Technical experts are a rich source of new stock ideas. Our models, Felix, Oscar, and Holmes each specialize in a different time frame and level of risk. Before their weekly poker game, they spend a few minutes trading ideas. They like to call this their “Stock Exchange.” Here is the cast of characters:

Felix is fussy, precise, and very cautious. He looks for what is working, but it also must have upside potential. He is an investor who thinks long term. Felix will not usually announce new picks, but he will answer questions, saying what he thinks about specific stocks.

Oscar is naturally optimistic and a bit excitable. He definitely likes to go with winners, and focuses on a one-month time frame. He trades either sector ETFs, or a basket of stocks (equally weighted) that reflect a sector. Oscar will mention a favorite sector each week, and will also answer questions about sectors.

Holmes is a trader, but a cautious one. Holmes emphasizes asset protection through profit taking, stops, and trailing stops. He is careful in selecting new positions, and generally looks at an intermediate time frame. There is no set holding period, but two or three months is not unusual. Holmes will tell us one stock recommended that week. For those who sign up for his email list (no charge, privacy respected, holmes at newarc dot com) he will report exits with a one-day delay.

Jeff sometimes joins the discussion with some comments about stock or market fundamentals.

This Week’s Ideas

My purpose is to show how different approaches – all sound methods – often lead to different conclusions. Technical versus fundamental, trader versus investor, short-term versus long-term — all make a difference. I hope you will find the weekly discussion interesting and become a part of it.

Each member of the group, independently, comes up with an idea. To my surprise this week was all about energy.

Felix

I am liking oil and gas this week. I particularly like SM Energy (SM). There is a lot of movement and great long-term opportunity for more growth.

Oscar

I’m still holding onto Regional Banks, but my latest sector pick is Refiners. Just a glance at this YTD chart for CRAK and you’ll see a strong element of seasonality in this sector. I don’t think we’re anywhere near this year’s peak just yet.

Most stocks in this area have been quietly jogging through this low volatility period, waiting to break out into a sprint. I know I’ll be watching when they cross the finish line. Will you?

Holmes

I do not talk as much as Felix and Oscar, but my stock picks are still ahead of the humans. Last week’s bumpy ride has not changed my bullish outlook. Here is one I bought this week: Solar City (SCTY).

Jeff

The aptly named CRAK focuses on the key element for refiners, the crack spread. This tracks the difference in price between their input, crude oil, and the refined product they sell. When oil prices fell most people missed the opportunity in refiners. One way to keep an eye on this is to watch the forward curve on crack futures. Yes, there is such a thing. The spread declines seasonally into the end of the year, and looks nicely higher net year. Oscar might be disappointed in how long this takes.

Felix seems to think that SM Energy will return to the good old days when it traded 80. Time will tell. In last week’s question about AAPL he thought the chart was too messy, but I liked the stock. I would point out who is leading on that question, but it is best not to talk trash around Felix.

Holmes picked Solar City, which is showing some volatility. Holmes is quick to exit trades that are not working.

Questions

Each week we will answer questions. Feel free to address any of us.

One reader noted insider selling in CAH. This can be an important fundamental factor, more typically when there is buying. Holmes does not consider it because the information is not released quickly enough to be helpful in his time frame.

Another reader suggested that the group needed a female perspective. That is interesting, since there will be a new member of the poker group soon. She is quick-thinking and fast-trading. She knows a good chart when she sees one.

An Important Note to Readers

Felix, Oscar, and Holmes are all models, carefully engineered and tested by one of the leading developers of the last thirty years. They are highly-modified momentum models, with different time frames and features.

I humanize them because it makes it easier to understand the characteristics in their design. I always remind readers that my posts are informational, not investment advice, but special emphasis is needed here. While we are trading based upon all three models, we are always watching and can act quickly when necessary. The models are not suitable for all investors.

The conversation is light-hearted, but the stock analysis is serious. We own positions in each of the stocks mentioned.