Yesterday, we got into a new Buy of the Week in China Automotive Systems Inc. (CAAS) at 19.90. We are looking to hold CAAS for a 3-5% gain this week. We are hoping it will bounce on some earnings buzz and strong chances for a very stellar repeat quarter. We will have to continue to wait and see, though, how this one does. Today, the market may be looking for some pullback to start the day on a fairly quiet morning, which I think presents some interesting opportunities.

Let’s get into the picks…

 

Buy Pick of the Day: Ultrashort Proshares Real Estate ETF (SRS)

Analysis: The main economic indicator for the day is the Existing Home Sales report at 10:00 AM. In congruence with this report, one of the major residential construction builders, KB Homes (KBH), released some rather unpleasant earnings today. KBH missed its earnings estimates this morning with an EPS of -0.71 vs. the expected -0.41. It was a pretty sizable miss. This miss is the first catalyst to what I think could be a pretty good day for the Ultrashort Proshares Real Estate ETF (SRS). The ETF, which models REITs and more commercial real estate, tends to have a strong correlation with what is also occurring in the residential sector.

The Existing Home Sales report is really anyone’s guess, but with the KBH news and the fact that forecasts are showing less existing home sales than last month, I do not see them being taken in a strong light in the first thirty minutes. I think that investors will sell into the report, which will be good news for SRS. Futures have been declining throughout the morning slightly, which tends to suggest that the market will drop to start the day. Further, the market has continued to rise because of good data that has been released and positive market sentiment. If the home report meets expectations or is worse, it is a very bad thing for the markets and should send it even lower.

We want to get involved in SRS, therefore, this morning with the intention of selling it within the first thirty minutes unless existing home sales comes out at 5 million or below. If the data comes out below expectations, then we will continue to hold the stock for more gains, up to 4%. 

Technically, SRS is somewhat hard to gage because it is an ETF; however, the stock has dropped…
continue reading