Monday, March 09, 2009

Weekly Stock Pick

Buy Sell Hold
Last Weeks Major Financial Events

Last week was another down week in the markets. This bear market is moving fast lately. If it keeps this pace, in my opinion we might be at some major significant buy point price targets sooner than later, but as always I’ll just let the market and the charts tell me where it wants to go, then I’ll pass the info along here. Last week the USA unemployment rate hit records highs at 8.2%, and AIG got more bailout money from the Fed. If AIG didn’t get the cash infusion, maybe the whole world would be filing bankruptcy. I’m not suggesting the Feds reward bad companies, but there is a bigger picture going on here, and it the very survival on the world’s financial systems and economies. So for now, let’s hope, pray and encourage the Feds around to world to pump up the volume on their cash infusions for everyone’s financial rescue. The governments of the world may be the market of last resort.

This Weeks Major Financial Events

This week the UK Fed may be buying a big stake in Lloyds Bank to help them, and Madoff is supposed to be arraigned his alleged $50 billion financial fraud. Thursday March 12 could be very significant day for the markets as the House financial services subcommittee plans a hearing on mark-to-market accounting rules, which have been blamed for forcing banks to report billions of dollars in write-down losses. If that meeting results in the government relaxing mark-to-market rules, Option Monster Jon Najarian thinks the stock market could explode. I’m inclined to agree, at least for a short term pop.

Scanning The Stock Charts for Opportunities

Scanning the stock charts this Monday morning I’ve zeroed in on a two stock charts showing low-risk high-reward buy long positions. This could be a risky bet in this market, but implementing a tight stop-loss can make it a possible rewarding one also. The other stock pick that I’m not listing here is WGL Holdings energy utility. After hearing about someone on Friday taking big option call positions in Duke Energy and then WGL showing up on my stock scans I wanted to share this with you. I don’t recommend WGL this week because it looks like WGL still has some consolidation work to do. Longer term, WGL looks pretty good technically and fundamentally.

This Weeks Stock Pick

This week’s buy long stock pick of mine is a company involved in dare I say, the financial sector of the property and casualty insurance industry. This company is the smallest of its two major competitor peers, ACE Limited, and the Travelers Group. The short sellers have been talking trash about this company, and even with their February 20 Earnings announcement of record earnings of approximately $1.5 million, resulting in a 21% increase in their book value per share to $278.28, not including the $5 per share dividend paid in the first quarter of 2008, Fairfax stock price dropped from 280 to where it closed on Friday at 227.38.

Buy Long Fairfax Financial Holdings Limited: Ticker FFH

Buy Entry: 211.16 to 227.38

Stop-Loss: 211.00 or below.

Important Stop-Loss Note: If 211.00 gives way, a possible downside target is 143.44 to 150.49.

Take-Profit Areas: 238.76, 250.14 to 261.52, 337.96 to 362.78, 365.12 to 391.94, 432.38 to 464.13

Important Take Profit Note: In the current market conditions, stop-loss is highly recommened if going long on this weeks pick, and taking profit on the nearer upside price targets would also be a prudent strategy too. I’m not suggesting to buy and hold any stock just yet.

Fairfax Financial Company Profile

Fairfax Financial Holdings Limited (Fairfax) is a financial services holding company which, through its subsidiaries, is engaged in property and casualty insurance and reinsurance and investment management. The segments of Fairfax are Canadian Insurance, U.S. Insurance, Asian Insurance, Reinsurance, Runoff and others. During the year ended December 31, 2007, the Company completed the acquisition of Cunningham Lindsey. On April 3, 2007, the Company completed the sale of substantially all of the assets of Guild Underwriters Napa Inc. In September 2008, Fairfax completed a 58.51% stake in Advent Capital (Holdings) PLC. In November 2008, Ridley Corporation Ltd completed the sale of its 68.8% interest in Ridley Inc. to the Company.

Click here to review and Trial the Trading Software I used in determining my long position on FFH. Enter I2S in the "coupon code" field to receive the 5% discount.

Click the Fairfax Financial Holdings Stock Chart for a larger view.

Fairfax Financial Stock Chart