To OTC Journal Members: 
 

40% and 20% Gains Notched in '09 - Time For a 100% Gainer

I've only introduced two new "Strong Buy" ideas in 2009, and I'm pleased to report both are making money for the members who have chosen to take advantage of them.

It's no secret the small and microcap stocks continue to struggle against the backdrop of this terribly rough market, and I'm the last to say it's time to dive in. However, I see pockets of once-in-a-lifetime opportunities in small stocks. We're not getting a lot of traction right now, but when they catch fire there will be huge money to be made on the initial surges.

For now, my two published "Strong Buy" recommendations in 2009 have been the Inverse Long Bond (TBT), and the Gold ETF (GLD). TBT was my idea at $39 on January 3rd- I called it my "easy money" idea for the first quarter of 2009- Friday's closing price was $46.41. I also suggested a call option which I closed out for a 50% return on TBT.

If you took my advice on TBT, you are up 20% in 6 weeks - 40% if you bought on margin.

GLD is my other "strong buy" idea so far in 2009. I recommended it February 3rd at $88.47. 

Friday, GLD closed at $97.80 for a net return over a couple of weeks of 10.5%, or 21% if you bought on margin.

That's a 20% return and a 40% return so far this year. Admittedly, XLF was a failed idea, despite charging up twice, but the TBT calls more than make up for it.

My other three ideas left over from December are all International ETFs, and today I'm going to make an adjustment in those ideas. Let's review:

First is the China ETF (FXI). This is a portfolio of the 20 largest publicly traded companies in China. I'm still a huge believer in this one as being a core long term holding. There's lots of evidence China will emerge out of the global malaise faster than any other major economy, and FXI puts you in the best position with the least risk to benefit. As a bonus you get a 3% cash dividend at the current price.

I had a buy on that one at $28, and a strong buy at $25. Today we closed at $25.15, so dip time is the time to pile in. The chart looks far better than anything in US equities. Since making it's all time low in late October, the lows are getting higher, and the highs are getting higher. From my recommended entry level there have been several opportunities to trade out for $5 point gains in the last 3 months.

The other international ETF I like is the one that represents the large cap stocks of Brazil (EWZ). The chart here is similar to the China ETF. It has made a series of higher lows since making its November low, and technically looks capable of delivering a big break out.

Brazil has a relatively healthy economy, and is very commodity oriented. They are a low cost producer of oil and a huge producer of ethanol. If you want to own oil or the like, the Brazil ETF is a great way to do it, but mixes in other upside as well. 

Brazil is not plagued with the same problems we face in the US, hence EWZ is trading far better than US equities over the last several months. I first recommended EWZ at $35 on December 13th. Friday's close at $34 doesn't represent much of a move in the wrong direction, and there have been a number of blips much higher than $35- we've now seen $40 three times since making the call.

At today's level, this one is a buy right now.
 

Sell EZA- Take The Proceeds To DGP

The final ETF is recommended back in December was EZA- the South African ETF of the large cap South Africa stocks. Those who are following this one know I suggested it as a proxy on Gold- since the country is so mining centric, I believed it would trade up in sympathy with Gold and other commodities.

As you can see from this chart that compares the move in the Gold ETF to the South African ETF, that relationship stopped working in mid January, most likely because there are several financials in the mix as well, and anything banking is getting killed everywhere in the world.

I recommended EZA at $34 in December. Friday's close was $32.51, so we're at a small loss.

This weekend, I'm telling investors to sell their EZA, and use the money to invest in a new Gold idea- DGP. 

I love the leveraged ETFs. There are a number of ETFs that are leveraged to trade double and triple the moves of their underlying securities. These leveraged ETFs are far preferable to option contracts, which have a lot of negative associated costs and risks.

Options have a premium for time value, and the price erodes as the expiration time comes closer. Thanks to the volatility in the markets, the option premiums these days are huge. Simply going long the options is a very expensive proposition, and risky because they can expire worthless.

These new leveraged ETFs offer you more bang if you're right, and greater losses if you're wrong. However, they don't have a time premium that erodes, so you can hold them much longer term without losing value simply because you're getting closer to expiration. There is no expiration.

So, this past week I decided to see if there was a leveraged ETF for Gold, and sure enough, I found a 2 for 1. If you really believe Gold is headed to much higher levels and want to maximize your returns, DGP is the way to go. Double the move, with no time value or premium. Double the move up, and double the move down.

Here's a chart with DGP over GLD. As you can see, when GLD goes down, DGP goes down more. When GLD goes up, DGP goes up more.

Gold made an awesome move this week, and actually traded briefly to $1,000 per ounce in Friday's extreme fear driven market. Fear and momentum is driving investors out of equities and into the shiny stuff.

On Monday, I recommend selling EZA, and using the money to invest in DGP. Go from South Africa to Gold, and do it two for one. Since Gold has made such an impressive move of late, it might be a good idea to only invest half the money in DGP, and hold the remainder for a temporary pullback.

DGP is the one to own if you want to own Gold, and I believe everyone should right now for part of their portfolio. Today, Gold is being driven higher by the intense climate of fear. This is just the beginning. Later this year inflation will become the talk of Wall Street, and then watch gold get really rocking.

Sell EZA- Buy DGP. $21.50 would be the ideal level to jump in, and Friday's close was $23. Go small now, and pile in at that level. Price target longer term: $50.

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