I hope everyone had a great Thanksgiving.  Since we’re in the middle of a holiday weekend, I thought I’d include a piece about finding real estate investments.  Throughout the early 2,000’s the rage was flipping houses as the housing market just kept going up, up, up…  Now, we’ve had a subsequent crash, and with mortgage rates at record lows, now could be the time to think about real estate investing again.

 First, you must increase the odds by finding more deals. Who is more likely to get a cheap apartment building, an investor that simply looks through the listings, or the one that uses ten resources?  Here are the ten: 

1. Talk. Let people know you are looking and sometimes the properties will come to you. There are a lot of owners out there who want to sell, but haven’t yet listed their property.
2. Use the Web. Go to a search engine and enter the type of real estate you are looking for, along with the city you want to invest in. You never know what you might find.
3. Drive around looking for “For Sale By Owner” signs. Owners often don’t want to pay to keep the ad in the paper every week, so you won’t see all properties there.
4. Find abandoned properties. That’s a pretty clear sign that the owner doesn’t want to deal with the property. He might sell cheap.  Here is another option: 
5. Find old “For Rent” ads. Call if they are a few weeks old. Landlords are often ready to sell, especially if the haven’t yet rented the units out.
6. Talk to bankers. You might get a foreclosed-on investment property cheaper if you buy it before they list it with a real estate agent.
7. Offer someone a finder’s fee. There are people that always seem to hear about the good deals. Have such people coming to you.
8. SearchEviction notices. If your local papers publish eviction notices, or if you can get the information at the courthouse, it can be useful. A landlord who just went through the procees of evicting tenants is a likely seller.
9. Look for Old FSBO ads. If you call on two-month-old “For sale By Owner” ads, and they haven’t sold, they may be ready to deal. Owners often give up the effort, but still would love to sell. Help them out!
10. Advertise. “Looking for investment properties to buy,” might be sufficient to generate a few calls.

 REAL ESTATE INVESTING THROUGH ETFs

If buying real estate isn’t for you, you can still play the real estate sector using ETFs.  Here are a few to consider:

•  Cohen & Steers Global Realty Majors ETF (GRI)
• Direxion Real Estate Bear 3X – Triple-Leveraged ETF (DRV)
• Direxion Real Estate Bull 3X – Triple-Leveraged ETF (DRN)
• Dow Jones Wilshire REIT ETF (RWR)
• First Trust S&P REIT Index Fund (FRI)
• iShares FTSE NAREIT Industrial/Office Index Fund (FIO)
• iShares FTSE NAREIT Mortgage REITs Index Fund (REM)
• iShares FTSE NAREIT Real Estate 50 Index Fund (FTY)
• iShares FTSE NAREIT Residential Index Fund (REZ)
• iShares FTSE NAREIT Retail Index Fund (RTL)
• PowerShares Active U.S. Real Estate Fund (PSR)

It’s been a crazy week on Wall Street.  The move has been mostly down with the exception of yesterday’s tremendous rally because of the GM IPO and a better than expected economic report (Philadelphia Manufacturing).  But all week the retail sector has been strong, and today’s Company Invest pick, Lowe’s (LOW) in particular looks poised for a big rally.

COMPANY INVEST TECHNICAL ANALYSIS

Looking at the chart “A” is the 3-day Relative Strength Index.  As you can see the momentum is positive and it is about to break through 50.  RSI readings above 50 are considered quite bullish.

“B” is the price chart.  Notice, instead of the usual candlesticks, I chose to display a line chart.  This is good for seeing certain patterns.  There is a powerful bullish pattern called the “W” pattern.  Essentially it is a double bottom pattern where the stock sells off, rallies, then pulls back again before really taking off, thus forming a “W” shape.  Two keys to this pattern:  #1 the second “V” of the “W” should not dip as low as the first.  What this says is that after a rally, there was just some normal profit taking (not a heavy selloff).  #2  The most powerful occurrence of the “W” pattern is when you see it occur right under a major moving average.  That’s because many short sellers place their stops right above moving averages.  So the theory is, if the stock price breaks through the moving average, those shorts will be forced to cover and buy back shares they sold, thus making the stock move even higher.  If it sounds confusing, don’t worry.  Just look for the W under either the 50 day or 200 day moving average with the right side higher than the left and you’ve got a winner.   And look at Thursday’s chart of LOW.  BINGO!

“C” is the MACD histogram.  Yesterday we got a bullish pPp reversal on the chart.  This is a 3-bar reversal where you have a selling bar, a deeper selling bar, then a shallower selling bar.  Confirmation of this pattern will occur when LOW closes above $21.64 (yesterday’s close).

“D” is the slow stochastic momentum indicator.  Notice the nice higher low the stochastic put in (green up-sloping line).  Also, we got a bullish touch of the signal line (black) with the stochastic line (red).  Look for a solid cross of the signal line to the upside for confirmation.

Company Invest Bottom Line: Looking at the black parallel lines in the price chart it looks like LOW could easily gain 10% in the near future and move to the $23.25 area for a great trade.  Start with 50 or 100 shares and put a stop in at $1 below the purchase price.

Company Invest Recent Picks:  Still holding ERY and QID despite a rough day yesterday.

MARKET STUTTERS DESPITE QE

Despite the implementation of Quantitative Easing (QE2) this week by Ben Bernanke and the Federal Reserve, there was a swift selloff in the market today.
Very few stocks closed in the green with the exception of Home Depot (HD) and some others in the retail sector.

Gold, oil, and most other commodities sold off hard as the dollar rallied fiercely despite the daily buying of US Treasuries by the Fed through Permanent Open Market Operations (POMO). Speaking of Quantitative Easing, for those of you who don’t know exactly what it is, check out the entertaining video below today’s trade update; it’s priceless!

COMPANY INVEST TRADE UPDATES

ERY: ERY is a triple levereged (3X) Bearish Energy Sector ETF. We suggested getting in last week and got stopped out. We then Re-entered the trade on Monday at $29.25. Since then, ERY has gained a nice 8.25%, closing at $31.67 today. What to do now? This trade is doing fantastic! We believe it has much upside to go. Hold your shares and look to add to your position on any slight pullback (possibly tomorrow). We put a 6% trailing stop in today. That way, worst case we’re still ahead on the trade.

QID: QID is the Technology sector Ultrashort ETF. We recommended QID in last weekend’s post for purchase on Monday morning. We got it at $12.60 on Monday and since then it has gone up nearly 5%, closing at $13.20 today — Not bad for two days! What to do now? Hold and buy more on a pullback (when the market bounces in the next trading day or two).

QE VIDEO

Today’s Company Invest pick is Bank of America (BAC) — another selection from the financial sector.  At CompanyInvest.com, we will only select stocks for trades that are not overbought, but right now most of the market is terribly overbought so it becomes a challenge to find stocks to trade.  Think of buying at wholesale and selling at retail.  We’re always looking to buy stocks when they are on sale.  In just two weeks time, BAC has pulled back 11%.  Now could possibly be a great time to enter a BAC position to the long side.

COMPANY INVEST TECHNICAL ANALYSIS

Looking at the daily chart, “A” is the slow stochastic indicator which measures buying/selling momentum.  A reading of 80 is considered overbought, while 20 is considered oversold. Today’s reading is at 7.30, way oversold.  Also, BAC has moved into oversold territory and out twice prior to now.  You should always buy when the stochastic indicator is on the bottom, so the extreme oversold status here is bullish.

“B” is the daily price chart of BAC going back 6 months or so.  The first thing to look at are the red and gray volume bars below the pricing candlesticks.  Look at the selling volume (red bars) that occurred last week. Those high volume bars could suggest “capitulation,” which occurs when panic selling happens and everyone is selling the stock.  A shakeout of sorts. Since then the red bars have been shorter indicating the selling is slowing down.

Next. we drew parallel red trend lines illustrating the downtrend that has occurred in BAC since last April. From these trendlines it looks like we have a low target of just below $11/share, and a high target somewhere between $13.30-$13.40.  So if you buy BAC near $11 and it runs to $13.40, there is a possible 21.81% gain to be made on the upside here.  We like that number!

Finally, “C” is the 3-day Relative Strength Indicator (RSI).  The 3-day RSI gives great swing trading (2-3 days to 2-3 week hold) signals.  Right now the RSI is way oversold (note the brown areas).  If you look at the last 8 times the RSI was this oversold, there was a rally of some magnitude ALL 8 times (The green arrows in the price charts indicate the trade entry points based on the RSI buy signals).

Company Invest Bottom Line:  Buy BAC here and put a stop loss order in at $10.47.  That way your risk is very low, while the potential reward is quite high.

Today at Company Invest, we focus on the retail sector and today’s pick looks like a great trade.  It’s Home Depot, member of the DOw 30, and the largest home improvement retailer in the country.

While the S&P and DOW have continued to go up, retail has taken a beating over the past 5-6 trading sessions, meaning it’s a good buy because we always try and buy stocks on sale. But looking at the daily chart, HD is in a great spot for a swing trade for a possible 10% pop to the upside.

COMPANY INVEST TECHNICAL ANALYSIS

“A” is the 3-day RSI.  The three day timeperiod is ideal for swing trades.  Look at the pattern of green circles to see that when the stock is this oversold, it nearly always rallies for 3 or more days.

“B” is important for two reasons.  #1, today’s candlestick was a “hammer.”  Look at the long tail, indicating strong support.  #2, notice where the stock closed today.  Right exactly at the 200 day moving average (major support). The trade is ideal, because if we open up lower in the morning, you could buy it below $30.50 and put a stop right at $29.75 (the 50 day moving average (blue line)).  Your risk will be less than .75 cents, but you could easily pick up $3-$4 on the upside at a target  of $33.

The MACD histogram “C” (blue bars) failed to put in a lower bar today.  Look for a higher bar tomorrow for confirmation of a reversal.

Finally, “D,” the stochastic oscillator, which measures momentum, is bottomed out, while at the same time the stock is sitting right on support.

Company Invest Bottom Line: Grab it here, stop at $29.75 for a run to $33.

Seasoned investors know all about “shorting” the market, but many newer investors do not.  When you “short” a stock, you borrow shares from your broker, immediately sell them (with the hope they will go DOWN in price).  Then if they do go down, you buy them back a lesser price, return the shares to your broker and you keep the difference.

(e.g., You short 100 shares of Alcoa (AA) at $13.00 per share.  In a week, the price of AA drops to $10/share.  You’ve just made a profit of $3/share or a quick $300 profit.)

If this sounds complicated, don’t worry. There are dozens of “short” ETFs (Exchange Traded Funds) around that you can trade.  An ETF is similar to a mutual fund, but can be traded like a stock (you can buy and sell shares intraday).

Today’s Company Invest pick is MWN.  MWN is a triple-leveraged ETF that is short the “midcap stocks.”  It seeks a return that is 300% of the inverse (or opposite) of the price performance of the Russell MidCap index.  Simple put, when the broader market goes down (S&P, Russell), this fund will go up fast.

You can see from the chart that MWN has taken a beating lately since the market has been rallying.  That is a good thing.  You want to buy stocks or ETFs AFTER they selloff, or when no one wants them.  It’s like buying wholesale instead of retail.

COMPANY INVEST TECHNICAL ANALYSIS

“A” shows the 3-day RSI in an oversold state.  This is a buy signal for a short term trade.

“B” shows the stock price sloping down, while the stochastic lines “D” are looking like they will slope up at the same time.  That is a positive divergence and another buy signal.

“C” Is the MACD histogram.  This is a nice predictor of trend change. As you can see, the blue bars have been getting smaller and are headed for the zero line. The last two times this happened (see other green arrows), the stock rallied by several dollars both times. Look for the bar to break above zero soon.

Finally, “D” is the slow stochastic, a measure of momentum. The best signals occur when the lines enter oversold territory (<20), go back above, then go back down below 20 again.  As you can see, this has happened.

Company Invest Bottom Line: At $13 a share, MWN is hard to pass up.  Grab 100 shares and put a $1 stop in.  That way, the most you could lose is $100, while you could easily make $500-$1,000 on the upside.  A great risk/reward play.

The Dow just gained 9% in September.  It was the best September since 1939!  The DOW is now closing in on 11,000.  Get out the party hats right?  As Prince sang, “Let’s Party Like it’s 1999.”

 We’ll it’s eerily like 1999.  For one, in April of 1999 the DOW broke 11,000 for the first time.  As of yesterday, 10/5/10, the DOW was again less than 50 points from breaking through 11,000.  11 years and NO gain in the DOW.  Wow! And here we are again.  1999 also marked the dot.com bubble inflating in full force.  Investors couldn’t swoop up stocks fast enough, and many of them (especially tech companies) got massively overvalued.  Then, in 2001, that bubble popped and it all came crashing down.

 Then there was the housing bubble and the commodities bubble, and now we’re in the middle of the Government induced, zero interest rate bubble.  This one took us from the March 2009 lows (a 68% rally!!!!)  And it our view, we’ll be giving this entire rally back over the next 3-5 years too.  Consider mutual fund cash levels.  Although we like to think the market is controlled by retail investors, it’s really the institutional investors (pension funds, mutual fund managers) that are in charge.  The chart below depicts mutual fund cash levels (the amount of cash fund managers have available to put to work).

 As of mid September, 2010, mutual fund cash levels were recorded at an ALL-TIME low of 3.4%.

Major rallies occurred in 1974, 1982, and 1990 when the cash levels were greater than 11%.

1. The market sold off in   1973, 1976, 2000 and 2007 when cash levels were below 4.5%.
2. A low of 3.9% in occurred 05/1972. The market top was 12/1972 followed by a 46% decline.
3. The next historical low was 4.0% on March 2000 as the S&P reached its peak. Prices held up to make a lower high in September 2000 and then sold off for a year to a 43% decline.
4.  The next historic low of 3.5% was set in June and July 2007. The price top occurred several months later in October 2007 and prices sold off for 1.4 years to a 56% decline.
5. The July 2010 level was 3.4% compared to 3.8% in June and 4.2% in July 2009. Cash levels are at a new historical low. The top could be in or prices could hold up for several more months but in either case the market is facing a long decline similar to 2000-2002 and 2007-2009 (40-60%).
6. Cash levels will have to move much higher before the secular bear market ends.

 But never, fear, stay tuned to companyInvest.com as we will guide you through these murky waters.  There will be many opportunities ahead, and stocks do not go straight down.  There will be many nice rally opportunities, and we’ll even show you how to make money when the market goes down.