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Trading Divergences With The Zero Indicator

 

Trading Divergences With The Zero Indicator

by THE MOLEMARCH 29, 2017

Yesterday I received a series of follow up questions regarding what now appears to have been yet another prescient tweet this time depicting a bullish divergence on the Zero. If you are new here and are unfamiliar with the Zero indicator then I recommend that you point your browser to the introduction, the tutorial, and most importantly the video section where you can enjoy dozens of recaps of past E-Mini trading sessions.

Let’s take a step back and talk about the basic premise of why I came up with the Zero indicator and why it continues to be favored by an overwhelming percentage of my subscribers. Some of you have been using it continuously for many years and I think the most loyal subs goes back all the way to 2009! Clearly the Zero seems to be useful but what exactly differentiates it from the myriad of indicators you get for free in your trading platform?

Some History

Many of you enjoy swing trading the E-Mini futures and I am no exception. But even for skilled traders doing so without a deeper understanding of what is driving equity markets can quickly lead you to a series of frustrating losses. Technically speaking the average retail trader of today has direct access to capabilities and execution speeds that our forefathers could only have dreamed of.

However we are all also suffering from a major disadvantage. The increasing proliferation of electronic trading over the past few decades has gradually separated us from what some may call the physical aspects of trading. These days there is very little opportunity to actually expose yourself to a floor of traders and base trades on participation and changes in apparent sentiment among fellow participants.

Although this may sound completely alien to you today, several generations of very successful traders actually never looked at single technical indicator in their entire life and purely based their trading activities on the ‘action’ they perceived among them. The vast majority of these oldtimers didn’t have a clue about charts or technical analysis (it barely even exited at the time) and mostly relied on their intuition and people reading skills (and of course the occasional ‘tip’) to place their positions.

So it’s fair to say that the way our grandparents were trading was fundamentally different. Unlike today everything was happening manually and thus an analog basis. Which meant filling out paper slips or calling your broker who happily would do it for you. These slips then physically were handed to the floor brokers who then would settle small as well as very large trades by shouting at other brokers in combination with a complicated series of hand signals. Watch the clip above for a pretty accurate historical review of how trading was done back in the ‘good ole’ days’.

Stock Tickers

So how did market information get disseminated across the nation and even the rest of the world? After the turn of the 20th century and the establishment of a nationwide electric grid the common practice was to run glorified bucket shops in key locations across the United States (and to some extent in Europe) which were equipped with a slightly modified version of the telegraph.

stock_ticker

It was called the stock ticker and it was a simple mechanical device that received analog electric signals from the exchanges or relay stations and then printed them on a thin roll of paper. What was being printed of course were stock symbols on the first row and their current bids on the second.

ticker_tape

At the end of a trading day cleaning crews would come in and actually clean off all the ticker tape which had accumulated during the session. Sometimes mountains of the stuff were being re-used in ticket tape parades (hence the name), so don’t ever think our grandparents didn’t care about recycling 😉

ticker_tape_parade

One of the intrinsic aspects of running a stock ticker was that it made a lot of noise. We are not talking laser printers here folks, but a rather crude early 20th century mechanical device that at times produced quite a racket. So if young Jesse Livermore was dropping by his local bucket shop he most certainly was able to hear their stock ticker rattle like crazy when there happened to be a lot of trading activity. And even if he showed up late he most likely would have been able to judge the recent amount of activity simply by the heaps of ticker tape that had accumulated on the floor (I’m however uncertain if those were routinely cleaned). So even thousands of miles away in Los Angeles or Seattle an aspiring stock trader would be able to actually get a good glimpse of the floor action all the way over in New York. Of course nothing beats the real thing which meant actually being right there on the floor and being elbowed and pushed aside while fellow traders were screaming on top of each other.

So if you think you have so much better today – think again. Yes, everything is a lot more convenient and quiet these days. Many of us have entered or closed out positions early in the morning in our pijamas or whilst sitting on the toilet (please make sure you scrub your screen with soap afterwards). But all that convenience comes at a price. We are physically removed from observing the ‘action’ – all we are given are dancing candles on a screen. Which ain’t bad and I’m sure Jesse would have given one of his limbs being able to do that in real time. But I’m equally sure he would have missed ‘listening’ to the tape in order to gauge participation, price momentum, a shift in sentiment among participants, the response to an urgent news report, etc..

Visualizing Participation And Momentum

Now pondering all that sometime in late 2008 I experienced some sort of an epiphany and inspired I immediately went to work. My goal was to merge various meta market measures (my secret sauce so don’t ask) into a visual indicator that ‘made a lot of noise’ when there was a surge in participation and remained quiet when there was none. In addition it was also supposed to provide me with sense of market direction: basically how does buying pressure align with selling pressure?

In the following two years it went through a few optimizations and small changes but the core algorithm driving the Zero has remained practically unchanged since its inception. I could think of a few improvements here and there but the basic concept has remained valid since then and has survived many years of some of nastiest and volatile tape in trading history. Short of listening to a floor of traders or a rattling ticker I am able to watch the Zero and still get a pretty good sense of what the market is doing and most importantly if price may be lying to me. I have written many tutorials on the subject and if you are curious to learn more then I once again encourage you to follow the links I posted in the beginning of this article.

Back To The Future

Over the years there have been countless times when the Zero literally saved my butt from either being lured into a losing position or alerted me early to a change in short term market direction. Monday was not unique but it’s a good example of how to asses price action and get positioned accordingly:

Here’s the tweet I posted early that day as well as in the blog’s comment section. I’m actually rather selective before making ‘calls’ like that. For one it’s public and nobody wants to wind up making a series of bad calls. Secondly my readers will most likely take my tweets or comments in consideration and as such I only post it when I myself am ready to pull the trigger. I usually refrain from confusing or haphazard comments which could be misinterpreted. The format of these calls is usually:

  • This is what I see.
  • Why it matters.
  • How/when/where I am going to place a trade.

In general I expect my subscribers to become familiar with the Zero, watch it for a few weeks, and then start interpreting the signals in the context of their own trading activities. I do not know if you’re trading a 5-min, 60-min, daily, or weekly chart. I have no idea what your trading horizon is. I also do not know what your campaign or exit rules are. So when I post my POV on the Zero it is mainly geared toward my own trading activities. Of course if yours happens to be compatible then have at it. Bullish or bearish divergences can become the springboard for short term or long term campaigns. It’s up to you to watch the Zero and interpret it accordingly. It doesn’t tell you when and where to buy – it’s an oscillator that shows you market momentum and participation.

With that in mind let’s take another look at two panels at that moment in time. What stands out in my opinion is the rather pronounced bullish divergence on the hourly (left) panel. The smoothed version is pointing up while price was gapping and still falling. On the 5-min (right) panel we are seeing very little participation which of course can also mean nobody is interested in buying.

Time For Action

What happened in the following hour was some continuation higher followed by a little spike low which didn’t even touch VWAP. Which is where I grabbed a small position – only 0.25% as it was still speculative. Some of you have mentioned that a relatively flat signal usually means sideways tape but that’s not exactly true. A few observations I have gathered over the years you may want to internalize:

  • If price starts moving hard despite low participation (i.e. a flat signal) then it’s most likely driven by institutions. Remember that the Zero only shows you what the tape does (price) and how it’s correlated to momentum and participation (signal). It’s our job to analyze this type of information as building a system around that is extremely difficult (but probably not impossible). For example attempt to define a signal divergence and the right moment to act upon it. Not that easy even for me and that’s just one single type of entry opportunity.
  • When there is low participation and very little movement then odds have it we’re going to see a range bound session. That seems intuitive – when there is no mojo then playing the ranges may actually be most profitable. Why? Because there is less resistance in both ways.
  • On the other hand if the tape drops or ramps hard on a weak signal then fewer participants are driving the tape and there appears to be less resistance against moves in either direction.
  • A ramp or drop on a strong signal is the most reliable and suggests a trend day, especially when it kicks off the day. Often a strong spike on the open is the point of recognition that participants are ready to rock & roll.  It is also when leading divergences are most valuable as a drop in ‘mojo’ with the tape advancing suggests later comers which are ripe for the taking.

Clearly there are a ton of variations in between which is why I have often produced demonstration videos to explain my thinking. But I hope that after reading this post you have a better understanding of the purpose of the Zero indicator and why many of us find it imperative when trading equity ETFs and in particular the futures.

Shameless Plugs Department

It’s not too late – learn how to consistently bank coin without news, drama, and all the misinformation. If you are interested in becoming a subscriber then don’t waste time and sign up here. The Zero indicator service also offers access to all Gold posts, so you actually get double the bang for your buck.
Published at Wed, 29 Mar 2017 13:00:48 +0000

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The Ultimate Guide On Raw Edge Discovery

The Ultimate Guide On Raw Edge Discovery

by THE MOLEMARCH 27, 2017

Earlier today the GoldGerb asked me how to put together a scatter plot for raw edge discovery as introduced to you by Scott during my Tenerife adventure. Since my gums and I are feeling a bit better than anticipated I thought I may as well condense some of the exchanges I’ve had with him into a dedicated post. It is my belief that raw edge discovery (or RED as it shall be known henceforth) is an integral but much neglected aspect of system development.

When done correctly RED can not only potentially help you avoid months and perhaps even years of wasted time. It will also lead to a cleaner and more solid system whilst helping you develop a deeper understanding of what actually drives your system’s edge. Finally it will allow you to establish baseline from which you are able to evaluate additional parameters or rules and avoid over optimization. It doesn’t do your laundry or wash your car but if you’re a system developer then RED is your starting point when considering a new trading idea.

Like Scott already pointed out in his original post the visualization we will use is a scatter plot, which is easy to do in Excel. There are many tutorials out there [1][2] and Google is your friend. But before we launch Excel or your favorite charting app you first have to go back to first principles and develop a hypothesis. Just like a scientist.

Scott and I looked at a heap of mean reversion systems and the hold time basically boils down to only a few bars. On average only 2 – 3 days. For example here’s Larry Connors’ hypothesis: For stocks in a bull market, trading above their 200 SMA, there is a mean reversion effect.

Raw Edge Discovery – RED

So how should we test this?

First we look at the change of price leading up to the entry condition. Doesn’t matter what exactly your entry conditions are, even if it’s something complicated like:

  • 1) The stock is a member of the Russell 1000 (at the time, not today eliminating – survivorship bias which is huge)
  • 2) Minimum daily liquidity requirement
  • 3) 70% of the stocks in the market trading > SMA(200)
  • 4) The individual stock trading > its SMA(200)
  • 5) A down move defined in different ways (see next list below)
  • 6) A volatility filter (VIX or VIX equivalent below x)

In reference to item 5) this is one of the most complicated mean reversion thing we’ve seen, ever, but a couple of useful takeaways:

  • A close below lower 1.0/20 bollinger
  • 3 lower lows (i.e. a Net-Line Buy Level [NLBL] forms at the high of the first candle)
  • 5 lower closes
  • RSI(2) < 10
  • ROC (3)  low

So you throw all these conditions together. It’s not curve fitting (yet) at this stage, but it *might be*, so don’t go crazy with the rules. Then you make your best guess of the timeframe for the entry condition. In mean reversion systems it is pretty trivial:

  • X axis: delta 3 days before (in percent)
  • Y axis: delta 3 days after (in percent).

By the way this is just a best guess. You could do a few best guesses maybe 3 days, 5 days, etc. In reality in most cases 3 days will turn out your sweet spot but prove me wrong. Of course if you’re building an hourly trading system then you’d be testing against +/- 3 or 5 hours.

2017-03-27_NLSL_edge

Here’s an example of just that produced by Francis – an intrepid reader who took one for the team and volunteered to run the numbers on our Net-Line concept across a few daily charts. The scatters he produced show us a pretty weak positive edge. So what have we learned? At least on the daily panel on their own without additional context single Net-Lines appear to be astonishingly useless as an entry system. Which incidentally is the very reason why I rarely if ever use Net-Lines without additional context such as SMAs, Bollingers, or other even other Net-Lines.

Now a fundamental point I hope you fully comprehend moving forward is that RED only shows you what the market does after your entry condition has been triggered. It has absolutely nothing to do with your future trading system.

The R squared value you’ll get from your scatter is a measure of how strong this effect is, which is effectively how close the dots are to making a line (i.e. how bunched up the dots). If you are looking for mean reversion for example you should be seeing a nice diagonal line.

Bullpucky Testing

So how do you know if you are fooling yourself? After all, if you tested pretty much any half decent MR system on AAPL then you’ll be looking pretty clever. Buying down closes on AAPL will look great on a 10 year backtest. Does that mean your raw edge is real?

  1. Firstly you test on Russell, and then SP500 and Wiltshire 3000 participants. Results should be a forest of good results not just an outlier. Ditto for testing foreign markets. All the good mean reversions test well across countries, e.g. the Nikkei, the Hang Seng, the DAX, etc.
  2.  Secondly you make sure you have statistically significant numbers of data points, in terms of standard error. But for any given set of data the scatter plot will be orders of magnitude (literally) more reliable than a backtest in proving or disproving your hypothesis. That’s how you make your best guess against curve fitting.

After you have proven your hypothesis, then and ONLY then do you start playing around with different exits and actual system stuff.

Back Testing

If your scatter shows you at minimum a weak positive correlation – congrats,  you are now ready for back testing. The gold standard is to take out some data you didn’t use to build your system on, you optimize as little as possible, and then run your new rules over the data you set aside. Don’t just throw 20 rules at your system from the get-go – start small and build it up rule by rule. The fewer rules the better. A system’s quality and resilience come via simplicity and not by adding complexity. The closer your optimized system backtest matches your ‘out of sample data’ backtest, the less you have fooled yourself.

So for example, lets say we built a system on “Buy 7 days down in AAPL, sell a 7 day high close“. That would test amazing, but if we tested the same thing across random out of sample data it would most likely suck. A classic way is to take the Russell 1000 for example, and keep out every 50th stock alphabetically. Don’t use that data at all for your backtests, but when you finish up your system building you run your system against those 50 stocks. The closer the match the less the curve fit, by definition. That’s not to say market type won’t change, but it does prove you haven’t succumbed to data snooping biases.

By the way all this is *really* easy to do with quantopian which we’ll cover in much detail in future articles of this educational series. Now before you recoil in horror at the thought of writing code keep in mind that even Convict Scott could figure it out, and he can barely program his way out of a paper bag.

So to make it easier for you guys, for daily MR systems there are ONLY three really viable entry methods.

  1. Entry a few minutes ahead of close – standard
  2. A.k.a. the Nick Radge: Limit order .5 ATR(14) below last close. We are going for more extreme, and therefore better mean reversion.
  3. Entry following open (generally this one is not as good)

If your system is positive on all three entry methods then it is a lot less likely to be curve fitted. Again this should be a good number in a forest of good numbers. The idea is once you prove the hypothesis to a standard you are happy with, you play with entries and exits until you get something close enough. Then again you run your fledgling new system on:

  • Out of sample data
  • Other indexes in the same market
  • Other stock markets in other countries.

If you still see good numbers (which is rare to be honest) then you can be fairly confident that you aren’t fooling yourself with randomness (hat tip to Nassim). Once again Scott and I both believe that the research environment in quantopian is ideal for this stuff, which is why I am working toward posting a pertinent introduction a few weeks from now. May be something we’ll do after May so that you guys don’t go away

Shameless Plug

It’s not too late – learn how to consistently bank coin without news, drama, and all the misinformation. If you are interested in becoming a subscriber then don’t waste time and sign up here. The Zero indicator service also offers access to all Gold posts, so you actually get double the bang for your buck.

Credits go to Scott Phillips who contributed large parts of this post

Published at Mon, 27 Mar 2017 16:34:03 +0000

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Micron Gets Six Price Target Hikes on Stellar Q2

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Micron Gets Six Price Target Hikes on Stellar Q2

By Shoshanna Delventhal | March 26, 2017 — 4:08 PM EDT

Shares of U.S.-based DRAM and NAND chip market leader Micron Technology Inc. (MU) hit a multiyear high on Friday, closing up 7.4% at a price of $28.43 per share.

As the Boise, Idaho-based semiconductor manufacturer’s stock reflects an approximate 174% increase year over year (YOY), a wave of analysts issued bullish notes on the chip maker, upgrading shares and lifting their price targets after fiscal Q2 earnings and guidance blew past expectations.

‘The Sun, the Moon and the Stars …’

Analyst Betsy Van Hees at Loop Capital, who maintains a buy rating and lifts her price target on MU from $30 to $25, indicates “the sun, the moon and the stars remain aligned for Micron as it benefits from the sweet spot of the memory cycle.” MKM Partners, Deutsche Bank, Credit Suisse, Nomura, Barclays, Pacific echoed this sentiment.

Barclays’ Blayne Curtis, with an overweight rating on Micron’s shares, lifted his price target from $26 to $35, noting “favorable supply/demand dynamics continue to support healthy pricing and the company improves cost.” Curtis also noted the magnitude of outperformance​ as attributable in part to Micron’s recent integration of Taiwanese Inotera Memories and new technologies ramp up. The analyst concluded, “we remain cognizant that the environment could eventually reverse.” (See also: Micron Closes $4.0 billion Inotera Deal.)

Joining the Bandwagon

MKM Partners, with a buy rating on Micron stock, increased its price target from $34 to $38, as Deutsche Bank, also with a buy rating, lifted its price target from $35 to $30.

John Pitzer of Credit Suisse, with an outperform rating on Micron’s shares and a new $40 price target says, “while MU is clearly benefiting from better cyclical pricing, the more important drivers seem more sustainable—mix, cost-downs and scale efficiencies.”

Nomura’s Romit Shah reiterated a buy rating on Micron and lifted his price target 33% to $40, applauding Micron’s record FQ3 annual earnings guidance of $6.

“Micron is benefiting to an almost comical degree from strong memory trends,” said Pacific Crest analyst Weston Twigg, with a sector weight rating on shares of the DRAM and NAND chip market leader. (See also: Micron Soars on Another Upbeat Earnings Report.)

 
Published at Sun, 26 Mar 2017 20:08:00 +0000

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Post-Fed boost for small-cap stocks may be limited

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 Post-Fed boost for small-cap stocks may be limited

By Caroline Valetkevitch| NEW YORK

Small-cap stocks benefited from a dovish lining to the U.S. Federal Reserve’s decision to raise interest rates this past week, but strategists warn it will take more to make these pricey stocks outperform their larger brethren in the long haul.

The Fed on Wednesday raised rates by a quarter of a percentage point, as expected, but did not flag any plan to accelerate the pace of monetary tightening. A less aggressive monetary policy may benefit small-caps, which tend to get hit harder as borrowing costs increase when rates rise.

Stocks in the small-cap space rallied after the Nov. 8 election that put Donald Trump in the White House as investors bet Trump’s plans to cut back on regulations and taxes would especially help small companies.

That hasn’t panned out in the new year, as they have underperformed the S&P 500 year-to-date. Their near-term performance hinges on how much the profit picture improves, but so far small-cap earnings have yet to rebound in the same way that large caps have.

Investors consider small-cap stocks comparatively expensive.

“We’re in a show-me state for small caps,” said Steve DeSanctis, equity strategist at Jefferies. “We’ve gotten (price-to-earnings) multiple expansion, so you need earnings growth.”

Fourth-quarter earnings for companies in the small-cap S&P 600 .SPCY were down 1.0 percent from a year ago, while the benchmark S&P 500’s earnings .SPX rose 7.8 percent, Thomson Reuters data show.

Analysts expect profit growth for the S&P 600 in the first quarter of 2017, but at a rate still well below that of the S&P 500.

The S&P 600 is up just 1.4 percent since Dec. 31, after rising 24.7 percent in 2016. The S&P 500 by comparison has gained 6.2 percent since the start of the year.

At 20.4 times forward earnings estimates, the S&P 600 looks expensive compared with its long-term average of 17, Thomson Reuters data showed. The S&P 500 trades at about 17.8 times forward earnings, also above its long-term average.

The Russell 2000 , a widely used gauge for small-caps, has a forward price-to-earnings ratio of 25.4, brushing against its highest level since 2009. Its 10-year average sits at 20.7.

“Growth and the interest rate trajectory are going to be two key factors,” said Dan Suzuki, senior U.S. equity strategist at Bank of America Merrill Lynch in New York. He thinks small caps may have more room to gain in the short run, especially if earnings surprise to the upside, but that valuations remains a negative.

On the flip side, rising rates also tend to boost the U.S. dollar, which would have a bigger negative impact on large-cap multinationals as a stronger dollar weighs on offshore revenues when they are translated into the U.S. currency.

Investors also worry that any tax reductions under the Trump administration may not come for many months, or even until 2018.

“Small-caps generally pay more in terms of U.S. corporate taxes,” said Nicholas Colas, chief market strategist at Convergex, a global brokerage company based in New York.

“You can somewhat view small-caps as a bit of a proxy for confidence in the tax reduction piece of the Trump economic plan.”

(Reporting by Caroline Valetkevitch; Editing by Daniel Bases and Leslie Adler)
Published at Sat, 18 Mar 2017 05:26:42 +0000

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Will Airline Stocks Recover from Winter Storm Stella?

by winterseitler from Pixabay

 

Will Airline Stocks Recover from Winter Storm Stella?

By Justin Kuepper | March 15, 2017 — 12:26 PM EDT

Winter storm Stella grounded more than 5,000 flights on Monday and Tuesday, which has taken a toll on an already-struggling airline industry.

United Continental Holdings Inc. (UAL) and Delta Air Lines Inc. (DAL) fell 7.5% and 2.5% over the past week, respectively. The U.S. Global Jets ETF (JETS) – which tracks the larger airline and parts industries – fell around 2.85% over the past week.

The industry has already been struggling with struggling unit revenue that led Delta, American Airlines, and Southwest Airlines to lower their forecasts for the first quarter of 2017. Rising fuel costs and adverse weather conditions were two of the causes cited by the airlines in their downgrades. Labor costs are also on the rise as unions negotiate new deals at higher costs while the revised travel ban announced by president Trump could hurt revenue.

Despite these concerns, Warren Buffett has been an avid buyer of American Airlines Inc. (AAL), Delta, Southwest Airlines Inc. (LUV), and United Continental. The billionaire investor is betting that the consolidation since 2005 will help control costs and avoid trade wars, while improving metrics like passenger revenue per available seat mile (“PRASM”) over the long-term.

On a technical level, United Continental could see significant support at around $61.50 and its 200-day moving average at $58.77. The Moving Average Convergence Divergence (MACD) remains in a bearish downtrend, but the Relative Strength Index (RSI) stands at highly oversold levels at 34.08. Traders should watch for a rebound from trend line support to re-test its highs of around $75.00 to $77.50 or a breakdown below these support levels.

Delta Airlines could similarly see support at its 200-day moving average at 43.04 or trend line support at around $42.00. Looking at technical indicators, the RSI appears oversold at 39.58 but the MACD remains in a long-term bearish downtrend.

Traders should watch airlines stocks for a rebound or breakdown from these key upcoming support trend lines. With the winter storm ending, airlines are likely to see a rebound from oversold conditions, but the long-term picture remains a little more cloudy.

Stock charts courtesy of StockCharts.com. Author holds positions in stocks mentioned via mutual funds and ETFs.
Published at Wed, 15 Mar 2017 16:26:00 +0000

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Buy Pullbacks on These Defense Stocks

 

Buy Pullbacks on These Defense Stocks

By Alan Farley | March 15, 2017 — 1:10 PM EDT

Defense stocks have pulled back following strong trend advances, underpinned by prospects for higher U.S. military spending during the Trump administration. Many of these issues are approaching or have reached support levels where committed buyers are likely to reload positions. Even so, sidelined investors should take a deep breath and play for the long haul because significant upside may wait until new spending parameters have been finalized.

Dow component Boeing Co. (BA) offers an exceptionally strong sector play, but its diverse operations could dilute this strategy’s objectives. In addition to military aircraft, the aerospace giant produces a broad range of non-military designs that could face increased headwinds if tariffs and border adjustment taxes become the law of the land. As a result, lesser-known plays with more-lopsided defense exposure could offer stronger returns.

NOC

Virginia blue-chip Northrop Grumman Corp. (NOC) broke out above the 2007 high at $77.30 in 2013 and entered a powerful trend advance that’s tripled the stock’s price in the last four years. It eased into a broad rising channel in 2015, holding those narrow boundaries in the last two years while signaling broad institutional and retail sponsorship that may continue through the rest of the decade.

The stock gapped up after the presidential election and stalled at channel resistance in December, ahead of a pullback that got bought at the 50-day EMA a few days later. A second test at that support level in January found willing buyers as well, with the stock now consolidating about 10-points under resistance. The next rally should break that barrier, ahead of an intermediate reward target at channel resistance between $265 and $270.

TDY

Southern California’s Teledyne Technologies Inc. (TDY) broke out of a 4-year cup and handle pattern with resistance at $66.50 in 2013 and entered an uptrend that’s posted a long series of all-time highs. The rally stalled near $110 in the fourth quarter of 2014, giving way to a triple top pattern that broke to the downside in August 2015 during the mini flash crash. The stock continued to lose ground into the first quarter of 2016, finally bottoming out at a 3-year low in the mid-70s.

It returned to resistance in September, pulled back and broke out after the November election, lifting to $129.36 in December. A broad consolidation pattern into February got bought after the company issued strong fiscal year guidance, with the rally posting an all-time high at $135.89 on March 1st, ahead of a pullback that’s now sitting on the 50-day EMA. Support at this level should offer a low-risk buying opportunity.

COL

Iowa’s Rockwell Collins Inc. (COL) has underperformed the broad defense sector in recent years, but that could change in coming months. It rallied above the 2007 high at $76 in 2014, yielding an uptick that reached the upper-90s in May 2015, ahead of a trading range that’s still in play nearly two years lower. Three tests in the lower-80s have generated strong support while the stock has now reached range resistance and the psychological $100 level.

Straight up action since mid-January has set off overbought technical signals at the same time that rising price has reached range resistance, raising odds for a final downturn that shakes out overeager bulls. However, it makes sense to let price be the guiding force for trade decisions, buying a breakout into triple digits or waiting for a pullback to fill the February 27th gap between $94.50 and $95 (red line).

The Bottom Line

Defense contractors have been pulling back in recent weeks, working off overbought technical conditions following strong post-election breakouts and rallies. Many of these blue chips have now approached or reached price levels that should trigger bounces that continue their developing uptrends.
Published at Wed, 15 Mar 2017 17:10:00 +0000

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Investor Group Lobbies for Indexes to Exclude Snap

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Investor Group Lobbies for Indexes to Exclude Snap

By Eric Volkman | March 6, 2017 — 5:55 PM EST

Last week’s IPO of hot messaging-app purveyor Snap (NYSE: SNAP) was a runaway success for many investors. Others, however, are not happy about how it was effected, and are taking their grievance to the owners of the most influential stock indexes.

The Council of Institutional Investors (CII), a group that represents a number of investment funds and other active stock buyers, is lobbying S&P Global (NYSE: SPGI) unit S&P Dow Jones Indices and MSCI (NYSE: MSCI) to exclude Snap from their indexes.

These investors are uncomfortable with the fact that the Snap stock distributed in the IPO carries no voting rights for their shareholders. This prevents those investors from influencing matters such as the company’s strategic direction, and its executive compensation packages.

Last month, CII sent Snap a letter requesting that the company reconsider its plan to sell only non-voting shares. In response, Snap Chairman Michael Lynton quoted his company’s S-1 IPO registration form saying that such a structure, “which prolongs our ability to remain a founder-led company, will maximize our ability to create stockholder value.”

In an interview with Reuters, CII Deputy Director Amy Borrus said of Snap, “They’re tapping public markets but giving public shareholders no say.”

“What we would like to see at the least is for the indexes to exclude new no-vote companies,” Borrus said in the interview.

Meetings with both companies have been set for later this week. S&P runs the S&P 500, arguably the most influential large-cap stock index on the U.S. market. MSCI operates a host of popular indexes that track the world’s debt and equity markets.

10 stocks we like better than MSCI
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Eric Volkman has no position in any stocks mentioned.
Published at Mon, 06 Mar 2017 22:55:02 +0000

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‘Green’ funds flush with new cash, challenges as Trump era dawns

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By David Randall| NEW YORK

Environmentally conscious investors are using their pocketbooks to protest President Donald Trump’s plans to slash environmental regulations, fueling a rally in funds that only invest in companies that meet progressive criteria for sustainability.

From the start of November to the end of January, investors poured $1.8 billion into actively managed equities funds in the “socially responsible” category, according to Lipper data. In the same period, there was a net outflow of $133 billion from funds that do not have environmental or social mandates.

Trump was elected president on Nov. 8.

Investors worried that Trump’s policies may imperil causes they believe in are hoping an influx of flows will help keep companies alive.

“If clients see the federal government withdrawing from a space they think is important, they may actually be more active in wanting to enforce their views through the dollars allocated,” said Vincent Reinhart, chief economist at Standish Mellon Asset Management.

The inflows are a boon for fund managers but also a challenge, requiring them to find companies whose share prices have a chance to climb despite less favorable federal policies.

For instance, shares of solar energy companies took a beating after the election, sliding 11 percent by year end on concerns the future of U.S. tax credits under a Trump administration, though they have recovered somewhat since then.

Still, cautious fund managers from Fidelity, New Alternatives, Calvert Investments and others are scrutinizing water technology and wind power shares, which should benefit from new federal infrastructure spending and a push by states such as California toward more renewable power generation.

Managers say water technology stocks should see an uptick from Trump’s campaign promise to spend $1 trillion on repairing and improving the country’s infrastructure. Wind stocks are attractive as that energy source is proving more cost-effective in growing areas of the country like California, which plans to get half its energy from renewable sources by 2030.

“If you look at where the policy is changing the fastest, it’s at the state level, and we see places like California continuing on that trend regardless of what is happening on the federal level,” said Kevin Walenta, who manages the Fidelity Select Environment and Alternative Energy portfolio. He has been adding to his positions in Spanish wind energy company Iberdrola SA (IBE.MC) and US-based water and plumbing company Comfort Systems USA Inc (FIX.N).

BETTING ON STATE POLICIES

Trump has not yet called for ending tax credits for solar and other renewable energy, though he has expressed doubt about the role of solar energy, bemoaned the loss of coal-mining jobs and blamed wind turbines for ruining picturesque landscapes.

Ahead of the election, power companies had already started to pivot away from solar and invest more in wind, with companies including Southern Co (SO.N), NextEra Energy Inc (NEE.N) and Xcel Energy Inc (XEL.N) announcing plans to expand wind-generating capabilities at a time when technology has helped lower its cost.

Wind power costs average between $32 and $62 per megawatt hour before subsidies, compared with an average between $49 and $61 per megawatt hour for utility-scale solar arrays without subsidies, according to a December 2016 report from Lazard. Coal power, which Trump has pledged to revive, costs between $60 and $143 per megawatt hour, the report notes.

With that cost structure, along with the potential increase in jobs from building and maintaining wind turbines, even solidly Republican states should continue to invest in renewables, said Murray Rosenblith, co-portfolio manager of the New Alternatives Fund (NALFX.O).

Rosenblith has been adding to his positions in wind companies Vestas Wind Systems (VWS.CO) and Gamesa Corporacion Tecnologica SA (GAM.MC), both of whose shares are up 10 percent or more since the start of the year.

“These are growing industries in states that are bringing back jobs,” he said. “Even if Trump wants to pull tax credits back as a political gesture he’s not going to find a lot of support in the party at large.”

(Reporting by David Randall, Ross Kerber and Nichola Groom; Editing by Jennifer Ablan and David Gregorio)
Published at Fri, 03 Mar 2017 20:00:58 +0000

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Snap Stock Soared 44% in Its First Day of Trading

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Snap Stock Soared 44% in Its First Day of Trading

By Eric Volkman | March 3, 2017 — 9:38 AM EST

Snap‘s (NYSE: SNAP) first day as a publicly traded stock was a smashing success. After its IPO price was set at $17, the company’s shares rose by 44% on the day to close at $24.48 per share.

Snap’s stock market debut is the highest-profile, and most expensive, IPO so far this year; it well eclipses the previous No. 1, Invitation Homes, which came to market in January. And with its share pop, Snap has at one stroke reached a value close to that of many famous names on the exchange. Its closing price gives it a market capitalization of over $28 billion, comparable to companies such as Target and CBS.

Snap is the owner of Snapchat, a short video and image messaging service popular with young users. As per the long-standing tradition of tech IPOs, the company has posted explosive revenue growth, but remains deeply in the red on the bottom line. In 2016, the company booked a loss of nearly $515 million on revenue of $404 million; those figures for 2015 were almost $373 million and just under $59 million, respectively.

In its IPO prospectus, the company said that on average, in the final quarter of 2016, its service had 158 million daily average users. Collectively, these people created 2.5 billion “Snaps” on a daily basis. That DAU count was up from 143 million at the end of June.

The company’s IPO was a major undertaking. It sold 200 million shares in the issue, which was underwritten by big-time financiers such as Morgan Stanley, Goldman Sachs, JPMorgan Chase unit J.P. Morgan, and Deutsche Bank.

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Eric Volkman has no position in any stocks mentioned.
Published at Fri, 03 Mar 2017 14:38:06 +0000

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The bump isn’t just Trump: What’s driving the stock rally

Photo: Richard Drew /Associated Press

The bump isn’t just Trump: What’s driving the stock rally

STAN CHOE, ASSOCIATED PRESS

NEW YORK — The stock market is hitting new heights, and yes, excitement about President Donald Trump’s policies is part of the reason for it. But it’s not the only one, analysts say.

Even if Trump had lost the election, many professional investors and analysts say they still would have expected stocks to rise, just perhaps not to the same degree. The Standard & Poor’s index has leapt 11.6 percent since Election Day, packing more gains into four months than it’s had in five of the last six full years. It dipped a bit Thursday, but it’s still close to its record set a day earlier.

Here’s a look at some of the factors behind the strong run for stocks:

Trump bump: The first reaction for markets to Trump’s win of the White House was confusion. Many investors had been expecting a victory for Hillary Clinton, and markets around the world tumbled on election night as the result became apparent. But they reversed course within hours. The reason: Investors are expecting the Trump White House to push through tax cuts for businesses and to loosen regulations on them.

Lower tax bills for companies should lead to an immediate rise in earnings, and stock prices tend to track profits over the long term. Easier regulations should also help businesses, the thinking goes, particularly big banks and other financials that have been under restrictions imposed following the financial crisis.

Financial stocks have been the best-performing sector by far of the 11 that make up the S&P 500 since the election. Besides the hope for looser regulations, analysts are also excited about the prospect for bigger profits given recent gains in interest rates, which will make lending money more profitable.

Improving economy: Growth has been frustratingly slow since the end of the Great Recession, but the job market is picking up steam. The unemployment rate in January was 4.8 percent, and economists see the economy as close to full employment. A report on Thursday showed that the fewest number of workers applied for unemployment benefits last week since Richard Nixon was in the White House.

Improvement was underway before Trump entered the White House, but his election has spurred things along. Optimism among small businesses, for example, spiked higher after the election and is now at its highest level since 2004, according to surveys from the National Federation of Independent Business.

Confidence also jumped for regular households following the election, and consumer confidence is at its highest level since the summer of 2001. If that translates into more purchases at stores and elsewhere, it should drive even more economic growth.

Other economies around the world are also improving, raising expectations for profits of big U.S. companies, which do a lot of their business overseas.

Investor confidence: Confidence has spread even to regular investors.

After years of hiding out in bonds and other safer investments, retail investors began creeping back into stock mutual funds and exchange-traded funds following the election. Investors plugged $20.7 billion into U.S. stock funds in November, the biggest month in nearly two years. They’ve followed that up with more purchases. That buying has helped to bid up stocks even more.

Corporate profits: Big businesses are finally earning bigger profits again.

Earnings per share for companies in the S&P 500 were nearly 6 percent higher last quarter than a year earlier, with nearly all of the companies reporting, according to S&P Global Market Intelligence. It’s a sharp turnaround from a year ago, when low oil prices and other factors were pulling down profits for S&P 500 companies. Profit growth was particularly strong for technology and financial companies. Microsoft’s earnings rose on stronger sales of business software, for example, and investment banks reported a strong quarter for their trading operations.

But just as each of these pillars has helped to lift stocks in recent months, a weakening of any one of them could remove some support. If tax cuts come later than expected, or if they end up being only minor ones, it could mean a drop for stocks.

Critics also worry that that stock prices have run up at a time when they were already looking overpriced relative to their earnings. One popular way to measure whether the stock market is expensive or not is to compare the S&P 500’s level against its earnings over the prior 10 years, adjusted for inflation. By that measure, which was popularized by Nobel-winning economist Robert Shiller, the S&P 500 is close to its most expensive level since the dot-com bubble was deflating in 2002.

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Domino’s Streak of Strong Sales Growth Continues

by Riedelmeier from Pixabay

Domino’s Streak of Strong Sales Growth Continues

By Daniel B. Kline | February 28, 2017 — 12:01 PM EST

Clearly, the Noid has been defeated.

Domino’s (NYSE: DPZ) continues to deliver results that defy the market conditions dragging down sales in much of the restaurant industry. The company posted comparable-store sales gains in both the United States and globally in the fourth quarter, its 23rd straight quarter of domestic same-store growth and its 92nd quarter in a row growing internationally.

And it’s not just that the company managed to add to its same-store sales totals: The numbers have been impressive. Domestic same-store sales climbed 12.2% year over year in Q4, and they jumped 10.5% for the full year. The chain’s international locations had 4.3% growth in Q4 and a 6.3% gain for the year.

“I’m extremely proud of our franchisees and operators worldwide, including those who contributed toward back-to-back years of double digit sales growth in the U.S.,” said CEO J. Patrick Doyle in the Q4 earnings release. “While these unprecedented results speak for themselves, I am most pleased with the passion and energy we demonstrated throughout 2016 in meeting the challenge of sustained success. The momentum and alignment within our system has never been stronger.”

A look at Domino’s numbers

In addition to growing same-store sales, Domino’s also improved its earnings per share. The company delivered Q4 EPS of $1.48, up 25.4% over the prior-year quarter. Full-year EPS came in at $4.30, up 23.9% over 2015. Revenue also climbed 10.6% year-over-year, despite the previous year’s quarter being a week longer.

Domino’s also provided indications that its expansion across the world is unlikely to slow down anytime soon. The company reported “record global net store growth of 1,281 stores in 2016, comprised of 171 net new domestic stores and 1,110 net new stores internationally.”

What’s next?

This is a clear case of “if it’s not broke, don’t fix it.” Going forward, however, Domino’s will tweak its formula. The company will continue to modernize the look of some of its stores, and it has been a steady innovator when it comes to ordering technology.

There’s nothing that suggest that an end is coming to either of Domino’s same-store sales streaks in the current quarter. Customers globally seem to have an ever-increasing desire for really convenient, mediocre pizza that this chain has been stunningly good at filling.

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Daniel Kline has no position in any stocks mentioned.
Published at Tue, 28 Feb 2017 17:01:02 +0000

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Tesla gets downgraded to ‘sell’ by Goldman Sachs

Tesla gets downgraded to ‘sell’ by Goldman Sachs

  @lamonicabuzz

Goldman Sachs thinks it’s time to pull the plug on Tesla’s stock.

David Tamberrino, an analyst at the influential Wall Street investment bank, downgraded Tesla’s stock to a “sell” rating on Monday morning. It’s pretty rare for analysts to be that negative about a high-profile company.

Tesla’s stock fell nearly 5% Monday and shares are now down more than 10% since the company reported its latest financial results last week. Tamberrino lowered his price target only slightly, from $190 to $185.

But a price of $185 is more than 25% below the $257 level it closed at on Friday. Shares were trading around $246 Monday following the downgrade.

Although Tesla (TSLA) recently said there’s strong demand for its Model S and Model X electric cars as well as the upcoming Model 3 — Tesla’s more affordable vehicle that should be available later this year — investors are nervous about all that Tesla has on its plate.

Tesla also recently bought SolarCity, an alternative energy company that is run by two cousins of Tesla CEO Elon Musk.

Tamberrino said the SolarCity deal was one reason why he was worried about Tesla.

The Goldman Sachs analyst added that “the acquisition of SolarCity — which is undergoing its own business model transition — comes at a time when we believe Tesla should be singularly focused on becoming a mass automobile manufacturer.”

As for the Model 3, Tamberrino thinks it will have “a more subdued launch curve than the company is targeting as some suppliers have expressed concern around final designs not being locked down.”

For that reason, Tamberrino thinks Tesla’s production goals for the Model 3 are too ambitious.

He’s predicting that Tesla won’t be able to hit an annualized run rate of more than 100,000 Model 3s until the fourth quarter of 2018 — a full year later than what Tesla expects.

Tesla also announced during its earnings call that its CFO was stepping down, not something that investors ever like to hear.

And Musk discussed plans to build as many as three more Gigafactories for battery and solar panel production. Tesla already has one for batteries in Nevada and another in Buffalo for solar panels.

Tamberrino is worried that Tesla is going to need to sell more stock to raise capital by the end of this year. That would dilute the value of existing Tesla stock.

But shares of Tesla are still up 15% this year despite the recent sell-off. Investors are happy with the solid demand for the Model S and Model X.

Some investors have also expressed hope that Musk’s willingness to participate in CEO summits at the White House with President Trump could mean that Trump will not attack Tesla the way he has other big companies.

The fact that Tesla has big plans to invest on U.S. factories may also help Musk curry favor with Trump — even though Musk opposes Trump’s proposed ban on immigrants from several predominantly Muslim nations and has taken issue with Trump’s assertions that climate change may not be real.

But Tesla is going to face a lot more competition from GM (GM), Toyota (TM), Ford (F) and Nissan(NSANF) in the electric car market.

Some analysts are worried Tesla may have dropped the ball by not getting the Model 3 to market sooner since GM already has the Chevy Bolt out and Nissan has the Leaf. Both of those cars are priced at levels that should be competitive with the Model 3.

And Goldman’s Tamberrino thinks that Tesla has too many distractions to deal with all the emerging competition from auto giants in Detroit and Japan.

“The company may lack the singular focus it should have on achieving its Model 3 launch targets,” he said.

Tesla was not immediately available for comment about the Goldman Sachs report.

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Fidelity slashes fees on stock and ETF trades to $4.95

A sign marks a Fidelity Investments office in Boston, Massachusetts, U.S. September 21, 2016. REUTERS/Brian Snyder/File Photo

Fidelity slashes fees on stock and ETF trades to $4.95

Fidelity Investments said on Tuesday it cut the price on trades for stocks and exchange-traded funds by 38 percent for retail brokerage clients.

Boston-based Fidelity’s price reduction to $4.95 from the previous commission of $7.95 a trade, will likely put pressure on the rest of the U.S. brokerage industry. Fidelity’s price offers a discount of more than 50 percent when compared with some rivals.

“It puts the flag up that Fidelity is the value player in investing,” said Ram Subramaniam, president of Fidelity’s retail brokerage business.

Discount brokers TD Ameritrade Holding Corp and E*Trade Financial Corp each charge $9.99 per trade and Charles Schwab Corp charges $6.95.

Fidelity said it also reduced option pricing to $0.65 per contract, down from $0.75. Fidelity’s online brokerage business has 17.9 million accounts and $1.7 trillion in total client assets.

(Reporting By Tim McLaughlin; Editing by Andrew Hay)

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Snapchat IPO; Trump Tuesday; Mobile World Congress

Snapchat IPO; Trump Tuesday; Mobile World Congress

  @CNNMoneyInvest

1. Snapchat IPO: Snap Inc., the parent company of Snapchat, is expected the reveal its initial public offering price after the market closes on Wednesday. While it’s one of the most highly anticipated companies to hit the stock market in a while, analysts attending Snap’s IPO road show have expressed concern about its earnings and revenue growth potential.

Snap’s 200 million shares are expected to be priced between $14 and $16 a share. That would give it a market value of nearly $20 billion.

2. Trump Tuesday: Tuesday will be a big day for President Trump. He’s kicking off with an interview on Fox & Friends, which will be his first morning show appearance since the inauguration. He called the Fox News Channel show the “most honest” morning program at a recent press conference.

Later that day, his sons Eric and Donald Trump Jr. will cut the ribbon at the new Trump International Hotel and Tower in Vancouver. The $360 million dollar facility has been the site of protests for the last several months with another planned on Tuesday.

President Trump will deliver his first address to a joint session of Congress at 9 p.m. ET. This will be the first time that he will outline his agenda to lawmakers. He’s expected to lay out what he’s achieved during his first month and announce what to expect for the rest of 2017.

3. Mobile World Congress kicks off: There’s nothing phone-y about all the new tech that will be released in Barcelona, Spain, beginning Monday. More than 2,000 companies, including HTC, LG, Sony (SNE) and Samsung will be on hand to reveal the latest in phones, tablets and anything else related to mobile gadgets.

The biggest buzz will go to Samsung following last year’s Note 7 disaster. Millions of the flammable phones were recalled. But Samsung isn’t expected to release the S8 follow-up. Instead it will focus on tablets.

Another company to keep an eye out for is Nokia (NOK). The iconic Nokia 3310 “candy bar” phone is expected to be making a comeback.

4. Coming this week:

Monday – Mobile World Congress kicks off

Tuesday – GDP second estimate; Trump’s Vancouver hotel opens and he addresses Congress

Wednesday – Auto sales numbers

Thursday – Chain store sales released

Friday – Nintendo Switch released worldwide

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Buy These Uptrending Stocks on the Pullback (LRCX)

 

Buy These Uptrending Stocks on the Pullback (LRCX)

By Cory Mitchell | Updated February 20, 2017 — 10:08 AM EST

Some traders like to buy a stock as it makes a new high, while others prefer to buy on a pullback. Stock prices are always moving up and down, so buying on a pullback presents an opportunity to get in at a better price than the recent highs the price has fallen from. These stocks have been trending higher for the last year and are currently pulling back. If the uptrend continues, these pullbacks could provide a good opportunity to take advantage of the next swing to the upside.

Lam Research Corp. (LRCX) started rallying in February of 2016, and in July broke out of a year-long range. The price has continued to rally strongly in 2017, reaching a high of $119.14. The price has started to pullback off that high, closing at $114.90 on Feb. 17. The trendline extending back to early 2016 indicates a potential buying region near $110 to $109. That entry area aligns with minor resistance from November and December, which could now act support. A number of other pullbacks during this rally have been about $9 to $10. If that holds true on this pullback, then the price would be expected to drop into that $110 region before rallying again. Ideally, wait for the price to stall out in the $110 region and then start bouncing again—showing that the price is still respecting that area—before buying. That way a stop loss can be placed below the recent swing low. A more conservative upside target is $121, while a more aggressive target is $125 for this short-term trade.

waiting for buying opportunity on LRCX

Copart, Inc. (CPRT) rallied strongly in 2016, also breaking out of a long-term range. In 2017 the price hit a high of $59.86 on Feb. 16. The price has barely started to pull back, but when it does, the first potential buying region is near $56. That’s where a trendline extending back to June intersects. Wait for the price to pause and rally off the $56 area before buying. This way a stop loss can be placed just below the recent swing low. June, September, and November are all examples where the price paused near support and then rallied. The price target on this short-term trade is $60.75. Note that Copart has earnings on Feb. 21.

waiting for pullback in CPRT

Genesee & Wyoming Inc. (GWR) bottomed at $41.56 in 2016 and has been moving steadily higher since. The rally since the start of 2016 has shown some tendencies which can aid in picking an entry area. Mainly, the price tends to rally and then move sideways within a range. In November the price rallied to a 2016 high of $80.73. It then experienced a sharp pullback, but then paused and rallied off the $69 region. Based on the tendency to range, and $69 being the closest support area within the uptrend, $69 to $68 is the potential buying zone. The stock has also shown a tendency to have a false break through the bottom of range before moving higher. Therefore, traders may need to give this trade a large stop loss (below $65 for example), or alternatively look for an entry near $67 or $66 if the price pulls back that far. This provides for a lower-risk trade as the entry point is closer to the stop loss level. The price target on this trade is $83.

Waiting for buying opportunity on pullback in GWR

The Bottom Line

Depending on the exact entry and stop loss levels, these trades have the potential for providing excellent risk/reward ratios. The trades are based on the assumption that the current uptrend will continue. The risk is that it won’t. This is why stop loss orders are used to limit the risk in case the price drops more than expected. These trade ideas are short-term in nature, designed to capture only a short-term rise in the stock price. Traders should do their own analysis and make sure all trades they take align with their own trading objectives.

Disclosure: The author doesn’t have positions in any of the stocks mentioned
Published at Mon, 20 Feb 2017 15:08:00 +0000

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With stocks at highs, investors eye consumer results

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 With stocks at highs, investors eye consumer results

By Saqib Iqbal Ahmed| NEW YORK

U.S. stock investors may look to a host of results from consumer-facing companies including Wal-Mart Stores Inc (WMT.N) next week for signs on whether the recent market rally has more room to run.

The consumer names are among the last major companies of the S&P 500 earnings season to report, but the results will also be watched for a read on spending as well as for commentary from executives on President Donald Trump’s proposal to tax imports.

Retail executives, some of whom met with Trump this week, have argued such a tax will raise consumer prices and hurt their businesses.

Besides Wal-Mart, Macy’s (M.N) and Home Depot Inc (HD.N) are among the heavyweights due to report next week.

Investors also will keep a close eye on housing-related data to gauge if a recent rise in consumer spending and inflation data is translating into higher home prices and a pick-up in home sales, market strategists said.

Wall Street ended the week on a high note, with all three major indexes registering record highs and the Dow reaching a seventh straight record close. [.N/C]

Investors were watching consumer names this week as Trump met with chief executives of Target Corp (TGT.N), Best Buy Co Inc (BBY.N) and six other major retailers.

Next week, investors may be looking for more clues about the impact of Trump’s proposals on retailers, with particular focus on Wal-Mart, JJ Kinahan, chief market strategist at TD Ameritrade in Chicago said.

“Maybe not so much what their earnings say as much as what their conference call will say about some of the president’s proposals around border taxes and immigration,” he said.

Results from some of the largest consumer-facing companies will also provide a read on whether improving consumer sentiment is reflected in actual results, said Steve Chiavarone, portfolio manager at Federated Investors.

“Does sentiment continue to work higher and eventually pull up actual results or can sentiment only take you so far until you have some follow-through in the real data? Those are the things that will be on our minds,” he said.

Results from small-cap retail companies will also be pored over as these companies have struggled from a profitability standpoint, said Steven DeSanctis, equity strategist at Jefferies.

“Though retail sales numbers have been good, profitability for a lot of the retailers has not been good,” he said.

“That’s going to be a big telltale sign for us. We’re overweight discretionary, thinking that was the cheapest group out there, and it still is the cheapest but… if the E drops out the PE, you run into a problem there,” he said, referring to price-to-earnings for the group.

 

(Reporting by Saqib Iqbal Ahmed; Additional reporting by Caroline Valetkevitch; Editing by James Dalgleish)
Published at Fri, 17 Feb 2017 22:44:46 +0000

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Cisco helps Wall Street extend streak of record highs

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By Yashaswini Swamynathan

U.S. stocks eked out enough gains on Thursday for the three main indexes to notch a record intraday high for the sixth straight session, helped by gains in Cisco.

The rally was sparked a week back by President Donald Trump’s vow of a ‘phenomenal’ tax announcement. Robust economic data has also been a boost, while bank stocks have risen on prospects of an upcoming interest rate hike.

Trump tweeted on Thursday: “Stock market hits new high with longest winning streak in decades. Great level of confidence and optimism – even before tax plan rollout!”

“The market is likely to take a breather after recklessly rising to continued record highs without a pause,” Perter Cardillo, chief market economist at First Standard Financial wrote in a note.

This type of action is due to the market expecting a perfect fiscal reform and that maybe placed on hold, he said.

The S&P 500 technology index .SPLRCT rose 0.29 percent and gave the broader index its biggest boost. Cisco (CSCO.O), which jumped 2.8 percent to $33.76 was the top stock on the three main indexes.

Adding to strong data points of late, a Labor Department report Thursday that showed the number of Americans filing for unemployment benefits rose less than expected last week.

At 9:38 a.m. ET (1438 GMT), the Dow Jones Industrial Average .DJI was up 14.36 points, or 0.07 percent, at 20,626.22, while the Nasdaq Composite .IXIC was up 10.13 points, or 0.17 percent, at 5,829.57.

The S&P 500 .SPX was up 0.96 points, or 0.04 percent, at percent, at 2,350.21. The index ended higher for the seventh session in a row on Wednesday, its first such streak since September 2013.

Six of the 11 major S&P sectors were higher, with utilities .SPLRCU and real estate .SPLRCR gaining the most, after two straight days of losses.

NetEase (NTES.O) jumped nearly 10 percent to $287.19 following the Chinese online game developer’s revenue beat.

Molina Healthcare (MOH.N) tumbled 16 percent to $50.35 after the health insurer reported a fourth-quarter loss and forecast 2017 profit far below estimates.

Alexion Pharma (ALXN.O) rose 2.9 percent to $135.84 after the company gave a 2017 revenue forecast that a Leerink analyst said would likely quell investor concerns.

Advancing issues outnumbered decliners on the NYSE by 1,425 to 1,132. On the Nasdaq, 1,231 issues rose and 972 fell.

The S&P 500 index showed 39 new 52-week highs and no new lows, while the Nasdaq recorded 75 new highs and eight new lows.

(Reporting by Yashaswini Swamynathan in Bengaluru; Editing by Savio D’Souza)
Published at Thu, 16 Feb 2017 14:54:20 +0000

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Groupon Beats on Q4 Revenue, EPS

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Groupon Beats on Q4 Revenue, EPS

By Eric Volkman | February 15, 2017 — 5:10 PM EST

There’s nothing like a more impressive than expected quarter to send a company’s stock price shooting higher. Such was the case for Groupon (NASDAQ: GRPN), which reported a fourth quarter that greatly pleased the market.

For the period, the company posted revenue of just under $935 million, an almost 2% improvement on a year-over-year basis. This was on the back of gross billings that were largely flat, at nearly $1.7 billion. On an adjusted basis, net income came in at $42.5 million ($0.07 per share), nearly double the $23.3 million ($0.04) of the same quarter the previous year.

On average, analysts were expecting revenue of only $914 million, and an adjusted bottom line of $0.03 per share.

For the entirety of 2016, Groupon’s revenue inched up by 1% to $3.1 billion, on billings that dipped by 3% to just under $6.1 billion. Adjusted net profit was $23 million ($0.04 per share).

“Our concentrated focus on key strategic initiatives provided a strong foundation for Groupon going forward and resulted in a streamlined global operation, a healthier Goods business, improved customer service and strong customer acquisitions after a successful online and offline marketing strategy,” CEO Rich Williams said in the press release detailing the results.

Groupon also proffered guidance for the current year. The company believes its adjusted EBITDA will be in the $200 million to $240 million range, well up from the $178 million of 2016. It did not provide revenue or net profit estimates.

Following the unveiling of the results, Groupon’s stock price increased sharply, closing Wednesday 23% higher at $4.66 per share.

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Eric Volkman has no position in any stocks mentioned.
Published at Wed, 15 Feb 2017 22:10:06 +0000

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Berkshire takes huge bite of Apple, boosts airline stakes

Warren Buffett, chairman and CEO of Berkshire Hathaway, speaks at the Fortune’s Most Powerful Women’s Summit in Washington October 13, 2015. REUTERS/Kevin Lamarque/File Photo

Berkshire takes huge bite of Apple, boosts airline stakes

By Jonathan Stempel| NEW YORK

Warren Buffett’s Berkshire Hathaway Inc (BRKa.N) was an aggressive buyer of stocks in last year’s fourth quarter, nearly quadrupling its stake in Apple Inc (AAPL.O) and increasing its stake sevenfold in the four biggest U.S. airlines.

In a regulatory filing, Berkshire reported owning 57.4 million shares of Apple as of Dec. 31, which would now be worth $7.74 billion, up from just from 15.2 million shares in the iPhone maker three months earlier.

Berkshire also reported a $9.3 billion airline stake, with investments topping $2.1 billion in each of American Airlines Group Inc (AAL.O), Delta Air Lines Inc (DAL.N), Southwest Airlines Co (LUV.N) and United Continental Holdings Inc (UAL.N).

It also disclosed new stakes in satellite radio company Sirius XM Holdings Inc (SIRI.O) and seed company Monsanto Co (MON.N), which is being bought by Germany’s Bayer AG (BAYGn.DE).

Though it is unclear who make which investments, the filing appears to reflect much of the $12 billion of stock that Buffett said he had bought between the Nov. 8 Presidential election and the end of January.

Larger Berkshire investments such as Wells Fargo & Co (WFC.N), Coca-Cola Co (KO.N) and International Business Machines Corp (IBM.N) are normally Buffett’s, but the 86-year-old billionaire has given his deputies Todd Combs and Ted Weschler more to invest over the years.

Berkshire’s initial investment in Apple got attention last year, given Buffett’s usual aversion to technology companies – apart from IBM – which he considers outside his zone of competence.

The new, larger stake makes Berkshire one of Apple’s 10 biggest investors.

“I’m stunned to see the size of that Apple position,” said Thomas Russo, who oversees $11 billion of assets, including 12 percent in Berkshire, at Gardner Russo & Gardner in Lancaster, Pennsylvania.

Berkshire did not respond to a request for comment.

The Omaha, Nebraska-based conglomerate also owns roughly 90 companies such as the BNSF railroad, Geico car insurance and Dairy Queen ice cream.

Its Class A shares closed on Tuesday up $2,078.95 at $250,419, a record high closing price and less than 0.2 percentage points below its all-time high on Dec. 14.

 

APPLE BECOMES CORE HOLDING

The plunge into Apple appears particularly well-timed.

Shares of Apple closed on Tuesday up $1.73 at $135.02, also a record closing high.

Assuming Berkshire has not sold its stake, Apple’s 16.6 percent gain this year would leave it with a $1.1 billion paper profit in 2017 alone.

It had been widely believed that Berkshire’s initial investment came from Combs or Weschler.

But their decisions have sometimes influenced Buffett, as when Berkshire last year paid $32.1 billion for aircraft parts maker Precision Castparts Corp, once a Combs investment.

“It’s quite possible that Warren woke up and began to understand the virtues of Apple that he had been neglecting or, like with Precision Castparts, Todd or Ted had an affinity for Apple that sparked interest from Warren,” Russo said.

Combs and Weschler are the leading candidates to eventually succeed Buffett as Berkshire’s chief investment officer.

The airline investments, meanwhile, suggest that Buffett has overcome his two-decade aversion to the sector after an unhappy – though, he has said, profitable – investment in US Air Group.

Buffett told talk show host Charlie Rose in an interview last month that it was “in large part” his decision to dive back into airlines.

“The industry was once balkanized, but now it is bulking up, and has come to realize that an empty seat is a perishable asset,” Russo said. “More planes are traveling more full.”

Shares of American, Delta, Southwest and United, as well as Apple, Monsanto and Sirius, rose in after-hours trading.

Such increases often occur when investors perceive that Berkshire has given a company its imprimatur.

Monsanto and Sirius did not immediately respond to requests for comment.

To make room for new investments, Berkshire appeared to have shed a $1.8 billion stake in agricultural equipment maker Deere & Co (DE.N) and nearly all of what remained from a more than decade-old stake in retailer Wal-Mart Stores Inc (WMT.N).

(Reporting by Jonathan Stempel in New York; Additional reporting by Jennifer Ablan and Dan Burns; Editing by Leslie Adler, Bernard Orr)
Published at Wed, 15 Feb 2017 11:03:35 +0000

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Xoma Launches $25 Million Registered Offering

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Xoma Launches $25 Million Registered Offering

By Shobhit Seth | February 13, 2017 — 11:00 AM EST

Xoma Corp. (XOMA) agreed to sell 1.2 million shares of its common stock and 5,003 shares of its convertible preferred stock in a registered direct offering. The Berkeley, California-based Xoma expects to gross around $25 million from the offering. (See also, Xoma Declares 1-for-20 Reverse Stock Split.)

The sale will be made directly to Biotechnology Value Fund L.P. and some of its affiliates. The sale will be made at a fixed price of $4.03 per share, which was Xoma’s closing price on the Nasdaq on Friday.

Each share of the Series X preferred stock will be equivalent to 1,000 shares of registered common stock, giving the preferred stock a value of $4,030 per common share, based on a conversion price of $4.03 per share of the common stock.

While the preferred stocks can be converted any time by the shareholder, there is a conditional cap on the conversion. The conversion will be disallowed if it leads to the beneficiary owing 19.99% or more of the then issued and outstanding total common stock of Xoma. (For more, see XOMA Reports Success in Insulin Trials.)

Subject to customary closing conditions, the direct issue is expected to close on or about February 15, 2017.

Xoma discovers and develops novel antibody therapeutics, 25 of which are financed by other biotech and pharmaceutical companies and tied to potential milestone and royalty payments. (See also, XOMA Reports Proof of Concept for New Drug.)
Published at Mon, 13 Feb 2017 16:00:00 +0000

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