Doc's Diamonds

What goes up ......... REVISITED

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Well, my proposed reversal on agricultural stocks has not transpired as of this time. POT and MOS continue to plug along to the upside. Again, this is why I did not sell all of the MOS in my SLO2 account. You cannot accurately predict the turns but must have the courage of your convictions and see it through unless you have new information that changes your analysis.

With that in mind, I am going to move to the short side further than normal tomorrow by purchasing DUG at a full position for my portfolio. My reasoning for this is similar to the reasoning for selling some of MOS before a strong turn in sentiment. Oil is at an all-time high. Now I happen to be of the belief that this high will be taken out easily over time. Oil might even ride further in the coming days. (AGAIN, YOU CANNOT PREDICT THESE TURNS EXACTLY.) However, the short-term movement is being caused by factors that will be corrected in a reasonable timeframe (disruptions in pipelines and such.) Once those are corrected and before the summer driving season hits full-swing, Oil will almost certainly drop back some after this rapid run over $113. The trends seem to indicate that it will drop back to $100 or lower for a time. The chart pattern (bearish) might indicate a return to just below $40 for DUG before it starts back down again. That would be a cool 21% gain that is very likely to occur. I am willing to take the chance that oil will pull-back some before returning to it's upward trend.

For those who are not familiar, DUG is an ETF which is an "ultrashort" of the oil and gas index. It is provided by Proshares, who have some of the best sector ultrashort ETFs available.

I will also purchase a 60% position in Sirius Satellite Radio (SIRI) at a limit price of 2.39. This is another speculative move that speaks to my belief that the merger between Sirius and XM will be approved to take place and that this will drive the shares upward (at least for the short-term.) I happen to think that SIRI is caught in a trading "window" between about 2.30 and 3.20. Good news is likely to drive the stock to the upper side of that window. If this occurs, SIRI should track to the upper end of that range. If it hits my target of 3.10, I will sell most or all of the position for a 29% gain. Again, I will not get greedy and if it slows down as it hits $3, I will consider selling slightly sooner some or all of my position.

These are contrarian moves against the trend of the oil market (DUG) and against the trend of the stock (SIRI). I will hold my other positions for now and reassess soon.

Doc