Three Reasons to Go Long on US Global Investors

By Quint Tatro  MAY 29, 2009 11:50 AM

Possible massive inflow of assets now that mining shares have caught a bid.


Editor's Note: The following is a daily commentary and trading alert sent out from our FlexFolio by Quint Tatro earlier this morning.  Click here for a FREE 2-week trial.

FlexFolio Morning Commentary - 9am

We arise this morning to once again see futures pointing North. Interestingly it seems that traders are starting to throw in any thoughts of a move lower from here and are starting to embrace the action for what it is. While it raises the contrarian eyebrows, we must not allow this qualitative observation alter our strategy at this point and continue to seek prudent entries regardless of the direction.

Yesterday we added two new names; a long and a short. Both of which I hope to give much time to mature and follow their longer term technical patterns. As I review my trade journal over the past few months it has become clear to me that I have micro managed the move, which makes a great deal of sense considering the nearly 2 years that micro-management equaled survival. Now, it looks like this is changing a bit and rather than switch sides on each shake, we must observe the longer term support and resistance levels, taking our cues accordingly.

This morning I come into the day with a long list of potential longs and a few shorts, of which I will start to enter should the action dictate. The commodity / inflation theme is really starting to heat up and is where I’ll focus my attention. The Bulls have done a very good job at holding key levels, if they can continue to do so, many stocks will set up allowing us to participate in any future break.

FlexFolio Adds - One Long, One Short - 10am

The market is experiencing some profit-taking this morning after a hot open. Considering it’s Friday and we’re closing out the month, it’s tough to take this for any more than what it is, traders shooting traders.

In sticking with our theme of late, which is trading patterns and not broad general market themes, I want to add another long and short this morning to the portfolio.

On the long side, I have started US Global Investors (GROW). Why?

1. This fund company is known for its metal-based mutual funds and should start to see a massive inflow of assets now that the mining shares have caught a bid.

2. This stock will typically move in sympathy with the mining shares and take some time to catch the move, but should attract traders' attention should it continue to set up technically.

3. The stock has put in a decent double bottom going back to November of 2008 and is trying to attack recent highs after breaking a shorter-term descending trend.

With an eye on the 4.75 level as a stop, I have gone ahead and taken a 600 share position here, at $5.62 to start.

On the short side, CA Inc (CA) has broken a trend going back to October of 2008 and has started the consolidation process now. With an eye on a move over the 50 day as my stop, I have gone ahead and taken a 700 share position here at $17.04.

GROW is almost +10% since trade sent to FlexFolio subscribers
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Please note that one of the things I am experimenting with in the FlexFolio is a .5% risk amount for each stock. I would like to start handling this account in a similar manner to which I would handle my own fund.

600 – GROW - $5.62
700 – CA - $17.04

1pm Update: In the interest of full disclosure, Quint has sold 1/3 of the position in FlexFolio on today's move.

No positions in stocks mentioned.

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