technical picture. As you can see below, it is very overbought per RSI with a downward momentum MACD. It is showing a text-book style of head-shoulders pattern and if it can have any meaningful bounce back, it will likely create a double top shape. All of them are quite bearish.  Then the tech stock index Nasdaq as a whole looks like shaping up as a top going into a seasonal bearish time period. I think NVDA will be heading much lower from here and a 15-20% correction is in the card.

Panic buying, panic selling

A few weeks back, I told you that you should like this COST, the stock for Costco. At that time, Costco was distributing its special dividend,  $7 per share, a great bonus for long-term shareholders. As I warned you though, the stock price would adjust down for the dividend but “good stocks like COST will likely come back to overcome this artificial decline”. This is exactly what has happened. COST indeed dropped quite a lot from high $170s to briefly below $170. While I did expect it to come back soon, I didn’t expect it to recover so fast. In just about a month time, COST has already surpassed its pre-dividend level and was over $180 before today. Then a bombshell was dropped today that Amazon (AMZN) will buy Whole Foods (WFM) for $42 per share. All the  stocks involving grocery including Costco, Walmart  (WMT) and Target (TGT) got smashed hard! Poor Costco crashed by 7% today and is trading below $170. There is panic buying for Amazon/WFM and panic selling for COST/WMT/TGT today!


Purely by luck, I happened to go long for Amazon and also WFM for a few days when both of them were sold hard in the past week or so. My long term COST shares obviously tanked today but I'm having covered calls with a strike of $168. Now with such kind of panic buying and selling, I'm busy today to go against the herd. I think AMZN is too expensive with a quite bearish technical pattern at the moment. So I took profits from the long positions and am shorting AMZN now. On the contrary, today's drastic selloff has created a great opportunity for these quality grocery stocks. I bought more COST and TGT, taking advantage of the "gift" from the herd.

The next big move should be up

Herd’s sentiment for the market is a rather interesting story to read. As with anything in the world, they go like a cycle from top to down periodically that will never change. The interesting part of sentiment is that herds seem never learn from the past and they will almost always be happy or depressing at the wrong time. They will be extremely euphoric when something is at the top on verge of falling or very depressed at the bottom when a turning point is just around the corner. As such their sentiment is always a great contrarian indicator. This time, herds are sending another signal that the long term bond yield should go up as the next big move.

Since the beginning of the year when the general sentiment was very depressing, I have been arguing that the long term Treasury bonds have a much better chance to go up with the interest yields going down (an inverse relationship between the two). I have said that the 10 year interest rate would likely not go beyond 2.65% in the near term but the odds are good for it to go down towards low 2%. The 10 year interest indeed has touched 2.6% at its top a couple of months ago and then has been relentlessly going down around 2.1% at the moment (a 20% drop within a few months). Traders are chasing up the government bonds now, shifting their depressing sentiment towards rather euphoric sentiment. I was even thinking that the interest rate could go down below 2% but maybe this won’t happen again when I see how excited traders have become towards government bonds now. It seems they have totally changed their mind now, becoming extremely positive for more gains from Treasury. When this happens, it tells me the upside for Treasury is likely limited but the downside risk is much higher now. I cannot tell the exact time point of course but I bet the interest rate’s next big move will be up in the months ahead. Accordingly, long term Treasure like TLT should go down or the inverse ETF like TBT should go up. We will see how it will play out.

Expecting a flash crash in the next 10 days

Still remember the one day flash crash a couple of weeks ago? You may consider this was just a random market fluctuation, it may not be so simple. Actually it was precisely “predicted” by some special traders. Let me explain.

You must have heard the volatility index, VIX, which has a nick name of fear’s index as it typically increases when the market drops with fears. VIX has its own options that traders buy or sell based on their prediction if VIX will go up or down. What’s is unique for the VIX option is that it is not an “American style” which allows for day trading. Rather, it is a “European style” that cannot be traded on the daily basis. It means, VIX options, when bought, can only be exercised on the option expiration day, not before. So why is this important for the “VIX prediction”? Well, traders cannot buy/sell VIX options for short term move expectation but they have to commit to holding them till expiration. In other words, it is based on their true “long term” belief which direction VIX will go in the next few weeks. You can imagine most of times, the calls (for up) vs puts (for down) are relatively balanced, meaning VIX is not expected to move sharply one way or the other. But from time to time, when traders are overwhelmingly betting for one side of move, you need to be careful. Believe or not, VIX traders have rather uncanny gut feeling with quite accurate predictability. Weeks ago before the May 19 expiration for VIX options, there was a huge imbalance (over 10 times) in favor of VIX calls, meaning traders were largely betting that VIX would have a huge move to the upside or the market would go down sharply. The market were very quiet with no fears whatsoever most of the time before May 19. Then all the sudden on May 18, VIX shot up 50% higher with S&P plunging nearly 2% in one day, wiping out all the gains in the previous months.

So what happens now with VIX options? Well, the VIX traders are sending another scary signal again. Right now, the VIX calls are over 15 times more expensive than the puts. They are telling us that VIX should sharply go up in the next 10 days till expiration on Jun 16. Of course, I don’t know exactly when and in what magnitude but I believe a sizable panic selling is coming pretty soon. Be careful if you are feeling happy now as a severe plunge could happen any day now!

More information/thoughts on Bitcoin/digital currencies

Following my post on a unique way of investing in the digital currency trend, I have got a question from quite few friends asking how to buy the GW tokens. I thought it would be easier that I simply describe the process here for those who are interested in.




First of all, of course you need to sign up via the GW website to create your own account. The link is here.  After you open an account, you can select how to buy the GW tokens via Bitcoin, Ether or US$. At the top, if you select the $, you can decide how much you want to deposit. After that, you should generate an invoice that will give you detailed instruction for wiring. The money will be held in a legal trust account for your safety. The instruction dose not give the legal firm's address. Not sure if all the banks ask for that but my bank requires it. Here is the address for Perkins Coie LLC, a pretty well known legal firm:  700 13th St NW, Washington, DC 20005.


After the money is transferred, it appears there is a one day delay for the money credited to my GW account. I guess because it takes time for GW to get the confirmation from the trust account. Then you can buy the tokens with the available fund. That's it!




I also got some questions whether now is the time to buy digital currencies (DC) like Bitcoin (BC) or Ether etc. As I said, currently there is a frenzy type of rush that has pushed the DC to their historical highs. Buying now is certainly with some short-term risk as DC is notoriously volatile. But there is no guarantee that you would necessarily get a much lower price if you are waiting for. We are entering an unchartered water and DC prices could go crazily higher in the years ahead. For example, after BC hit its all time high over $2750 a week ago, it dropped down to $2000 within days. But then it started to fight back again and is trading hands around $2650 as I'm writing. Will it go down again to a much lower level or it will simply go up to much higher levels? I certainly don't know. So directly buying DC like BC needs a strong stomach. That's why I'm so excited to learn this renting business in the DC mining sector. Similar to rent a house to someone who want to use it, the day to day house price changes won't have much impact on the renting business, correct? As long as the overall trend is up, you don't need to worry much about the short term property price fluctuations. Same here with the GW token renting business. You basically rent out your tokens to others who wants to use the GW mining services and you will get paid regardless if the one who rented your tokens could successfully mine to get the BC or not. In addition to the rents the token holders can get as regular income, I also see a good potential for the value appreciation of the token itself down the road. If the Bitcoin frenzy continues which I'm personally very sure about, the interest to directly mine the BC will only go up. With limited quantity of the GW tokens available but the demand for it may go up, potentially a lot, the token value should also go up with it. That's basically the supply vs demand logic. The fact that the company will increase the token price after the first 2 weeks and by 20% at most towards the end of the launch period (2 months in total) tells me that this is already the expectation foreseen by the company. I'm pretty excited about the potential here! 

This COW is waiting to be slaughtered

Today I'm going to talk about something unusual, not a conventional stock idea. It is about livestock, more specifically cattle prices. We are seeing something extreme developing that often leads to a big trend change. It is about traders sentiment, a very good contrarian indicator.


As of now, future traders are becoming extremely bullish for cattle, betting for higher prices moving forward, as indicated in the Commitment of Traders (COT) report. We have rarely seen such an extreme as in the past decade, only two other times the euphoric sentiment have reached to similar high levels. The most recent one occurred in 2014 and the cattle prices crashed soon after for a 40% plunge till late 2016. By then the sentiment became extremely depressed. Then the trend turned around and cattle prices jumped almost 30% from late 2016's low till now. History starts to repeat itself as now the traders' sentiment has again become extremely euphoric, more so than that in 2014. Are we going to see another 40% decline for cattle prices? I don't know but I'm pretty sure it will soon start to turn down and likely with another huge crash to follow. If anyone interested in betting for this trend, the ETF for hogs and cattle called COW may be a good short target.

A unique way to profit from the social media

Last week, I talked about the challenges the newcomer social media company, Snap, is facing. Understandably social media is hot and everyone wants to make some money from them. Almost every day there are some social media companies newly created, some of which will go IPO for general investors. Trying to determine which one(s) will be successful as FaceBook is really a daunting task since most of them will probably lose money or even disappear eventually. Is there a safer way to ride onto the social media trend without much fear of the failure of individual social media stocks? Sounds impossible but I can offer one idea actually!

Have you heard about the “California gold rush”? It was the time during 1848–1855 that some gold was found in California. Within the short 7 years period of that time, over 300,000 from other parts of the US and even abroad rushed to California to look for gold. Yes, some of them got lucky enough to become very rich by finding good amount of gold but most of them as you can imagine ended up  hopelessly without making much money or even lost more or died over there.  But one type of business really flourished and made a lot of money without even touching any gold: the so-called picks and shovels business. As easily understandable, every gold seeker required some tools (picks and shovels) to dig for gold, right? Even though most of such gold explorers failed, those selling the tools were still making money. In other words, the safest player for almost any industry is the one who produces and sells the tools needed for the industry. If you can find and invest in such companies, the chance of making money is much greater than betting for individual ones directly relying on the success of the underlying business. No difference for the social media business. You need a tremendous luck and tenacity to find and hold up a social media stock like FB for long term before you can see some serious profit from it. But it is probably much easier to hold up a picks and shovels stock that has products you know needed for the social media companies regardless if their business is going well or not. Even better, if you can buy and hold a few picks and shovels stocks that support different aspects of the social media functionality, as you are almost like a fund manager to create a mini ETF for the social media backbone. I can give you a few ideas of such companies: the very mature ones with also good dividend yields are Intel (INTC for chips for almost all the computers) and Cisco (CSCO for routers connecting devices on Internet). More newer ones including Qualcomm (QCOM for chips specific for iPhones], Skyworks (SWKS for chips for mobile devices including connected cars), and Nvida (NVDA for chips for videos important for all the social media arena) and is also producing chips critical for automated cars. Of course I don’t mean they are all cheap but if you spread your money among them and buy them slowly over time, you won’t miss the social media hot trend for sure and safely!

A low risk ride of the bull train of digital currency

By now, you must have heard about BITCOIN or digital currency. If not yet known, the early guy who bought Bitcoin with merely $200 ended up walking away with $12 million. Cannot believe, right? Yes, that's how powerful to take some risk to try some new innovations from their early days. If you are interested in getting into the bitcoin frenzy, here is an opportunity with much less downside risk. There are three ways to make money for digital currency (DC): either mining coins yourself that requires a great deal of IT technical skills, or buying DC directly, or providing mining services for those who want to mine DC. The last option is similar to renting business with much less risk as it is not so much impacted by the very volatile DC prices. Right now, there is such an opportunity with GigaWatt (GW). In a nutshell, you buy their GW tokens that allow you to use their mining services and you can rent your tokens to those who want to mine. The token number issued is capped and therefore will be limited in availability. Since the DC trend has become really strong and been adopted by more and more businesses as well as governments like Japan, the demand for mining DC will only increase moving forward. I personally got the first hand experience of making 20 times my money by buying a DC called Ether. It is really something you should not discard. My source tells me this GW renting business is real and trustable with a potential 20+% annual return. You can go there to review in more details to see if you like the idea. Be aware, the tokens can be bought out pretty soon if the demand goes crazy, given how hot the DC is right now.

Of course, don’t get me wrong. This is a highly speculative idea with no guarantee whatsoever. I personally simply strongly believe the DC mega trend, similar to my strong belief in gold and silver, and have been the beneficiary of testing the water from it with great profits. As with any new technology and innovations, it won’t be a smooth road but is destined to be very bumpy. The good news is that you don’t need a lot of money to make good profits as early pioneers. For GW tokens, the minimal investment is just one dollar for one token in the first two weeks of launch from today, which will be more expensive after that. This round of token launch will only last for 2 months at most or can be much shorter if the demand is high. Potentially the token's value may immediately increase by 20% by the end of this two months launch period according to the predefined escalating pricing scheme. So if you want to get into this mega trend, don’t wait for too long. I have bought my share of the GW token directly with money that needs to be wired in first. I'm looking forward to the unique experience with the very first DC mining service in the world. I like the odds for a good profitability! My long time experiences in various investments tell me this is something likely big and potentially life changing!!