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Sterling Weekly for the Week of December 27th, 2010
A Look Back at Our Commentary and 2010 Track Record

Since the previous edition of the Sterling Weekly the Dow Jones Industrial Average rose 192.84 or approximately 1.7% to 11,555.03 As 2010 draws to a close I thought I would take a look back at 2010 commentary and see how our forecasts faired. 2010 proved to be a somewhat of a challenging year. We saw the "Flash Crash" in early May and a historic election in November of this year. I personally found the summer and fall very challenging from a work standpoint as my travel schedule and consulting clients kept me very busy in the summer and fall and as a result there was a unfortunate and prolonged gap in the publication of the Sterling Weekly. As a result, prior to this week's edition, I managed to publish a whopping 18 editions of the Sterling Weekly, an average of just once every 3 weeks. Something I hope to correct in 2011. Despite the lowly production numbers, the accuracy of our forecasts I feel is fairly respectable. Of the 18 editions of the Sterling Weekly published in 2010, basically 8 of them contained some sort of forecast that able to be checked for accuracy, the rest were basically policy comments that don't really lend themselves to our end review. However, for those that are subject to accuracy review, here is how I see them shaping up.

The Good:

1. In the January 25th edition of the Sterling Weekly I discussed the fact that I thought the market was in the process of completing the Third Leg of its move upwards from the 2009 market lows and reaching the upward range of a Fibonocci Retracement that I originally published in the August 24th, 2009 edition of the Sterling Weekly. I stated that I thought the market might see a pullback that would take the Dow Jones Industrial Average to somewhere between 9,332.64 and 7,939.84. In the February 8th edition of the Sterling Weekly I refined my downside targets to a range of 9,712.73 to 9,487.67. In the May 17th edition of the Sterling Weekly with the Dow Jones Industrial Average at 10,620 I refined the upper end of my downside target to 9,652.37 On July 2nd, 2010 the Dow Jones Industrial Average reached an intra-day low of 9,614.32 and closed at 9,686.48 About 34 points away from our refined target. Not bad if I do say so myself.

2. In the March 8th edition of the Sterling Weekly I wrote that I felt the S&P Insurance Index 'IUX' having closed at 178.36 would continue to move higher and test 191.07 and longer term the 231 level. On April 14th, the 'IUX' closed at 189.05 or 2 points away from my target. The 'IUX' again closed at 189.41. I still feel there is a good chance the 'IUX' will reach the 231 level.

3. In the March 15th edition of the Sterling Weekly with the NYSE-ARCA Airline Index 'XAL' having closed at 38.36 I wrote that I thought it would move continue to move higher and test the 43.50 level. On November 5th, the 'XAL' closed at 50.25 While this one far exceeded my upside target I am going to throw it in the win column since I did not forecast any upside resistance that would have limited its upside.

Not So Good:

1. In the March 1st edition of the Sterling Weekly I said that I thought the S&P Retail Index 'RLX' having closed at 421.58 would probably reach the 445.53 level, but I doubted that it would reach the 497 level. Well, the 'RLX' reached a closing high of 512.35 on December 21st. I guess if you are going to be wrong, it is better to be wrong to the upside.

Still Waiting:

1. In the January 18th edition of the Sterling Weekly with the NYSE-ARCA Natural Gas Index 'XNG' having closed at 567.11 I forecast a move in the 'XNG' to 601 level. Well, I got close. The 'XNG' reached a closing high of 597.73 on December 23rd. I came with 3.27 points (or 9.6%) on a forecast move of 33.89 points. I think we might see the 'XNG' reach the 601 level within a couple of weeks.

2. In the March 22nd edition of the Sterling Weekly with the S&P Healthcare Index 'HCX' having closed at 1,611.80 I forecast a move to 1,710.31 and a longer term move to 2,257.90 Well, the 'HCX' reached a closing high of 1,658.03 on December 17th. While moving in the right direction, We are still waiting.

3. A couple of other things we are still waiting for. In the June 7th edition of the Sterling Weekly I thought there was a good chance we could see a "Double Dip" for the US economy. Well, I couldn't find the exact unemployment rate for June, but July's unemployment rate was 9.5% and the most recent unemployment rate was 9.8%. Also, in our December 6th edition of the Sterling Weekly I said I thought the price of Oil could reach $113 per barrel. Time will tell on both of these forecasts, but I have a feeling I could still be right.

My 2011 resolution for the Sterling Weekly is to come closer to my goal of publishing every week and to continue to be as accurate as possible with my commentary and forecasts.

Sterling Calendars for the Week of December 27th, 2010.
Economic Calendar

Date

Est. Time Release

For

Consensus Prior
12/28 9:00am Case-Shiller 20 City Index Oct. 0.1% 0.59%
12/28 10:00am Consumer Confidence Dec. 56.1 54.1
12/29 7:00am MBA Mortgage Applications 12/24 N/A (18.6%)
12/29 10:30am Crude Inventories 12/25 N/A 5.33M
12/30 8:30am Initial Claims 12/25 416K 420K
12/30 8:30am Continuing Claims 12/18 4,060K 4,064K
12/30 9:45am Chicago PMI Dec. 61.5 62.5
12/30 10:00am Pending Home Sales Nov. (3.0%) 10.4%

Prime Update:

The Prime Stock Newsletter is our daily newsletter that contains commentary on the overall market, and our single best trading idea for the day! (Both Long & Short Sale Recommendations) We select this stock through a combination of technical (charting) and fundamental (financial) analysis. The Prime Stock Newsletter provides select expanded quotation information, corporate description, select recent company news, our technical analysis of the shares and our expectations, and our options recommendation for the company.

Our most recent Performance Report is now available available (here). We are proud to report 19 of our last 20 recommendation resulted in profitable trades for an average profit of $0.53/share. This is an 95% success rate.

Archived copies of our Performance Reports can be found (here).

Highlights from Recent (20) Editions of the Prime Stock Newsletter
Recommendation Date Entry Point Recent Close or Exit Price Profit* Note
Big Lots 'BIG' short Dec 6 29.38 27.85 $1.53 Sold on the 14th
Moly Corp. 'MCP'' Dec 21 $40.45 $49.44 $8.89 Still Holding
O'Reilly Auto 'ORLY' short Dec 28 $60.15 $59.21 $0.94 Covered on the 28th

 

* The per share PROFIT is a theoretical calculation based upon the opening price the day the recommendation is published and the intra day high (or low for short sales) on the exit day. The exit day is determined based upon the application of our "Rules for Trading", the implementation of "stops" within our stated policy, and may not reflect the complete or full movement of the underlying recommendation.

 

Disclaimer: The Sterling Investments series of newsletters is produced by Sterling Investment Services, Inc. All information used in the production has been obtained from sources believed to be reliable and accurate. Sterling Investment Services does not warrant or assume any liability for inaccuracy of the information used to produce our publications. To receive further information on these services please visit our web page at: www.sterlinginvestments.com If you would like to contact us our fax # is (404)-816-8830 Email address is: enelson@sterlinginvestments.com Sterling Investment Services may hold positions in the securities recommended or may be providing consulting services to the companies mentioned within this report.
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