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Walmart Stock Nears Key Support After Earnings Miss

Walmart Stock Nears Key Support After Earnings Miss

By Justin Kuepper | February 21, 2018 — 3:25 PM EST

Walmart Inc. (WMT) shares have fallen more than 12% since the beginning of the week after the company reported worse-than-expected fourth quarter financial results. Revenue rose 4.1% to $136.3 billion – beating consensus estimates by $1.39 billion – but earnings per share hit only $1.33 and missed consensus estimates by four cents per share. The company’s full-year profit guidance also came in at $4.75 to $5.00 per share, below expectations of $5.13 per share.

Aside from the lackluster guidance, the company’s e-commerce growth came in at just 23%, which was sharply lower than the growth of roughly 40% seen in past quarters. Management primarily attributed the slower growth to the Jet.com acquisition that added scale but anticipates the growth rate to ramp back up to the 40% range after the first quarter. Full-year e-commerce sales remain up 44% versus the prior year. (See also: Walmart Sellers in Control After Earnings Miss.)

Technical chart showing the performance of Walmart Inc. (WMT) stock

From a technical standpoint, the stock broke down from trendline support earlier this month, rebounded to the pivot point and fell again to key support levels. The relative strength index (RSI) appears oversold at 31.71, but the moving average convergence divergence (MACD) remains in a bearish downtrend. These two technical indicators suggest that the stock could see some consolidation and a possible move even lower if the trend reverses in the longer term.

Traders should watch for some consolidation above trendline support levels after closing the gap dating back to mid-November. If the stock breaks down from these levels, it could reach the 200-day moving average at around $86.21 or reaction lows at around $77.50. If the stock rebounds, traders should watch for a move to S1 support and the 50-day moving average at around $100.00 on the upside. (For more, see: Why Walmart Will Never Be Amazon.)

Chart courtesy of StockCharts.com. The author holds no position in the stock(s) mentioned except through passively managed index funds.

Published at Wed, 21 Feb 2018 20:25:00 +0000

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Stocks Post Strong Recovery Following Market Drop

Stocks Post Strong Recovery Following Market Drop

By Justin Kuepper | Updated February 16, 2018 — 6:23 PM EST

The major U.S. indexes moved sharply higher over the past week despite a couple of concerning economic indicators. On Wednesday, the Census Bureau reported an unexpected 0.3% drop in January retail sales along with a sharp downward revision in December’s figures. The Consumer Price Index (CPI) also rose an unexpected 0.5% month over month and 2.1% year over year, which sparked concerns that the Federal Reserve could hike rates more quickly.

International markets were also higher over the past week. Japan’s Nikkei 225 rose 0.55%; Germany’s DAX 30 rose 2.58%; and Britain’s FTSE 100 rose 2.86%. In Europe, industrial production rose more than expected in December, which helped power the fastest economic growth rate in a decade. In Asia, investors have been expressing increasing concern over growing corporate and household debt levels that could derail the region’s growth.

The SPDR S&P 500 ETF (ARCA: SPY) rose 4.44% over the past week. After falling to S2 support at $259.41 earlier this month, the index rose past S1 and 50-day moving average resistance levels at $271.81 this week. Traders should watch for a breakout to the pivot point at $278.64 or a breakdown to retest S2 support on the downside. Looking at technical indicators, the relative strength index (RSI) rose to neutral levels of 51.62, while the moving average convergence divergence (MACD) could see a near-term bullish crossover following its bearish crossover in late January. (See also: 12 Stocks to Buy for Market’s Upturn: Goldman Sachs.)

Technical chart showing the performance of the SPDR S&P 500 ETF (SPY)

The SPDR Dow Jones Industrial Average ETF (ARCA: DIA) rose 4.09% over the past week, making it the worst performing major index. After briefly touching S2 support at $238.70 earlier this month, the index rebounded to its S1 and 50-day moving average resistance at $250.88. Traders should watch for a breakout to the pivot point at $257.49 or a breakdown to retest S2 support levels on the downside. Looking at technical indicators, the RSI appears neutral at 51.19, but the MACD could see a near-term bullish crossover.

Technical chart showing the performance of the SPDR Dow Jones Industrial Average ETF (DIA)

The PowerShares QQQ Trust (NASDAQ: QQQ) rose 5.88% over the past week, making it the best performing major index. After briefly reaching reaction lows at around $153.00, the index rebounded past its 50-day moving average and S1 resistance levels to the pivot point at $165.51. Traders should watch for a breakout to retest prior highs at around $171.00 or for a move lower to retest S1 support and pivot point levels on the downside. Looking at technical indicators, the RSI appears neutral at 54.34, but the MACD could see a bullish crossover. (For more, see: Stock Investors Should Fasten Seat Belts for More Plunges.)

Technical chart showing the performance of the PowerShares QQQ Trust (QQQ)

The iShares Russell 2000 Index ETF (ARCA: IWM) rose 4.58% over the past week. After briefly touching its 200-day moving average support at $144.91, the index rebounded past S2 resistance levels to S1 and 50-day moving average resistance at $153.66. Traders should watch for a breakout to the pivot point at $156.48 or a breakdown to retest S2 support at $148.32 on the downside. Looking at technical indicators, the RSI appears neutral at 51.53, but the MACD could see a near-term bullish crossover.

Technical chart showing the performance of the iShares Russell 2000 Index ETF (IWM)

The Bottom Line

The major indexes moved higher over the past week, with neutral RSI levels and potential MACD crossovers signaling a new intermediate-term bullish uptrend. Next week, traders will be closely watching several key economic indicators, including existing home sales on Feb. 21 and jobless claims on Feb. 22. The market will also be keeping a close eye on evolving political risks both in the United States and abroad. (For additional reading, check out: Why Stock Market’s Big Rally Won’t Last.)

Note: Charts courtesy of StockCharts.com. As of the time of writing, the author had no holdings in the securities mentioned.

Published at Fri, 16 Feb 2018 23:23:00 +0000

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Gauging the Strength of a Market Move

Gauging the Strength of a Market Move

By Matt Blackman | Updated February 19, 2018 — 6:47 PM EST

Most traders and investors are familiar with the saying “the trend is your friend.” But deciding what constitutes a trend often proves challenging because it depends on the trader’s preferred time in the trade. Furthermore, once a trend has been identified, the trader must determine its strength.

In his book “The Logical Trader,” Mark Fisher describes a number of techniques to help his reader spot trend breakouts and identify their strength. Fisher’s ACD trading system uses intraday data to identify the daily opening range for finding trades. But this intraday ACD technique may not appeal to the long-term trader or investor. Here we look at how the technique can be applied to a longer time horizon.

Opening Range

In the article Spotting Breakouts as Easy as ACD, we look at how short-term trades are entered on a five-minute chart. Using the first five to 30 minutes of the day, depending on the equity or commodity, we determine the opening range (OR) high and low. “A ups” and “A downs” are then calculated based on a set number of points above or below the daily OR. In Figure 1 below, we examine the stock Broadcom. An A up (A down) (green lines) occurs if the price of the stock moves $0.27 above (or below) the OR.

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Figure 1: Five-minute chart of BroadCom. Chart provided by MetaStock.com. Intraday data by eSignal.com.

Monthly and Half-Yearly Opening Range

Opening range can also be applied to longer periods. Just as the daily OR has a greater chance than other times throughout the day of being the high or low, monthly OR has a greater chance than another day in the month of being the high or low for the next 20 or so trading days. Once the trader knows this fact, it can be exploited to better the odds of making money.

This is also true of the first two weeks (10 trading days) of each six-month period. The high and low set during the first two weeks of January and July often represent an important area of support or resistance for the next five and a half months.

The good news is that both monthly and half-yearly ORs are very easy to calculate. Simply take the high and the low of the first trading day of the month for the monthly OR, or take the first 10 trading days in January or July for the half-yearly OR and draw two lines across your chart. If price breaks above the high, a bullish bias is adopted. If it breaks below the low line, a bearish stance is taken.

Monthly opening range is plotted in Figure 1 (orange lines). We see that after breaking down through the monthly OR, the stock continued to trade lower, confirming a medium-term negative market bias. Advance warning of the breakdown was provided by the bearish divergence on the relative strength index, or RSI, in the upper window of the chart in Figure 1.

Pivot Vs. Pivot Range

Most experienced traders are familiar with pivots. A pivot point is simply the point at which a security changes direction and is therefore a turning point. A pivot low price bar has higher bars before and after it so that the formation looks like either a “V” or “U.” A pivot high looks like the mirror image of a pivot low.

Pivots signify the end of a short-term move and minor reversal or the end of the dominant trend and a major change in direction. Pivot points are used to calculate Fibonacci levels of support and resistance, swing trade entry and exits, and in a host of other trading techniques.

A pivot range is also based on the high, low and close, but is calculated somewhat differently than a pivot point. As the name implies, pivot ranges have a high and low limit.

Here is the calculation from “The Logical Trader.” The same formula is used to calculate daily, monthly and six-month pivot ranges, but note that for the monthly, the high, low and close of the first day of the month should be used. And for the six-month pivot ranges, the high, low and close of the first 10 trading days of January and July should be used:

  • Pivot price (also equals formula for a pivot point) = (high + low + close) / 3
  • Second number = (high + low) / 2
  • Pivot differential = daily pivot price – second number
  • Pivot range high = daily pivot price + pivot differential
  • Pivot range low = daily pivot price – pivot differential

In Figure 2, the monthly (blue lines) and six-month (orange lines) pivot ranges are plotted for Broadcom. In both cases, the pivot ranges acted as either resistance (when in a bear trend) or support (bull trend).

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Figure 2: Daily chart of Broadcom with monthly (blue lines) and half-yearly (orange) pivot ranges. The green and magenta lines are a 20 and 50 day moving average. Chart provided by Metastock.com. Intraday data by eSignal.com.

Like opening range, pivot ranges can be used to execute trades. Similar to an ACD trade, A ups and downs as well as C ups and downs are used, but because the trader is using longer time frames, larger values are employed than when the daily values are calculated (not shown in Figure 2). When trading Broadcom, instead of using an A up of $0.27 to trade short-term using the daily OR, the longer-term trader would apply a half-year A up of $2.50 to $3 above the half-yearly pivot range, depending on volatility and stock price at the time.

The time frame is different but the concept is the same. The goal is to identify breakouts, assess their potential and then trade accordingly.

Three-Day Rolling Pivot

Another technique for helping traders spot breakouts is the three-day rolling pivot. When the three-day rolling pivot range is below the price action, long trades are favored and when above, short trades are preferred.

040704_3.gif

Figure 3: BRCM five-minute chart showing the three-day rolling pivot range with A ups and A downs. Chart provided by Metastock.com. Intraday data by eSignal.com.

In Figure 3, a buy signal is generated on Mar 1 (No. 1) when the price breaks through the A up. A long trade is further confirmed by the fact that the three-day rolling pivot is acting as support. The stock then begins to trade in a range in which the three-day rolling pivot turns from support to resistance by Mar 5. When the stock drops through the A down at point 2 on Mar 6, a sell is generated.

Here is the calculation for the three-day rolling pivot:

  • Three-day rolling pivot price = (three-day high + three-day low + close) / 3
  • Second number = (three-day high + three-day low) / 2
  • Pivot differential = daily pivot price – second number
  • Three-day rolling pivot range high = daily pivot price + pivot differential
  • Three-day rolling pivot range low = daily pivot price – pivot differential

Putting It All Together

Fisher’s point in “The Logical Trader” is that OR and pivot ranges are methods used by his professional traders to gauge overall market bias and are more powerful than simply relying on standard support and resistance. How are opening and pivot ranges used together?

  • If OR < pivot range < close = plus day and the trader is bullish.
  • If opening OR

For example, if OR is less than the pivot range and assuming there is some room between the A up and the pivot range, a long trade could still be taken. But fewer shares would be purchased, since the trader knows that the price has a strong probability of stopping or reversing when it reaches the pivot range. But when the price trades above the OR and pivot range, the trader has a higher degree of confidence that the trade has some room to move, so he or she buys more shares as it is now a plus day.

The Bottom Line

Opening range provides a wider area with a probability that it will either be the high or the low of the period under examination. The pivot range, whether it is daily or half-yearly, gives another point of reference for support or resistance. By plotting these values on the chart, a trader can immediately see when the stock or market is gaining or losing strength and momentum.

Designating where OR and pivot range are in relation to each other and to the current price helps the trader decide how much confidence can be used when placing a trade. This information is highly useful in making trading decisions. And, like any reliable technical trading technique, it is one that works in all time frames.

Published at Mon, 19 Feb 2018 23:47:00 +0000

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U.S. market gurus who predicted selloff say current calm an illusion

U.S. market gurus who predicted selloff say current calm an illusion

NEW YORK (Reuters) – You ain’t seen nothing yet.

Some veteran investors who were vindicated in calling for a pullback in shares and a spike in volatility could now be cheering. Actually, they’re looking at the risks that still lie ahead in the current relative calm.

The last week’s wild market swings confirmed that the market was in correction territory – falling more than 10 percent from its high. The falls were triggered by higher bond yields and fears of inflation but came against a backdrop of a stretched market that had taken price/earnings levels to as high as 18.9. Adding to downwards pressure was the unwinding of bets that volatility would stay low.

The fall had come after a growing number of strategists and investors said a pullback was in the offing – although the consensus opinion was that the market would then start rising again.

The big question is: what comes now?

“Do you honestly believe today is the bottom?” said Jeffrey Gundlach, known as Wall Street’s Bond King, last week, who had been warning for more than a year that markets were too calm. Gundlach had been particularly vocal in his warnings about the VIX, Wall Street’s “fear gauge,” which tracks the volatility implied by options on the S&P 500.

The sell-off in U.S. stocks derailed some popular short volatility exchange-traded products, which contributed to more downwards pressure on the market. Gundlach in May last year warned that the VIX was “insanely low.”

Hedge fund manager Douglas Kass from Seabreeze Partners Management Inc was short SPDR S&P 500 ETF and said he “took a lot of small losses” last year but says he still sees more stress ahead. He said he is now re-shorting that ETF.

Investors who bet low volatility would continue will need time to unwind their strategies, Kass said.

Dan Fuss, known as Wall Street’s Warren Buffett of bonds, has been warning for years that Treasuries were vulnerable to a vicious sell-off and set for much higher yields and lower prices. “I‘m not trying to be an ‘end of the world person’ here, but it is a possibility,” Fuss told Reuters last November.

In a telephone interview this week, Fuss, the vice chairman of $268-billion Loomis Sayles and one of the world’s longest-serving fund managers with six decades of experience, said he had built cash and cash equivalent reserves to their most extreme levels in his Loomis portfolio and had put some of that money to work last week.

His biggest worry in 2018: “The geopolitical side. Nothing beats peace.”

Veteran short-seller Bill Fleckenstein, who ran a short fund but closed it in 2009, said that “last week’s action was an early indication that the end of bull market is upon us.”

Fleckenstein said there was a lot of money in the market with no conviction behind it, for example, buying index funds and ETFs just “to be part of the party” which was an element of “hot money.”

“Last week was just the preview to the bigger event that we’ll see this year probably,” Fleckenstein said. Fleckenstein said he is not short at the moment – although he did make “a couple of bucks” last week shorting Nasdaq futures. He said he is looking for an opportunity to get short again. He said he has “flirted with the idea of restarting a short fund”.

“I‘m not short at the moment, because the action was such that I covered, but I expect that I’ll be short aggressively at some point this year. It’s not quite time, but it’s pretty close.”

Many strategists have been bullish about the market’s potential to stretch the near-nine-year-old bull market further. Many had said they expected a pullback, but then a resumption of gains.

The drop in the benchmark S&P 500 last week did not dent strategists’ expectations for mild to moderate gains in the U.S. stock market by the end of the year, as they cited strength in corporate earnings and interest rates not expected to derail equities.

Byron Wien, longtime Wall Street strategist who is vice chairman in the Private Wealth Solutions group at Blackstone, said in his predictions for 2018 that this year the S&P 500 would have a 10-percent correction.

“I don’t think we’re done,” said Wien, who ultimately thinks the bull run will continue some more and that the S&P would end the year above 3,000. But the path there could be bumpy. Wien thinks the correction “did not cleanse the optimism sufficiently” and sees further downside beyond the 10-percent fall – which has since been partially recouped.

“Everyone says: ‘Oh, well, now we’ve had the 10 percent correction that everyone was waiting for, then we go back up again’,” said Wien. “But it’s not as simple as that.”

(This version of the story was refiled to remove the erroneous “percent” from P/E level in paragraph 3)

Reporting by Jennifer Ablan and Megan Davies; Editing by Nick Zieminski

Published at Fri, 16 Feb 2018 11:38:15 +0000

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TripAdvisor Stock Breaks Out to Fresh Highs After Earnings Beat

by Pamjpat from Pixabay

TripAdvisor Stock Breaks Out to Fresh Highs After Earnings Beat

By Justin Kuepper | February 15, 2018 — 11:55 AM EST

TripAdvisor, Inc. (TRIP) shares rose more than 8% in early trading on Thursday after the company reported better-than-expected fourth quarter financial results. Revenue rose 1.6% to $321 million – beating consensus estimates by $8.83 million – while adjusted earnings per share came in at six cents. Management indicated that auction results stabilized, reported that online acquisition costs fell and announced a $250 million share buyback.

Analysts have responded favorably to the earnings results. Earlier this morning, Piper Jaffray’s Michael Olson raised his price target on TripAdvisor shares from $40.00 to $47.00 per share but maintained a Neutral rating, citing strong results with revenue and EBITDA that came in above consensus. The company’s EBITDA guidance was flat for the year, but Olson noted that the guidance was actually favorable when compared with the consensus calling for -5.5%. (See also: Trade Priceline and TripAdvisor Stocks on Guidance.)

Technical chart showing the performance of TripAdvisor, Inc. (TRIP) stock

From a technical standpoint, the stock broke out from trendline resistance to retest its prior highs made in the middle of last year. The relative strength index (RSI) moved to overbought levels of 72.16, but the moving average convergence divergence  (MACD) accelerated its bullish run-up. These dynamics suggest that the stock could see some near-term consolidation, but the overall trend remains largely positive for the time being.

Traders should watch for some consolidation above trendline resistance levels at around $42.00 before a potential move higher. The next major areas of resistance are prior highs at $46.00 and $48.00. If the stock closes below these levels, traders should watch for a move down to R2 support at $39.72 or the 200-day moving average at $38.57. There is also significant support at around $36.00 from the pivot point, trendline and 50-day moving average. (For more, see: Top Cheap Travel Websites.)

Chart courtesy of StockCharts.com. The author holds no position in the stock(s) mentioned except through passively managed index funds.

Published at Thu, 15 Feb 2018 16:55:00 +0000

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Asian shares extend bounce to fifth day, dollar sags to three-year low

[Stock-market-ticker]

by Pexels from Pixabay

Asian shares extend bounce to fifth day, dollar sags to three-year low

TOKYO (Reuters) – Asian shares rose for a fifth straight day on Friday as investor confidence slowly returns after a sharp sell-off earlier in the month, while the dollar continued its descent, hitting a three-year low against a basket of major currencies.

U.S. debt yields rose near multi-year highs. Two-year note yields hit a 9 1/2-year high as bond prices fell on Federal Reserve officials’ signaling that recent volatility in U.S. stocks would not stop them raising interest rates in March.

European shares are expected to rise 0.3 to 0.4 percent at the opening, according to spread-betters.

MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.4 percent, though many Asian markets were closed on Friday for the Lunar New year.

Japan’s Nikkei rose 1.2 percent, with investors relieved to see the government appoint Bank of Japan Governor Haruhiko Kuroda for another term, suggesting the central bank will be in no rush to dial back its massive stimulus program.

Measured by the MSCI’s broadest gauge of the world’s stocks covering 47 markets, global shares have now reclaimed more than half of the 10.7 percent plunge from a record intraday high on Jan. 29 to a four-month intraday low a week ago.

Investors have been reassured by a fall in the Wall Street Vix index, the “fear gauge” that measures the one-month implied volatility of U.S. stocks.

The index dropped below 20 for the first time since its spike to 2 1/2-year high of 50.3 last week, a jump that caused massive losses among investors who bet equity markets would be stable on a combination of solid economic growth and moderate inflation.

The Vix futures fell back to more normal patterns, from the past several days of so-called backwardation, in which the front-month contract becomes the most expensive.

The return of a more usual curve suggested that the loss-cutting and position unwinding of “volatility short” strategies had run its course for now, easing investors’ nerves.

“I’ve said markets will be unstable until February, and that February will offer a good buying opportunity,” said Eiji Kinouchi, chief technical analyst at Daiwa Securities, noting that U.S investors were likely to book profits in January to take advantage of lower tax on capital gains.

The selling appears to have run its course and the fall in volatilities, both implied and actual, is likely to prompt investors to return to stocks, he said.

The U.S. dollar, on the other hand, slipped below its January low against a basket of major currencies to reach its lowest since late 2014.

The dollar index fell to as low as 88.37, and was on course to lose over 2 percent for the week, its biggest such loss in two years.

There is no strong consensus yet on what is driving the dollar’s persistent weakness, especially in light of rising yields. Some say it simply reflects a return of risk appetite and a shift to higher-yielding currencies, including many emerging market ones.

But others cite concerns that Washington might pursue a weak dollar strategy as well as talk that foreign central banks may be reallocating their reserves out of the dollar.

There are also worries President Donald Trump’s tax cuts and fiscal spending could stoke inflation and erode the value of the dollar.

“His protectionist policies could also fan inflation. Markets appear to have calmed down for now but fundamentally it is different from last year,” said Yoshinori Shigemi, global market strategist at JPMorgan Asset Management.

“You could say that right now, rather than stocks rising around the world, it is the dollar falling against almost everything,” he added.

The euro rose to $1.2556, its highest since December 2014. Having risen 2.37 percent so far this week, it could post its biggest weekly gain in nine months.

The dollar dropped to 105.545 yen, its lowest level since November 2016 and down 2.8 percent for the week, which would be the biggest in a year and a half.

The South African rand hit a three-year high of 11.6025 to the dollar on Thursday on hopes the resignation of President Jacob Zuma had paved the way for new leaders to speed up economic growth.

The dollar’s fall came even as U.S. bond yields remained near a multi-year high.

The 10-year U.S. Treasuries yield hit a four-year peak of 2.944 percent on Thursday and last stood at 2.910 percent.

Shorter-dated yields also rose as investors grew convinced that the correction in stock prices in recent weeks would not prevent the Fed from raising interest rates in March and twice more this year.

Cleveland Fed president Loretta Mester said on Tuesday the recent stock market sell-off and jump in volatility will not damage the economy’s overall strong prospects. Mester is being considered a leading candidate for the Fed’s Vice Chair.

The two-year yield rose to as high as 2.213 percent, its highest since Sept 2008, on Thursday and last stood at 2.210 percent.

Oil prices maintained this week’s gains, with U.S crude futures trading at $61.65 per barrel, up 4.1 percent so far this week.

Elsewhere, virtual currency bitcoin recovered the $10,000 mark for the first time in two weeks, gaining more than 70 percent from its near three-month low of $5,920.7, before easing back a tad to $9,925.

Reporting by Hideyuki Sano; Editing Kim Coghill & Shri Navaratnam

Published at Fri, 16 Feb 2018 06:59:52 +0000

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Trading With Wolves

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By ToffanelloG from Pixabay

Trading With Wolves

by THE MOLE

The swings of the past week serve as yet another healthy reminder that all markets work on a zero sum basis. After all Martin Scorsese called it the ‘Wolves of Wall Street’ for a reason – not the bears or the bulls of Wall Street. However the underpinnings of what may serve as sensationalistic backdrops for summer blockbusters are what we as traders need to deal with in real life on a recurring basis. And it is a reality (mostly) devoid of hookers, drugs, yachts, lambs, and entertainment slush accounts. Trading should be boring because as soon as things start to get exciting significant losses become a growing possibility.

So the bulls are back with a vengeance, for now that is. I’m still not convinced that the fat lady has completed her repertoire and will remain nimble over the remainder of this month. Which means smaller position sizing, wider stops, and being extremely picky with my entries. I’m having a late start today due to various chores I had to attend to today so all I can offer today is a quick update on our running campaigns.

The ZB short campaign was stopped out at ~1.2R. That’s fine and we may actually get another chance at entry by the looks of it.

My debit call spread in the E-Mini is still rocking and if you take a peek at the VIX in comparison with last week then you know why I didn’t grab naked calls in the first place. Vega squeeze would have turned my positions from winning into a losing proposition. This bounce thus far is productive but until ES 2727 is taken out the bears still have a very good chance of taking things lower. Above 2727 we shift back into a more bullish perspective.

The CL campaign is kind of flopping all over the place but I decided to leave it in place as I very much like the formation on the daily. However it’s no guarantor of success and a stop out is still in play.

EUR/USD was a short entry yesterday and quickly proceeded lower. Unfortunately it snapped right back however and stopped me out at break/even (not 1.2R as shown on the chart – sorry). After that I was kind of observing the situation and if you are a sub then you know that my original plan was to go long on a touch of the ILS of my previous short position.

So when that price range was touched I went long with a stop near 1.234 (got to love that one). However things are unfolding quickly now and I’m advancing my trail to < 1.2463. So yeah, a flurry of activity but nothing lost on the short and a wee bit gained already on the long position. THAT’s what I meant by being nimble 🙂

Published at Thu, 15 Feb 2018 17:13:30 +0000

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‘Dog Of The Dow’ Coca Cola Reporting Without Fizz

by Couleur from Pixabay

‘Dog Of The Dow’ Coca Cola Reporting Without Fizz

By Richard Suttmeier | February 15, 2018 — 9:16 AM EST

Soft drink giant and component of the Dow Jones Industrial Average The Coca-Cola Company (KO) is one of the “Dogs of the Dow” for 2018. The stock closed Wednesday, Feb. 14, at $44.10, down 3.9% year to date. The stock set its all-time intraday high of $48.61 on Jan. 26 and then declined into correction territory to its 2018 low of $42.19 set on Feb. 9. The stock is thus now 9.3% below the high and 4.5% above the low coming out of correction territory.

Analysts expect Coca-Cola to deliver earnings per share of 38 cents when the iconic soda company reports earnings before the opening bell on Friday, Feb. 16. In January, the soft drink giant announced a brand modernization program away from sugary sodas. These new drink options will not be a part of this quarterly result, so guidance will be important. The projected success of the Coke Zero Sugar brand could call for double-digit growth, which could stabilize weak share price performance. (See also: The New Plan from Coca-Cola’s New CEO.)

The daily chart for Coca-Cola

Daily technical chart showing the performance of The Coca-Cola Company (KO) stockCourtesy of MetaStock Xenith

The daily chart for Coca-Cola shows that the stock has been above a “golden cross” since April 27, when it closed at $43.01. A “golden cross” occurs when the 50-day simple moving average moves above the 200-day simple moving average, indicating that higher prices lie ahead. This tracked the stock to its all-time intraday high of $48.61 set on Jan. 26. The stock then crashed by a correction percentage to its 2018 low of $42.19 set on Feb. 9. The horizontal lines show the semiannual and quarterly risky levels of $45.39 and $45.83, as well as my monthly risky level of $46.54.

The weekly chart for Coca-Cola

Weekly technical chart showing the performance of The Coca-Cola Company (KO) stockCourtesy of MetaStock Xenith

The weekly chart for Coca Cola is negative, with the stock below its five-week modified moving average of $45.59 and above its 200-week simple moving average at $42.90, which is the “reversion to the mean.” Note that the stock held this key average on Feb. 9. The 12 x 3 x 3 weekly slow stochastic reading is projected to decline to 51.20 this week, down from 61.24 on Feb. 9.

Given these charts and analysis, I recommend buying Coca-Cola shares on weakness to the 200-week simple moving average at $42.90 and rising each week, and reducing holdings on strength to the semiannual and annual risky levels of $45.19 and $52.35, respectively. (For more, check out: 7 Consumer Stocks That Can Beat the Market.)

Published at Thu, 15 Feb 2018 14:16:00 +0000

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Citadel Advisors’ Stock Holdings Rose 18.2% In 4Q: 13F Filing

Citadel Advisors’ Stock Holdings Rose 18.2% In 4Q: 13F Filing

At a time when hedge funds are facing tremendous pressure to bring in big returns, few have been able to meet investor demand. But Ken Griffin’s investment firm Citadel Advisors has been one of the few funds to impress over several recent quarters. (See also: Tough Times for Citadel’s Ken Griffin: Only $600 Million in Profits In 2016.)

Citadel’s 13F filing for the fourth quarter of 2017 reveals that Griffin was once again able to outpace the S&P 500 in the final months of 2017. This task has become increasingly difficult for many hedge funds. The list value of Citadel Advisors’ stock holdings was up by 18.5% as compared with the previous quarter, while the S&P 500 Index gained only 6.1% for the same period, according to Valuewalk.

Positions In Amazon and Facebook

Griffin’s largest position for Q4 was in SPDR S&P 500 ETF (SPY), a position of more than $18 billion and constituting nearly 12% of Citadel’s total portfolio. The next largest positions represent a significant drop-off in terms of size and percentage weight in the portfolio.

Coming in second place was Amazon.com Inc. (AMZN). Citadel owned $5.6 billion in AMZN shares by the end of Q4, representing about 3.6% of the firm’s total holdings. Third place was Facebook Inc. (FB), a position of $3.1 billion and 2.0% of the total holdings.

The next largest positions were in IShares (IWM), Powershares QQQ (QQQ), Alphabet Inc. (GOOG), and Alibaba Group (BABA). In total, these seven positions represented just under one-quarter of Citadel Advisors’ total portfolio.

Biggest Buys Include SPY, BABA, and FB

Aside from being the largest single position in Citadel’s stock holdings, SPY also represents the largest purchase for Q4. Ken Griffin bought up $6.1 billion in SPY shares during the last three months of 2017. He also bought more than $1 billion each of BABA, FB, and Bank of America Corp. (BAC). According to the 13F report, the fund’s total holdings in stocks were $154.4 billion, as of December 31, 2017.

Compared with the size of the purchases over Q4, Citadel’s biggest sells were relatively small. The largest sale was for Goldman Sachs (GS). Griffin sold of more than $440 million in stock for the bank. He also sold off more than $324 million in Apple Inc. (AAPL) stock. The third-largest sell was for Fidelity (FIS), a sale of $284.5 which marked a liquidation of Citadel’s position. (See also: Hedge Funds Bet on Consumer Discretionary Stocks in Q4: 13F.)

The U.S. Securities and Exchange Commission (SEC) requires 13F reports from all hedge funds managing at least $100 million. These filings are due 45 days from the end of each quarter and are available to the public. While 13Fs can be a useful window into how major investors focused their efforts in the previous quarter, they are necessarily outdated by the time they become available to the public, making them unreliable as tools for investment.

Published at Thu, 15 Feb 2018 15:55:00 +0000

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Asian stocks pull further off two-month lows as Wall St. bounces

Pedestrians stand in front of an electronic board showing Japan’s Nikkei average outside a brokerage in Tokyo, Japan, December 1, 2016. REUTERS/Kim Kyung-Hoon

Asian stocks pull further off two-month lows as Wall St. bounces

TOKYO (Reuters) – Asian stocks pulled further away from two-month lows on Tuesday, lifted by Wall Street’s extended rebound from last week’s steep fall, but investors remained cautious ahead of U.S. inflation data later in the week.

MSCI’s broadest index of Asia-Pacific shares outside Japan was up 1 percent after sliding to its lowest level since Dec. 11 on Friday.

Australian stocks rose 0.5 percent and South Korea’s KOSPI climbed 1 percent. Japan’s Nikkei added 1 percent.

The Shanghai Composite Index was 1.2 percent higher, buoyed by global gains and suggestions of possible Chinese government support.

An affiliate of China’s securities regulator on Monday encouraged major shareholders of domestically-listed firms to increase their holdings after last week’s global selloff mauled Chinese stocks. [.SS]

Wall Street’s three major indexes rose for the second day on Monday as investors regained some confidence after U.S. equities had their biggest weekly drop in two years. [.N]

Still, caution lingered in the broader markets following the U.S.-led tumble in riskier assets last week and ahead of U.S. inflation data on Wednesday. A stronger-than-expected reading on price pressures could trigger a fresh wave of selling.

“It is hard at this stage to tell if the U.S. markets have bottomed out, considering that bets against the dollar still remain significant,” said Kota Hirayama, senior emerging markets economist at SMBC Nikko Securities in Tokyo.

“On the other hand, attempts by investors to pull money out of the emerging markets during last week’s turmoil appeared to have been unexpectedly limited, so that is an encouraging sign.”

The dollar index against a basket of six major currencies extended modest losses suffered overnight and dipped 0.1 percent to 90.119. The index edged back from a two-week high of 90.567 scaled late last week, when it had benefited as a safe haven in the wake of the global market selloff.

The greenback was steady at 108.680 yen. The euro was flat at $1.2293.

The South African rand dipped 0.5 percent on the day to 11.97 per dollar after news that the country’s ruling party African National Congress had opted to remove President Jacob Zuma as head of state.

The rand had risen 2 percent over the past two days, helped by hopes that Zuma would step down, but it gave back some of those gains as the latest news was seen prolonging the political standoff.

The Australian dollar was steady at $0.7864 after rising about 0.6 percent overnight on the back of higher commodity prices and improvement in broader risk sentiment. [AUD/]

Copper prices also bounced further away from two-month lows as more stable global markets encouraged investors to return to commodities.

Copper on the London Metal Exchange extended an overnight rally to trade 0.8 percent higher at $6,885.50 per tonne. [MET/L]

The dollar’s pullback from two-week highs also helped commodities. A lower greenback favors non-U.S. buyers by reducing the price of dollar-denominated commodities.

Brent crude rose 0.7 percent to $62.99 per barrel.

Spot gold was a shade higher at $1.323.06 an ounce.

Reporting by Shinichi Saoshiro; Editing by Eric Meijer and Kim Coghill

Published at Tue, 13 Feb 2018 02:24:09 +0000

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Picking Over The Survivors

Picking Over The Survivors

by THE MOLE

Long term survival in the financial market is just that, surviving the myriads of traps and tribulations you will invariably encounter during your trading career. Although the risk of a complete wipe out on a day to day basis is pretty small it only has to happen once in order to dissolve years of hard work and compounded assets, sometimes in mere minutes. Of course what spells disaster for those unfortunate or dumb enough to have gotten a tad to greedy near a market peak or those attempting to catch a falling sword, means exciting opportunities for the patient and more seasoned survivors.

Lest we become victims of explosive market volatility ourselves, lets however review a bit of technical evidence and then decide if the time has come to strike. Shown above is the VXV:VIX ratio I mentioned yesterday and of course many times over the past few years. This particular chart is more of a long term version with a slower BB in combination with a slightly smoothed SMA of the VXV:VIX.   What that does for me is to cancel out some of the noise and appreciate the big picture.

But as always we are not taking trades courtesy of indicators alone – all we are doing here is to assess the momentum in implied volatility. Based on prior observation there seems to be a decent possibility that we’ll see a snap back, meaning that IV is ready to revert to its mean. But you can also see that the smoothed signal has not yet pushed > the lower BB. So we don’t have confirmation yet and any entries taken here would be speculative.

The SPX:VIX ratio shows me a little divergence near the close that could possibly drag prices lower again. On its own it’s not a signal but if it subsists we should definitely take note.

The SPX on its own shows us a volume hole between 2700 and 2735ish. That one may be difficult to cross and there may be push back.

UVOL vs. DVOL. The bears were putting up a haphazard fight yesterday morning but then simply walked away in the afternoon. That looks pretty bullish to me and alleviates some of the concerns mentioned above, but it does not outweigh them obviously.

What pushes me back towards equilibrium in my outlook is the Zero signal which looked rather supportive yesterday. There were clear attempts by deep pockets (+2 and +3 signal spikes on the Zero in the right panel) to bang the tape higher and pin a positive close.

I have decided to take out an early exploratory entry near 2680 with a stop < 2610. We are talking a tiny 0.2% position and if it survives the day I’ll add more meat to it. The odds here are probably < 50:50 as it’s equally possible that we’ll see one more retest of the lows. Please don’t make big BTFD bets here, I don’t think we’ll return to business as usual anytime soon.

Update on the EUR/USD campaign. I’m taking profits here at about 1.2R much to my chagrin. To be frank I was quite disappointed by the lousy performance of the USD on Monday and Tuesday. Not sure where all the money went but it’s not going into Dollars or bonds.

Speaking of which my trail on the DX campaign now advances to about 0.5R. Better than a loss but come on – this thing should have exploded higher but the old greenback seemed completely unimpressed and barely pushed higher.

Two more special goodies below the fold for my intrepid subs:

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Published at Wed, 07 Feb 2018 13:03:55 +0000

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U.S. stock market chill threatens to ‘put IPOs on ice’

U.S. stock market chill threatens to ‘put IPOs on ice’

NEW YORK (Reuters) – Wide swings in the U.S. stock market has blunted initial public offering (IPO) activity on Wall Street in what was set to be the busiest week for new listings in more than two-and-a-half years.

All signs points to the disruption to IPOs continuing.

Ten companies had planned U.S. stock market debuts for this week, according to Renaissance Capital, a manager of IPO-focused exchange traded funds. It would have followed the biggest January haul of IPO proceeds on record, and would have been the most active IPO week since June 2015, Thomson Reuters data showed.

Only six companies went ahead with their IPO due to the volatile stock market, which has sapped much of the investor demand for new listings.

This bodes poorly for companies looking to pull the IPO trigger in the short term.

Forty companies have filed for an IPO with the U.S. Securities and Exchange Commission in the past year, aiming to raise an aggregate $9.2 billion, according to data from Renaissance Capital. This does not include so-called confidential IPO filings which are not yet visible on the SEC’s website.

“This volatility has the potential to put IPOs on ice,” said Kathleen Smith, principal at Renaissance Capital.

A saving grace for the IPO market is that mid-February typically sees a lull period for new listings. This is because the year-end financial information necessary for filing an IPO by a calendar-year company with the Securities and Exchange Commission (SEC) goes stale in the middle of this month. After that, companies will need to compile and audit a new set of quarterly earnings. Only three IPOs are currently scheduled for next week.

“When stability does come back to the market, the IPO market should benefit from a growing domestic and global economy with heightened consumer confidence,” said Lear Beyer, co-head of Equity Capital Markets Origination and head of Financial Institutions Group Origination at Wells Fargo & Co.

U.S. stocks see-sawed this week, demonstrating swings Wall Street has not seen in years. The S&P 500 closed down 3.75 percent on Thursday and was on track for its biggest weekly percentage drop since 2011.

IPO postponements included a $500-million listing of IPSCO Tubulars, the U.S. subsidiary of Russian oil and gas pipe maker TMK; the $220-million flotation of Turkish fast-food chain operator TFI Tab Food Investments; and a $130-million listing by Argentine biotechnology firm Bioceres.

Medical technology company Motus GI, scheduled to list on Thursday, also did not price its IPO this week.

The biggest IPO to go ahead was the $437-million listing for Cactus Inc, which supplies wellheads and pressure control equipment.

Other listings included Victory Capital Holdings and Chinese wearable technology company Huami, although the Victory IPO priced at $13 per share, below its $17 to $19 indicated price range. Cardlytics priced on Thursday in a $70-million listing.

Listings for blank-check company Mudrick Capital and medical aesthetics provider Evolus Inc went ahead, while Quintana Energy Services sold shares at $10, below its $12-$15 target range.

Of the seven listings this week, four were trading below their IPO prices on Friday.

“Investors will be looking at what companies and sectors will benefit from the impact of the recent tax reform and a higher interest rate environment relative to inflation fears that have disrupted the market,” said Beyer.

Reporting by Joshua Franklin in New York; Editing by Nick Zieminski

Published at Fri, 09 Feb 2018 20:22:44 +0000

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Tesla Stock Declines Toward Key Support After Earnings

Tesla Stock Declines Toward Key Support After Earnings

By Justin Kuepper | February 8, 2018 — 10:36 AM EST

Tesla, Inc. (TSLA) shares moved about 2.5% lower in early trading on Thursday after the company reported fourth quarter financial results. Revenue rose 44.3% to $3.29 billion – beating consensus estimates by $10 million – and net losses of $3.04 per share exceeded consensus estimates by eight cents per share. With a cash balance of $3.4 billion, the company announced that it would be slightly increasing its capex spending next year.

Of course, investors were most focused on the production of the Model 3 – a mass market car that could make or break the company. While the production run rate was just 2,500 vehicles per week by the end of the first quarter, the company anticipates that these production levels will increase to 5,000 per week by the end of the second quarter. Management also expressed confidence in Model Y and Semi model developments over the coming years. (See also: Tesla Earnings Could Reward Loyal Shareholders.)

Technical chart showing the performance of Tesla, Inc. (TSLA) stock

From a technical standpoint, the stock rose during the beginning of the year to around $360.00 before falling to the middle of its price channel. The relative strength index (RSI) has moderated to neutral levels at around 49.08, but the moving average convergence divergence (MACD) experienced a bearish crossover earlier this month that could be the sign of a longer-term downtrend in the stock over the coming weeks.

Traders should watch for a rebound from lower trendline resistance at around $330.00 to the upper end of its price channel at around $370.00. If the stock breaks down from these support levels, traders should watch for a move down to trendline support near its prior lows at around $300.00. A lot of the price action continues to be driven by speculation surrounding the Model 3 production target and the company’s ability to deliver on its promises. (For more, see: Tesla Stock Poised To Rebound By March, Traders Say.)

Chart courtesy of StockCharts.com. The author holds no position in the stock(s) mentioned except through passively managed index funds.

Published at Thu, 08 Feb 2018 15:36:00 +0000

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Tesla Earnings Could Reward Loyal Shareholders

Tesla Earnings Could Reward Loyal Shareholders

By Alan Farley | February 7, 2018 — 9:07 AM EST

Tesla, Inc. (TSLA) has struggled with the Model 3 production ramp-up in recent months, forcing CEO Elon Musk to backtrack on ambitious goals he has outlined for the highly anticipated electric automobile. That could change after this week’s earnings report, with a little good news having an outsized impact on recently weak buying interest. It is urgently needed at this point, given rapid cash burn that could empty company coffers before the end of 2018.

Musk has been firing on all cylinders in other recent projects, including the successful launch of SpaceX’s Falcon Heavy rocket and selling out an inventory of 20,000 flamethrowers through his Boring Company. Loyal but frustrated shareholders hope that this momentum escalates into publicly traded Tesla, lifting the stock through heavy resistance between $350 and $400 and into a major uptrend. (See also: Elon Musk Biography.)

TSLA Long-Term Chart (2010 – 2018)

The company came public at $19 in June 2010, quickly selling off to $14.98, which marks the lowest low in the past eight years. It bounced into the mid-$30s a few months later and settled into a broad trading range, testing resistance several times before breaking out in April 2013. The subsequent uptrend advance posted dramatic gains into the third quarter of 2014, topping out just below $300.

Sideways action into 2015 generated strong support just above $180, with that level finally breaking down in the first quarter of 2016, dropping the stock to a two-year low at $141. It popped back above broken range support two months later, denying short sellers while generating a failed breakout attempt. The stock pulled back to the contested level once again after the presidential election, posting a higher low that established a strong platform for an April 2017 breakout.

That trend advance lasted just two months, lifting to a new high at $387 and pulling back to $300 in July. It returned to range resistance in September, exceeding it by less than three points before aggressive sellers took control, generating a selling wave that undercut the July low. Deeper support at the April breakout level held, with the subsequent bounce drifting into the midpoint of the 10-month trading range ahead of this week’s earnings report.

The monthly stochastics oscillator is perfectly positioned for bulls heading into the release, crossing over at the deepest oversold technical reading since December 2016. This predicts at least six to nine months of relative strength, suggesting that bulls will ultimately prevail, lifting the stock through resistance and into a rally impulse that could eventually cross $500 while silencing Musk’s many critics. (For more, see: How Tesla Mauled the Bears.)

TSLA Short-Term Chart (2016 – 2018)

The stock has carved a seesaw trading range since May 2017, loosely outlining a rectangle or head and shoulders pattern. A bearish reaction to the report needs to hold the red line near $310 to avoid a downswing that completes the head and shoulders pattern and favors a more bearish outcome, including a failed breakout and descent through $250. Conversely, a rally that exceeds the Jan. 23 high at $360 opens the door to a second test at range resistance, completing a more bullish rectangle that could yield a major breakout.

On-balance volume (OBV) peaked in 2014 and drifted through a long distribution phase, finally turning higher in the fourth quarter of 2016. It posted a new high in September 2017 and has pulled back into 2018, indicating that funds and private investors are sitting on their hands, concerned about the slow Model 3 ramp-up. However, it will take just a few higher-than-average rally days for the indicator to hit another high. (See also: Tesla Stock Poised to Rebound By March, Traders Say.)

The Bottom Line

Tesla heads into earnings with relative strength indicators turning up from deeply oversold technical levels. This pattern strongly favors bulls following the release, with the potential to break resistance and head into a new trend advance. (For additional reading, check out: Tesla Raises $546M in First Asset-Backed Deal.)

Published at Wed, 07 Feb 2018 14:07:00 +0000

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381-point Dow surge disappears as bond jitters return

Why stocks roared back after nosedive
Why stocks roared back after nosedive

 381-point Dow surge disappears as bond jitters return

  @MattEganCNN

Wall Street’s bond market headache won’t go away.

A 381-point surge on the Dow disappeared by Wednesday’s closing bell as concerns about rising Treasury yields returned. The Nasdaq slumped almost 1%, while the S&P 500 fell modestly.

The stock market appeared to be making a comeback after historic plunges on Friday and Monday. The Dow surged 567 points higher on Tuesday, and at one point Wednesday it was poised for a two-day gain of almost 1,000 points.

But Wall Street is still nervously watching the bond market, where the trouble started last week.

U.S. stocks pulled back on Wednesday after heavy selling lifted the 10-year Treasury yield back to 2.85%, matching a four-year high. The jump came after an auction of 10-year Treasury notes drew less than stellar demand.

Investors fear the rapid rise in Treasury yields this year could signal inflation and faster rate hikes from the Federal Reserve. Higher bond yields also make stocks look less attractive by comparison.

“The global bond bubble is leaking air,” Peter Boockvar, chief investment officer at Bleakley Advisory Group, wrote in a note to clients after the Treasury auction. He said assets like stocks that are valued off of bonds are “vulnerable too.”

While the market failed to hold on to the early gains, the mood has calmed significantly. Extreme fear drove the Dow down by a record 1,175 points on Monday. The VIX(VIX) volatility index fell about 15% on Wednesday after exploding during the market turmoil.

Despite the volatility, analysts believe the fundamental backdrop is solid. Corporate earnings have never been higher, and U.S. and global economic growth has gathered momentum.

“We believe the recent sell-off is a correction rather than the start of a bear market,” Pierre Blanchet, head of multi asset strategy at HSBC, wrote in a report on Wednesday.

Overseas market jitters mostly eased after plunging earlier this week. European markets raced higher, while stocks in Asia were mixed.

The question now is whether “this draws a line under the recent stock market correction or whether this is merely a dead cat bounce,” currency analysts at ING wrote in a report on Wednesday.

Published at Wed, 07 Feb 2018 21:34:14 +0000

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Trump breaks his silence on market chaos

Trump used to brag about stocks. Now he's quiet
Trump used to brag about stocks. Now he’s quiet

Trump breaks his silence on market chaos

  @MattEganCNN

He broke his silence Wednesday about the market turmoil: “In the ‘old days,’ when good news was reported, the Stock Market would go up,” he wrote on Twitter.

He added, “Today, when good news is reported, the Stock Market goes down. Big mistake, and we have so much good (Great) news about the economy!”

Trump’s complaints came two days after an awkward split-screen moment: The Dow was plunging more than 1,000 points just as he was giving a televised speech touting the economic benefits of his tax plan.

Wall Street’s darkest day since 2011 put the president in a tough spot because he took so much credit for the market’s big gains after he was elected.

So what is Trump talking about?

He has a point about good news and bad news: The market did indeed plunge in recent days after positive economic news. Though that’s not a new thing — it happens from time to time. And there is some logic behind it, even if it’s frustrating to presidents and everyday investors alike.

Consider the rude reaction on Wall Street to Friday’s jobs report, whichshowed that wages grew at the fastest pace since 2009. That’s a clear win for Main Street after years of weak pay increases for workers.

Yet the stock market had a hellish day. The Dow plunged 666 points, or 2.5%, its worst day in more than a year.

Wall Street was focused on the short term. Investors worried that wages could grow so quickly that they will put a dent in record corporate profits and make the Federal Reserve nervous about inflation.

“We’re back in this perplexing phase where good news for the economy is treated as bad news for financial markets,” said Candice Bangsund, portfolio manager at Fiera Capital.

If the Fed aggressively raises interest rates to fight inflation, it will remove one of the drivers of the bull market. Because of that fear, investors sold bonds, which drove yields to four-year highs. Higher yields make risky stocks look less attractive by comparison. Thus the sell-off.

So in that sense, Trump was right: Good news for Main Street was viewed as bad news by Wall Street.

But this happened under Trump’s predecessors, too.

More than once underPresident Barack Obama, Wall Street became nervous that good economic news would force the Fed to raise rates. And in other cases, the opposite happened: Bad jobs news drove stocks higher because it meant theeasy money wasn’t going anywhere.

This inverse reaction was so common that sometimes, as with a strong jobs report in August 2016, it was noteworthy that good news was treated as good news.

Of course, the recent market turbulence is about more than the good news/bad news situation Trump alluded to.

The stock market boom since Trump’s election became overheated. Euphoria set in, making the market more vulnerable to sharp setbacks. A cool-off period was long overdue — and may prove to be a healthy thing.

“Markets do better over the long term when they experience corrections periodically,” Capital Group CEO Tim Armour said in a recent report. “They can’t go up all the time.”

In the past, Trump himself loudly cheered for the market to keep rallying. After the Dow hit 20,000 in early 2017, he said “Now we have to go up, up, up.” It was a big reversal from during the 2016 campaign when he called the market a “big, fat, ugly bubble.”

Published at Wed, 07 Feb 2018 18:54:06 +0000

 

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Snap Stock Breaks Out to New Highs Following Earnings

Snap Stock Breaks Out to New Highs Following Earnings

By Justin Kuepper | February 7, 2018 — 11:55 AM EST

Snap Inc. (SNAP) shares surged more than 40% in early trading on Wednesday after the company reported favorable fourth quarter financial results. Revenue rose 72.4% to $285.69 million – beating consensus estimates by $32.74 million – and net losses of 13 cents per share beat consensus estimates by three cents per share. Shares rose in after-hours trading before opening sharply higher and rising during Wednesday’s session.

Aside from the top-line financials, user growth exceeded analyst expectations with a 5% increase over the previous quarter. Average revenue per user rose 46% year over year to $1.53, while the cost of revenue per user rose 5% year over year to $1.02. The company had cash and equivalents of just over $2 billion by the end of the year, with its fourth quarter cash burn reaching nearly $200 million. (See also: Snap Crosses IPO Price After Adding Nearly 9 Million Users.)

Technical chart showing the performance of Snap Inc. (SNAP) stock

From a technical standpoint, the stock broke out from trendline and R2 resistance at $16.25 and longer-term trendline resistance at $18.00 to its highest levels since last summer. The relative strength index (RSI) moved to overbought conditions at 80.91, but the moving average convergence divergence (MACD) experienced a bullish crossover that could signal more upside ahead over the coming weeks and months.

Traders should watch for some near-term consolidation, given the overbought RSI readings, above $18.00 support levels. After a period of consolidation, the stock could move higher to test its next major trendline resistance levels at around $22.00, which were set back in June of last year. Analysts remain mixed, with Bank of America Merrill Lynch upgrading the stock with a $24.00 price target and Susquehanna downgrading the stock with a $7.00 price target. (For more, see: Snap’s VP of Product Announces Exit Amid Crucial Redesign Rollout.)

Chart courtesy of StockCharts.com. The author holds no position in the stock(s) mentioned except through passively managed index funds.

Published at Wed, 07 Feb 2018 16:55:00 +0000

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How a little-known investment might have made the market plunge worse

How a little-known investment might have made the market plunge worse

   @ivanakottasova

Investors have an obscure way to place bets that the market will stay calm. And for more than a year, they couldn’t lose. Stocks crept higher and higher with barely a bump.

But those bets suddenly went bad this week when the market took a terrifying plunge. And those little-known investments may have made it worse.

Several risky funds that reward investors when the markets are quiet imploded in the global market rout.

Those funds are inversely linked to the VIX, a gauge of turbulence in the market. So when volatility spiked by a record 116% on Monday, the funds plummeted.

“That was a very crowded trade, full of people who didn’t understand the products,” said Sal Arnuk, co-founder of Themis Trading and co-author of the book “Broken Markets.” “And it blew up in their faces.”

 The most popular inverse volatility fund is the VelocityShares Daily Inverse VIX Short-term ETN(XIV), also known as the XIV. It lost almost 100% of its value after the market closed on Monday. It had spiked 188% last year, during a period of unusual calm for the stock market.

Credit Suisse, which runs the fund, announced it would close it later this month, 12 years ahead of schedule. Credit Suisse said there would be “no material impact” to the bank.

A similar fund run by Nomura Securities is being liquidated after it crashed. And the ProShares Short VIX Short-Term Futures ETF(SVXY) plunged 85%.

Some market analysts believe the implosion of these complex instruments, which are favored by hedge funds, may have driven the VIX higher and stocks lower than they otherwise would have been. The Dow plunged by a record 1,175 points on Monday.

“There is a feedback loop. It all snowballed,” said Michael Block, chief market strategist at Rhino Trading Partners. He said it “absolutely” contributed to the market turmoil.

The theory is that investors who suffered massive losses betting against volatility were forced to “panic sell” into the broader market, driving stocks down further. It became a vicious cycle.

“It spirals,” Block said. “Suddenly everyone is selling, and rather than give up your whole year of gains, you start puking as well.”

To be sure, the market wasn’t down justbecause of these complex volatility instruments. Fear returned to the market because of worries about inflation and spiking bond yields. But those concerns may not fully explain the severity of the losses.

“While it’s not the underlying cause,” RBC Wealth Management portfolio analyst Kelly Bogdanova said, the volatility funds “certainly fueled the move and made it a bigger move.”

The inverse volatility funds are not meant for casual investors. They are geared toward sophisticated speculators, hedge fund investors and other traders with deep understanding of hedging.

Whenever markets go haywire, some people blame the sophisticated computer programs that buy and sell stocks based on complex algorithms and formulas.

And while high-frequency trading does often exacerbate volatile markets, Themis Trading’s Arnuk said this week’s turmoil didn’t begin there.

Kristina Hooper, chief global market strategist at Invesco, said there were “a lot of forces at work,” but the short volatility trade blowing up “certainly aggravated it.”

BlackRock, which has made a fortune on the boom in exchange-traded funds, put out a statement Monday saying it “strongly supports a regulatory classification system” that would differentiate “plain-vanilla ETFs” from the risky funds that imploded.

The good news is that unlike the risky mortgage securities at the heart of the 2008 crisis, these volatility instruments don’t change the overall economic environment.

“It’s not systemic. This is not like the housing market or credit markets blowing up,” said Block. “Maybe we have already seen the end of it.”

–CNNMoney’s Julia Horowitz contributed to this report.

 Published at Wed, 07 Feb 2018 01:15:26 +0000

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Berkshire Hathaway Stock Breaks Down to Prior Price Channel

Berkshire Hathaway Stock Breaks Down to Prior Price Channel

By Justin Kuepper | February 6, 2018 — 10:26 AM EST

Berkshire Hathaway Inc. (BRK.A, BRK.B) shares fell nearly 5.5% on Monday, which was more than the 4.2% drop in the S&P 500. After topping $300,000 per share in mid-December, Warren Buffett’s iconic company lost $18,700 per share in value and fell to just over $295,000. Buffett noted on CNBC in early January that he felt stocks were not overvalued given the level of interest rates and the ramifications of the corporate tax cut haven’t been fully realized.

As a value investor, Warren Buffett has always focused on making investments in companies at attractive valuations, which creates a margin of safety. This margin of safety could help pad the stock in the event of a significant market decline since value stocks tend to be punished less than growth stocks. That said, some analysts have suggested that the conglomerate has a stretched valuation following the significant rally in the stock market. (See also: How Warren Buffett Made Berkshire Hathaway.)

Technical chart showing the performance of Berkshire Hathaway Inc. (BRK.A) stock

From a technical standpoint, the stock broke down from the pivot point and trendline support at $314,600, as well as S1 support and the 50-day moving average at $302,976, to the middle of its previous price channel. The relative strength index (RSI) fell near oversold conditions at 32.23, while the moving average convergence divergence (MACD) experienced a bearish crossover that could signal more downside ahead.

Traders should watch for a move lower to S2 and lower trendline support levels at $282,200 if the market experiences another major decline. Otherwise, the stock could consolidate  within its price channel between the upper and lower trendlines before making another breakout attempt to retest highs of around $325,000. The next major support levels in the event of a bigger correction would be prior lows of around $275,000 and $260,000. (For more, see: Buffett, Bezos, Dimon to Found Healthcare Company.)

Chart courtesy of StockCharts.com. The author holds no position in the stock(s) mentioned except through passively managed index funds.

Published at Tue, 06 Feb 2018 15:26:00 +0000

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Icahn calls U.S. stock nosedive ‘rumblings of an earthquake’: CNBC

Icahn calls U.S. stock nosedive ‘rumblings of an earthquake’: CNBC

NEW YORK (Reuters) – Billionaire activist investor Carl Icahn warned on Tuesday that investors have exposure to “way too many derivatives” and called the stock market’s nosedive just “rumblings of an earthquake.”

“The market is really not a place for the average person to be playing around with derivatives,” Icahn said on CNBC. “Today, you have these triple-leveraged ETFs (exchange-trade funds) that are crazy.”

U.S. stocks swung wildly between positive and negative territory on Tuesday, a day after the Dow and S&P 500 indexes saw their biggest one-day declines in more than six years, while a world stock index dropped more than 1 percent. The pullback followed a rapid run-up in the start of the year and strong 2017 gains.

Icahn, who has been raising red flags on the stock-market’s meteoric rise, said the S&P 500 and Dow Jones industrials indexes should recover, given the “great fundamentals” in U.S. companies and the recent tax cuts.

“I think this market will bounce back probably. Eventually, you get through this little panic thing,” Icahn said. “Ironically, even though I am bearish and we have a lot of hedges on, I am not that bearish.”

Icahn said investors should not use the markets like a casino. “… that’s a huge mistake. This casino is on steroids.”

He suggested that the Federal Reserve’s loose quantitative easing policies had helped prop up stocks. “I don’t think this is the explosive time (for stocks)…I think here, we will get out of this.”

All told, Icahn said the major risks are in ETFs and exchange-traded notes (ETNs).

Credit Suisse said on Tuesday it would terminate the second-largest publicly traded product tracking swings in the S&P 500 after its value plunged during the global markets selloff.

VelocityShares Daily Inverse VIX Short-Term Exchange-Traded Note (ETN), which tracks financial instruments that bet against a fall in markets, will stop trading by Feb. 20, the Swiss bank said in a statement.

The notes were worth a combined $1.6 billion on Friday, according to Thomson Reuters’ Lipper unit, but the redemption after Monday’s selloff will likely leave investors with a fraction of their initial investment, just one casualty of the global selloff.

“It completely evaporated in one day,” Icahn said of XIV.

“One day, this thing is just going to implode because you have too much leverage with too many people buying these (ETF) things and Wall Street sells them these products. And I’ve been saying for a long time, it is extremely dangerous,” he added.

Reporting by Jennifer Ablan; Editing by Richard Chang, Nick Zieminski and Susan Thomas

Published at Tue, 06 Feb 2018 19:29:19 +0000

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