Mishlove: My Picks for Friday
Senior Editor, CNBC
Hey everyone, guest blogger Jeff Mishlove is here with his picks for this last day of the trading week. We'll get right to his thoughts: Wednesday’s picks illustrated the principle (I’ve often emphasized on CNBC’s “How to Win” program) that the short-squeeze strategy is productive of large moves in both directions. Of course, I am not privy to inside information, so if the earnings report is below expectations, we can see a large downward move – just as readily as we might see a large upward move if the report is positive.
So, of the six stocks that I recommended for purchase on Wednesday, I see that four of them had price movements greater than 5% in the next 24 hours. Three of those, however, were in the downward direction. Only ICU Medical had a strong, positive price jump. It rose 6.37%. For purchase on Friday, I am deviating from my normal short squeeze strategy. That is because the two stocks with earnings reports coming out that also have the strongest short squeeze potential also show no history of large, single-day price jumps. They are Arch Coal and USG Corp . But, after glancing at their charts, I would ignore them.
So, my recommendations for the weekend are based on stocks that have a history of healthy, single-day price jumps – even if there is little or no potential for an extra boost from short sellers forced to close their positions by buying.
Lee Enterprises publishes 56 daily newspapers plus over 300 specialty publications – mostly classified advertising. It is down over 15% from its recent 52-week high, and could see a substantial bounce.
Gentex Corp , a manufacturing company based in Michigan, is about 8% down from its 52-week high. Short sellers control about 7% of the stock float, while institutional investors own over 80%.
NVR, Inc. is a homebuilder whose stock, while down for the year, has recovered substantially from its low of last July. Short sellers control over 19% of the stock float. The stock is definitely in an upward trend right now.
China Eastern Airlines is near the bottom of the range in which it has been trading for most of this year. It is likely to benefit form expansion of air travel from China to the U.S.
Of course, picking stocks to hold over the weekend is tricky. Generally, the biggest price movements come from announcements regarding merger and acquisition activity. And, the system I am using – based on earnings announcements and short squeeze potential – is not particularly useful for that. In fact, I am not aware of any good, short-term trading system, for predicting M&A announcements. So, I’d be happy to hear from readers who have suggestions in this direction.
Jeffrey Mishlove is creator of www.forecastingsystems.com. He is a registered commodity trading advisor. He serves as president of the nonprofit Intuition Network. He is the former host of the weekly, national public television series Thinking Allowed.
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