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Turbo Charging China

I heard yesterday's market described as the "hope that there could be hope" again some day. Today, there's no hope for hope again. However, I believe there is hope, but you have to look for it in the right places.

Consider the OTC Journal's record since the 2008 market bottom in November. In the small stock world, China Energy Recovery (OTC BB: CGYV) is my #1 idea along with FXI- the large cap China ETF on the same theme. 

China was the world wide story yesterday. Manufacturing statistics for December and January showed improved over the prior two months, which was a big surprise to the world financial markets. Forgetting the current stimulus package, it's important to recognize China is embarking on the largest urbanization project in human history. China expects 350 million people to move to the cities by 2025. Many new cities and towns will be created in the coming decades.

Rumors of a second Chinese stimulus package saw expectations of demand for materials and commodities soar. As this boom relates to China Energy Recovery (CGYV)- 43% of their stimulus package is being spent on eco-environmental improvements and transportation infrastructure. That equates to $300 billion in spending.  The International Energy Agency estimates China will spend $200 billion on renewable energy technologies through 2020. Renewable energy is expected to grow 7% to 10% by 2010, and 20% by 2020.

Smack dab in the middle of all this spending is China Energy Recovery. I believe their business, like the last three years, will double in size for the next three years, putting us close to the $200 million mark by the end of 2011. No one else does what they do in China for recycling energy and eradicating pollution from offending factories.

So- consider the track record since the November 2008 lows: CGYV, which made a low of $.90 back then, closed today at $1.75- a full 94% above the low trade in 2008. FXI closed at $24 today, down $1 from my strong buy recommendation. This is a loss of 4% since mid December. This, as opposed to the S&P 500, which has lost 26% of its value this year alone. I'm keeping you in areas that offer a lot of upside potential, but not as much downside risk.

The Oil Gusher: Ready To Gush Again

Technicians call this the "Bread and Butter" trade. It's a chart you don't see to often, and I'll bet it pays off 90% of the time you see it.

Around here, we call this a "Double Rep" buy signal. We use the Dinapoli 3x3 Displaced moving average to identify these entry points. That's the blue line you see on the chart. The 3x3 moving average is far more predictive than the simply moving averages you see most of the time. I won't go into the technical mumbo jumbo behind it- suffice it to say it works a lot of the time.

The Double Repo happens when you see the security penetrate to the upside once, head back down, the penetrate to the upside a second time. Hence- the Double Repo- short for Double Repenetration.

You are looking at a weekly chart of the price of oil. Welcome relief for those of us who have to fill our gas tanks, but unwelcome for investors in the energy patch.

After completing a very steep six month decline, oil has finally stabilized, and looks to us like it's ready to move back to the upside. I believe oil will break out above the $45 resistance level in the next few days or weeks, and now is the time to get into oil. 

I've found a great way to own oil for those who only want to pledge a little capital to experience maximum upside. Consider DXO- the 3 for 1, low priced ETF that tracks oil. If oil goes up 1%, this thing goes up 3%, and vice versa. It's also low priced, so your investment dollars go a long ways.

I bought a big swack of it on Monday morning at $2.03. It has since been as high as $2.40, and today closed at $2.29 as oil gave back some of its recent gains.

I believe there is currently decreasing supplies of oil. I also believe in the second half of 2009, there will be International growing demand. Domestic demand growth will come in 2010. 

Oil has also traded kind of sideways for the past three months after a historic six month sell off. The market is always emotional and over reactive in the short term, and gets it right in the longer term.

Oil was absurdly over bought at $140 just as it was absurdly oversold at $35. It has recently broken the $40 barrier, and I don't believe a break through $45 is far behind.

$2.20 is you absolute ideal entry level at this point. I expect you might see $2.20 in the early going tomorrow. This will be out in front of the widely feared jobs report. 

The worst case scenario for the jobs report was priced into the market today, so don't be surprised tomorrow if the market becomes highly turbulent in the early going, then ends up closing up on the day after a hideous jobs report. If that's the case, you would be wise to pounce on DXO at $2.20 if you're fortunate enough to see it there.

$2.00 SSL- (suggested stop loss) - $3 price target on DXO.

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