July 18, 2008
Earlier this week I made
aggressive buy recommendations to all of our
subscribers, and those recommendations need further
updates. The recommendations were to buy Fannie
Mae (FNM) and Lehman Brothers (LEH) at specific levels
(for aggressive accounts only) with the goal of
near-term capital appreciation in mind. Quickly,
after those recommendations were made, these stocks
appreciated measurably and updates to those
recommendations are now necessary.
The following updates reveal my
current upside targets for Fannie Mae and Lehman
Brothers. In addition, although we did not
recommend Freddie Mac directly, we have offered our
upside target for Freddie Mac as well because that stock
is lumped into this overall strategy and could easily
have been chosen along with Fannie Mae and Lehman
Brothers.
First of all, these stocks were
chosen for two primary purposes, and then an additional
catalyst came into play. First, the market was in
a bottoming process and poised to turn higher, so we
were interested in long plays which offered significant
turnaround potential. When the Market reaches
channel - based bottoms the corresponding recovery is
almost always lead by short - covering. That told
us to look for stocks which were heavily shorted, in
anticipation of a corresponding short covering rally.
Obviously Fannie Mae and Lehman Brothers were high on
this list.
Second, Both of these stocks were
testing their own longer term support levels as defined
in our real time trading reports for FNM and LEH
respectively. This told us that the risk/reward of
buying these stocks near support was in our favor.
Then, the final decision was made
when the Government stepped in to regulate short selling
in FNM, and the SEC revealed an inquiry into Goldman
Sachs (GS) in relation to the Bear Stearns (BSC)
debacle. Please review my article from Wednesday
on this subject. This final catalyst told me that
short sellers would start to pull away from FNM and LEH
because the SEC was watching closely for misconduct.
Combined the first Market Timing
signal, the corresponding test of support in the stocks
themselves, and the added catalyst offered above,
presented compelling opportunities in FNM and LEH, with
FRE part of the group.
Here are the specific
recommendations and revised upside targets for FNM and
LEH:
Fannie Mae (FNM): Our
entry level into FNM was $8.8. The revised upside
target for FNM is represented in our real time trading
report for FNM as longer term parameter #2. We
recommend taking profits at or near that level. In
addition, understand that this report updates every day,
so please monitor this target price for any adjustments.
Here is the report (watch longer term parameter #2):
http://www.stocktradersdaily.com/clubsite/Club2/SSD/NewFocusStock.php?Stocks=fnm
Lehamn Brothers
(LEH): Our entry level into LEH was $14.35.
The revised upside target for LEH is represented in our
real time trading report for LEH as longer term
parameter #2. We recommend taking profits at or
near that level. In addition, understand that this
report updates every day, so please monitor this target
price for any adjustments. Here is the report
(watch longer term parameter #2):
http://www.stocktradersdaily.com/clubsite/Club2/SSD/NewFocusStock.php?Stocks=leh
Freddie Mac
(FRE): Although we did not recommend FRE directly,
we have identified the upside target for FRE as longer
term parameter #2 in the real time FRE report listed
below as well. It also updates every day, so
monitor it closely:
http://www.stocktradersdaily.com/clubsite/Club2/SSD/NewFocusStock.php?Stocks=fre
Our reports are available to
members and Trial Members only. Click here to sign
up for a Free Trial if you are not a current subscriber:
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Good Trading,
Thomas H. Kee Jr.
Thomas H. Kee Jr.
President and CEO
Stock Traders Daily
http://www.stocktradersdaily.com
1.866.213.2067
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