Monday
June 5, 2006
The
Volatility Dance
"Volatility
can be scary, it can make you feel like you understand nothing about
the market and it can make you feel like the market is positively
bipolar", Cramer said tonight.
Cramer's two step plan is this: Understand the volatility, then trade
off of it.
"The number one reason getting in your way of making money is lack of
understanding volatility," he said. "You get volatility when the market
cannot process supply and demand correctly."
"The first source of volatility", Cramer explained, is that brokers
don't position any more. (Positioning is when hedge funds sell stock
slowly as opposed to dumping it outright.)
The second is because of new exchange traded funds (ETFs).
The
stocks contained therein rise and fall due to the movement of the ETF
itself.
The third is hedge funds.
"Hedge funds are pushing stocks up and down," Jim told us. "You are at
the mercy of mutual funds, pension funds and hedge fund accounts."
As an example on how to play the volatility game, he said you must
first pick a stock, and never ever a bad company. Jim chose
OXY
for this exercise because "OXY is the least hedged of all the
oils."
Using OXY, Cramer said if you have 300 shares of it, you should drop 50
shares every time it jumps 3% and when it goes down, buy it back.
"Treat trading like a dance," he said. "When the stock goes up, sell a
little and when it goes down, buy a little."
"Buy and sell your stock in increments because small trades equal big
payoffs."
As always, Jim is just giving us the tools to do for
ourselves.
"Take my rules and apply them to yourself."
_______________
DYN
(DYNEGY INC HLDG CO)
On the
program, Jim Cramer
speculated that DYN is out to sell themselves. He noted that
the balance sheet problems they had have been cleaned up and
they
dumped all of their senior management, save its CEO.
________________
KRY
(CRYSTALLEX
INTL CP)
KRY will find out
tomorrow if they are granted approval to proceed drilling in their mine
in Venezuela
"We
are in the hands of the ministry of the
environment", CEO Todd Bruce said. "We are in the
final administrative state in
having the permit issued."
Cramer pondered 'Why would President
Hugo Chavez allow a profit-making company to come into Venezuela?'
"Because
a large part of the mining industry is based there,"
Bruce said. "There are many companies, including Crystallex, that
already operates mines there", he said. "It's basically just more of
the
same."
_________________
Radio Recap
Cramer explained that crude prices are
affected by 2 things: supply and demand, and world events.
Cramer told listeners to take a closer look at BHI
(BAKER HUGHES INTL),
who had the best quarter out of all the drillers.
Cramer said that now is the time to think about
investing in Peru becuase of Alan Garcia's victory over the
leftists in
his country's runoff election.
Jim
noted that Mr. Garcia like capitalisn ans Wall Street and could signal
good things for United States interests in Latin America.
He said to check out AMX
(AMERICA MOVIL SA)
as a fresh government Peruvian play.
U.S.
Job Report May Slow Down Fed's Rate Increases
US job growth has slowed down in May according to the
government's monthly employment report, released June 2nd.
Many
speculate that this turn may give the Federal Reserve
reason to put a pause or at least slow down
the interest rate hikes of late.
The unemployment rate fell from 4.7% to 4.6%.
The May rate is the lowest since July, 2001.
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