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Two Ways To Play: Credit Suisse Says Remove Rally Caps


Strengthen your portfolio in good times and bad.

CS says Sell the Rally

Bloomberg reports analysts at Credit Suisse say investors should sell stocks into the rally sparked by the government's takeover of Fannie Mae (FNM) and Freddie Mac (FRE) because the U.S and European economies remain weak.

Global markets surged in yesterday's session but the analysts said in a report that the recovery would not last because U.S. home prices need to fall another 10 to 15 percent to absorb the excess inventory. The timetable would take approximately another 2 ½ years. Professor Kevin Depew wrote about this in yesterday's Five Things You Need To Know.

From the Bull Pen: Bulls looking for financial exposure can consider SVB (SIVB) on a pullback to $55.

From the Bear Cave: Can the DJ U.S. real estate index fund (IYR) reach $70 on this rally? Bears can play the downside, if and when, with buy stops above $72.

Entergy, More Steam!

According to Thomson Financial, Goldman Sachs upgraded Entergy Corp. (ETR) from "neutral" to "buy" because of relative valuation and potential near-term catalysts. Analyst Michael Lapides said shares of Entergy deserve a premium multiple, based on free cash flow and returns, carbon regulation, and comparable valuations.

Lapides said he doesn't believe that the share price reflects any future carbon regulation, which should increase gross margins for its merchant nuclear fleet. Lapides cut his price target to $117 from $129, but said he still sees a 23% upside from current trading levels.

From the Bull Pen: Those bullish ETR can play the upside; sell stops near $95. Southern Company (SO) is another option. The stock broke out of a base to close right at the next resistance level ($38). Sell stops can be set below $37.

From the Bear Cave: Exelon Corp (EXC) is a downside option. Bears can consider initiating a short position if and when the stock rallies to $70.

For more ideas in real time throughout the trading day, check out Minyanville's Buzz & Banter.

Quick Check Around the World

Asian trading closed with the Hang Seng -1.46%, Nikkei -1.77%, Sensex -0.30%, Taiwan -3.51% and Shanghai +0.11%.

Glancing towards Europe, we see the CAC +0.68%, DAX +0.63%, FTSE +0.87%

As of 8:30 AM EST, S&P futures are higher 4.3 points to 1271, and Nasdaq futures are up +6 points to 1767.

A Look At Commodities

Commodities mixed. Crude oil is down -2.01 to 104.30. Gold is off -1.70 to 796.50. Silver is lower -0.090 to 11.90, and copper is up +2.10 to 313.00.

The dollar index is lower -0.217 to 79.369.

On the Radar


10:00 Pending Home Sales (m/m): -1.0% cons.
10:00 Wholesale Inventories: 0.8% cons.
5:00 ABC Consumer Confidence

Click here for the full trading radar.

Happy Tuesday! Good luck!
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No positions in stocks mentioned.

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