All posts in "Stocks"

Tobacco Stocks Probing New Highs

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Tobacco Stocks Probing New Highs

By Alan Farley | June 15, 2017 — 1:39 PM EDT

Tobacco stocks have offered perfect investment vehicles for patient shareholders in the past decade, paying sizable dividends while posting a near endless series of new highs. Of course, taking exposure in this controversial industry isn’t for everyone, especially if loved ones have paid the price for nicotine addiction. However, buying shares of a company isn’t the same thing is supporting their business practices, and it’s our job to seek out superior returns wherever we can find them.

Strong Asian growth now drives industry profits, along with a resurgence in U.S. consumption triggered by modern vaporizer technology. In addition, the current administration has plans to strip away regulations across a broad swath of industries, making it unlikely that producers will get singled out for criticism in coming years. Given these tailwinds, tobacco stocks are likely to perform well into the next decade. (For more, check out: Back From the Dead: Why Tobacco Stocks Are Soaring.)

Philip Morris International Inc. (PM) carries the highest sector capitalization for tobacco producers trading on the U.S. exchanges at $184 billion. It spun off from parent Altria Group, Inc. (MO) at $50 in March 2008 and entered an immediate downtrend that posted an all-time low at $32.04 in March 2009. The subsequent recovery wave reached the upper $90s in 2013, giving way to a multi-year correction that found support in the mid-$70s.

The stock rallied above the prior high in 2016 and stalled out, building a base on new support and then spiraling lower in November. That marked the washout low, ahead of a strong buying impulse that reinstated the breakout in January 2017, followed by a powerful trend advance to an all-time high at $122.90 on June 6. Philip Morris stock has been pulling back in a bull flag pattern since that time, while daily stochastics have dropped into the oversold zone. (See also: Philip Morris, the Best Is Yet to Come: Wells Fargo.)

Both monthly and weekly indicators have held buy cycles through this period, signaling a bullish divergence and potential pullback buying opportunity ahead of continued upside. Even so, a more advantageous trade entry might come if aggressive sellers break short-term support and knock the stock down to the top of the first quarter range and 50-day EMA at $115.

Altria Group expanded into spirits and finance leasing services following the Philip Morris spin-off,​ but tobacco remains its biggest profit component. It fell just 7 points during the 2008 economic collapse, returning to the prior high in 2010, ahead of a 2011 breakout that reached $70.14 in July 2016. A pullback into the fourth quarter settled near $60, ahead of a January 2017 rally into March’s all-time high at $76.54. (See also: Altria Optimistic on FDA’s Filing of Heated Products.)

Altria Group shares sold off into May, testing new support near $70 and turning higher into June, settling into a narrow platform that traded within 60 cents of resistance this week. On-balance volume (OBV) has already risen to a new high, highlighting strong institutional sponsorship that should support a fresh rally leg into the low $80s, where a two-year rising-highs trendline could trigger another reversal.

Reynolds American Inc (RAI) rallied above the 2008 high in 2011 and entered a rising channel that accelerated into a steeper channel in 2014, highlighting impressive relative strength. The uptrend stalled near $50 at the end of 2015, giving way to a shallow correction that ended with a high-volume October gap to a new high in the mid-$50s. It took three months to clear the high posted in that session, yielding a long series of new highs into last week. (For more, see: Reynolds Announces Leadership Roles Post Acquisition by BAT.)

The stock sold off with the broad market, dropping into the first test at the 50-day EMA since January, and it is still testing that level. Weekly stochastics fell into an unconfirmed sell cycle in reaction to the decline, raising odds for an intermediate correction lasting a minimum of eight to 12 weeks. Given this scenario, a pullback into deep support at $50 could offer a buying opportunity.

The Bottom Line

Tobacco manufacturers and distributors are leading the broad market, resistant to broad headwinds facing other high-yielding instruments. This resilience could last into the new decade, given humankind’s addictive interest in the controversial crop. (For additional reading, see: Behind Tobacco Stocks’ Recent Strength.)

Published at Thu, 15 Jun 2017 17:39:00 +0000

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PayPal Holdings Inc.: Payment Tech’s Growth Opportunity

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PayPal Holdings Inc.: Payment Tech’s Growth Opportunity

Lucas Downey June 12, 2017

Published at Mon, 12 Jun 2017 19:40:00 +0000

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How to Trade a Summer Correction

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How to Trade a Summer Correction

By Alan Farley | June 12, 2017 — 10:10 AM EDT

The Nasdaq 100​ sold off more nearly 2.5% at the end of last week, while the Powershares QQQ Trust (QQQ) posted the highest volume day since the August 2015 mini flash crash. Those bearish metrics generated a major distribution day that’s likely to yield a summer correction, testing gains posted since the November breakout. Traders and market timers should take defensive actions as soon as possible to protect gains and prepare for opportunities triggered by sharply lower stock prices.

The tech-heavy index posted six straight months of higher prices into last week, setting off extremely overbought technical readings that may require months of profit taking to shake out complacency and set the stage for a strong 2017 close. However, it was not a typical downtrend day because a good chunk of capital exiting big winners like Amazon.com, Inc. (AMZN), Alphabet Inc. (GOOGL) and NVIDIA Corporation (NVDA) rotated into market groups that have underperformed in recent months. (See also: The Top 4 ETFs to Track the Nasdaq.)

Let’s look at three ways to trade and survive a summer correction, with a narrow focus on aggressive risk management, shorter holding periods and well timed short sales. Countertrends​ can unfold quickly through a series of sharp down days or evolve through two-sided action that persists for weeks or months before reaching the deep lows needed to institute new long-term positions. These time-tested techniques should work with both scenarios.

Raise Cash

The over-loved and overbought technology sector now holds a large supply of weak-handed players that are likely to panic when the market heads lower because they’ve been conditioned by Wall Street to hold for the long term but don’t have the discipline to follow that advice. It is often better to be the first one out the door, raising cash that can be used for short-term trades or to buy back beloved issues at much lower prices. This follows the old trader’s wisdom to “buy ’em when they’re cryin’ and sell ’em when they yellin’.” (For more, see Tech Stocks May Be Both Cheap – and Risky.)

Don’t Try to Pick a Bottom

The Nasdaq 100 set off a weekly-scale Stochastics sell signal last week, raising the odds for bearish price action that lasts between eight and 12 weeks. It is best to avoid bottom fishing until the indicator reaches the oversold zone while concentrating firepower on relative lows that generate buy signals on the 60-minute chart. Once positioned, it’s important to sell aggressively when bounces reach short-term resistance levels that are likely to attract fresh selling pressure. Those levels also mark entry zones for carefully timed short sales that should be covered aggressively during breakdowns and wide-range sell-off days.

Play the Rotation

Banks, industrial metals, energy, retail and small caps closed Friday’s session higher or near their unchanged levels, putting a floor under the S&P 500, but it will take weeks or months for those laggards to provide steady leadership rather than hours or days. As a result, these sectors are more likely to offer well timed position trades than longer-term investments, at least through the summer months. (For more, check out Sector Rotation: The Essentials.)

Banks are best positioned to take advance of a positive rotation after a three-month decline that dropped SPDR S&P Bank ETF (KBE) into deep support at the 200-day EMA. Last week’s buying surge has already reached short-term resistance, setting up two possible trading scenarios. First, a consolidation near the April high at 44 will set off fresh buy signals if it can hold that level for one to two weeks. Alternatively, a pullback that tests the 50-day EMA at 42.50 should also be buyable, ahead of continued upside into the March high.

The Bottom Line

The Nasdaq-100 posted the highest selling volume since August 2015 on June 9, signaling the start of a summer correction that shakes out high levels of complacency. Market players that adapt quickly can take advantage of this downturn, avoiding the typical traps that can empty trading and investment accounts. (For related reading, check out Why a 10% Stock Correction May Be Good.)

Published at Mon, 12 Jun 2017 14:10:00 +0000

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Fooled By Randomness

 

Fooled By Randomness

by THE MOLEJUNE 8, 2017

It is Mario Draghi’s turn to torment market participants this morning, which means a market overview will have to wait until the wave of volatility has washed over us and hopefully left some of our open campaigns intact. In the interim I decided to channel my inner Nicholas Taleb and ruin your collective day by singlehandedly smashing what you hold most dear as traders, i.e. your perspective on how markets function and your ability to anticipate what may come next. And if you think I am joking then you are most likely doubly mistaken. Read on at your own peril:

2017-06-08_random_series

Still here? Very well then. Take a look at the chart above and then grab a piece of paper and write down your thoughts about what you are seeing. Would you trade this chart? What are your general impressions about it? Do you see any entry opportunities? Are we perhaps counting waves or looking at specific cycles? When you’re done please follow me to exhibit B:

2017-06-08_random_series2

I tell you what I think. Not a bad chart at first sight I’d say but it has its periods of sideways volatility. But when it gets going it really ramps so a trend trading system here may just work fine. Playing the swings may also work if you slap a Bollinger on it. Do you agree? Disagree? Make not of all that and then follow me to exhibit C:

2017-06-08_random_series3

Ouch, not a chart I would want to be trading – that looks pretty nasty. That’s usually the type of tape I try to avoid. Although it has trending periods it seems to turn on a dime at a moment’s notice. Agree – disagree? Take note.

It’s All Just Noise

I’m sure your curiosity has peaked by now and you wonder what the purpose of today’s exercise may be. And the sad truth of the matter is that it’s all nothing but noise. All three charts above were produced purely by the power of a simple python script using a vanilla random function:

import numpy as np
import pandas as pd

import statsmodels
import statsmodels.api as sm
from statsmodels.tsa.stattools import coint
# just set the seed for the random number generator
np.random.seed(107)

import matplotlib.pyplot as plt

X_returns = np.random.normal(0, 1, 10000) # Generate the daily returns
# sum them and shift all the prices up into a reasonable range
X = pd.Series(np.cumsum(X_returns), name=’X’) + 50 # so the chart starts at 50
X.plot();

Order And Chaos

Trust me, I know how you feel – it’s like the floor just gave way underneath you and took with it all the technical trading knowledge you’ve accumulated over the years. The good news is that it’s not as bad as you think, if that makes you feel any better. Let me explain. Over the past few years I spent quite a bit of time investigating fractal patterns in financial data series. A major aspect of my work was the use of machine learning tools in combination with time series classification parsers to find recurrent patterns, also called ‘motifs’. Some may call them fractals although technically speaking fractals are self-recurring on larger intervals, so I usually prefer the term motif as we normally look for the same recurring pattern within the same time window.

Turns out that I actually wrote a multiple-dimension parser and parsed for the same motif on a series of time windows, so in the end a fractal it is. What I learned in months of testing is that there are in fact recurring fractals in financial time series. However, the type and frequency significantly differ from one symbol to the next, plus the number of recurring patterns/fractals/motifs only account for about 5% of the series. Which means that 95% of it is noise, or more correctly what is known as a ‘random walk’.

All Models Are Wrong, But Some Are Useful

So is everything we have learned about the markets complete horse wash? Are there in fact no technical patterns and are we fooling ourselves? Well, yes but no. In the words of George Box (one of the great statistical minds of the 20th century): “all models are wrong, but some are useful.” In reality there is most definitely a significant amount of randomness to all financial markets. But I would call it ‘guided randomness’ because in between the noise are the actions of human traders who look at a chart and believe that buying or selling at a certain threshold makes a lot of sense. And as such it often becomes a self fulfilling prophecy, because just like water it seems that a random walk simply follows the path of least resistance and then finds its next level. Which of course may explain why ‘following the herd’ works so well until it doesn’t

Do Entries Matter?

But still two of those random charts I posted above look pretty tradeable, don’t they? Which makes one think of course whether or not the true key to profitability and success as a trader lies in picking entries. And of course we already know that it doesn’t because markets change all the time and so do the systems that operate successfully during any arbitrary trading period. Meaning you may be picking great entries like your nose one quarter and then lose it all back and then some doing the very same thing the next.

Van Tharp once stated that [successful trading is 40% risk control and 60% self-control. In turn, the risk control portion is one half money management and one half market analysis. Thus, market analysis is only about 20% of successful trading. Yet most traders emphasize market analysis while avoiding self-control and de-emphasizing risk control. To become successful, traders need to invert their priorities].

We’ve talked about self control many times here but let’s set that aside for now. Focusing on the remaining 40% only half (i.e. 20%) supposedly should be devoted to market analysis. I think that’s a vast over estimation and my own belief is that market analysis should account for not more than 5% of your trading. A lot more time should be devoted to campaign management, risk management, and capital commitment.  Which are activities that are by definition a lot more analytical than technical. Instead of reading charts to find entries we should be spending a lot more time analyzing how to extract maximum returns on entries we have been taking. Of course as a financial blogger that would most likely reduce my audience by a significant margin.
Published at Thu, 08 Jun 2017 13:16:01 +0000

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Macy’s Warning Sends Department Store Stocks Sinking

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American department store chain Macy’s Inc. (M) continues to see its shares fall Wednesday after dipping more than 8% on its reduced outlook for the current quarter.

Chief Financial Officer (CFO) Karen Hoguet told analysts Tuesday that the department store’s gross margins may come in below forecasts offered in February. (See also: Macy’s and the Day Retail Died.)

Investors Fear Pressure Will Continue into Q2

With gross margins now expected to be 60 to 80 basis points below last year, Cincinnati-based Macy’s says it plans to offset the burden with increased cost savings.

In general, investors are receiving the warning as a sign that the intense pressure on American retailers in the recent period hasn’t eased up in Q2. Macy’s industry peers such as J.C. Penney Co. Inc. (JCP) and Kohl’s Corp. (KSS) saw their stocks close down about 4% and 6% respectively following the announcement on Tuesday.

New CEO Lays Out ‘North Star Strategy’

Hoguet joined Macy’s newly instated Chief Executive Officer (CEO) Jeff Gennette in the department store chain’s first meeting with analysts in four years, just 10 weeks into Gennette’s tenure.

After working at Macy’s for 34 years, the new CEO says he has “tremendous faith” in the brand’s ability to strengthen its bond with customers, although admitting that it must “work hard” to “figure out all the answers.” Gennette further detailed a new “North Star Strategy” that outlines how the firm will evolve its marketing, merchandise, experience, interplay between stores and online, and innovation front deemed “what’s new, what’s next.” The North Star Strategy will reportedly involve a new loyalty program to roll out later in the year, a simplification of pricing and a reduction in duplicate items while the firm focuses on more trendy fashion over basic clothing.

As luxury retailers benefit from an increase in demand for premium products driven by Millennial trends and a solid stock market, Macy’s hopes to leverage its high-end brands such as Tommy Hilfiger and DKNY, along with private-label brands including I.N.C., Hotel Collection and Martha Stewart. In a move that will also boost margins, Gennette seeks to grow exclusive and private label brands to make up 40% of total revenue by 2020 compared to the current 29%. (See also: 2017: The Year of Retail Bankruptcies.)
Published at Wed, 07 Jun 2017 19:53:00 +0000

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Stocks Rise as Earnings Surpass Expectations

 

Stocks Rise as Earnings Surpass Expectations

By Justin Kuepper | May 26, 2017 — 4:58 PM EDT

The major U.S. indexes moved higher over the past week as first-quarter earnings estimates continue to surpass analyst expectations. According to FactSet, one-third of S&P 500 companies have beat mean earnings estimates, and 64% have beat mean sales estimates. New home sales swung 11.4% lower to an annualized rate of 569,000 and existing home sales fell 2.3% to a 5.57 million annualized rate, but long-term averages remain firmly in positive territory, and existing home prices remain strong with a 6% year over year gain to $244,800.

International markets were mixed over the past week. Japan’s Nikkei 225 rose 0.52%; Germany’s DAX 30 fell 0.29%; and, Britain’s FTSE 100 rose 0.7%. In Europe, the European Central Bank talked down the impact of the ‘Brexit’ on the Eurozone economy as economic activity hovered near a 6-year high. In Asia, Moody’s lowered China’s credit rating for the first time since 1989 citing concerns over rising debt. The rating was lowered by one notch to A1 from Aa3, putting in the same category as countries like Israel and Japan.

The S&P 500 SPDR (ARCA: SPY) rose 1.42% over the past week. After rebounding from its lower trend line support, the index rebounded past its R1 resistance at $240.90 to its upper trend line resistance. Traders should watch for a breakout to R2 resistance at $243.73 or a breakdown to the 50-day moving average at around $236.97. Looking at technical indicators, the RSI has moved closer to overbought levels at 63.56, while the MACD may have experienced a bullish crossover after a brief decline.

The Dow Jones Industrial Average SPDR (ARCA: DIA) rose 1.33% over the past week. After rebounding from lower trend line support, the index reached its upper trend line support and R1 resistance at $211.23. Traders should watch for a breakout to R2 resistance at $214.00 or a breakdown to the 50-day moving average and pivot point at $207.04. Looking at technical indicators, the RSI is approaching overbought levels at 62.90, but the MACD may have experienced a bullish crossover.

The PowerShares QQQ Trust (NASDAQ: QQQ) rose 2.45% over the past week, making it the best-performing major index. After rebounding from its lower trend line support, the index reached upper trend line resistance at around $142.00. Traders should watch for a breakout to new highs or a breakdown to R2 resistance at $140.20 on the downside. Looking at technical indicators, the RSI is overbought at 71.82 while the MACD may be experiencing a bullish crossover after a modest decline.

The iShares Russell 2000 Index ETF (ARCA: IWM) rose 1.12% over the past week, making it the worst-performing major index. After rebounding from lower trend line support, the index reached the pivot point at $138.18. Traders should watch for a breakout toward upper trend line resistance and R1 support at $142.70 or a move lower to lower trend line support and S1 support at $134.54. Looking at technical indicators, the RSI appears neutral at 50.35 while the MACD remains relatively flat over the past few sessions.

The Bottom Line

The major U.S. indexes moved higher over the past week, although several of them remain in overbought territory. Next week, traders will be closely watching several key economic events, including personal incomes on May 30, jobless claims on May 31, and employment data on June 2. Of course, investors will also be keeping a close eye on the evolving political situation in the United States and other countries.

Note: Charts courtesy of StockCharts.com. As of the time of writing, the author had no holdings in the securities mentioned.
Published at Fri, 26 May 2017 20:58:00 +0000

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Pot Stock Winners of the Week

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Pot Stock Winners of the Week

Partner Content By Daily Marijuana Observer | May 27, 2017 — 1:09 PM EDT

Looking across the 200+ cannabis-related publicly listed companies, there were a few clear pot stock winners this week. A handful of cannabis-related companies ended the week up more than 5%, and a few have market capitalizations greater than $50 million USD. The broader marijuana sector, as tracked by the Solactive North American Medical Marijuana Index, finished this week up roughly 1.5%.

(MORE: What Stocks are on the Marijuana Index)

This week’s pot stock winners are:

Insys Therapeutics Inc. (NASDAQ:INSY)

On the winners list for the second week in a row, Insys Therapeutics Inc. gained over 11% this week. On Wednesday, Insys announced that the U.S. Food and Drug Administration has approved the final product label for Syndros™, the company’s dronabinol (synthetic THC) oral solution for the treatment of chemotherapy-induced nausea and vomiting and AIDS related anorexia. This approval marks the final regulatory step necessary before the product can be launched commercially.

Marapharm Ventures Inc. (CSE:MDM)(OTC:MRPHF)

Shares of Marapharm Ventures Inc. gained over 40% this week. On Tuesday, May 23rd, Marapharm announced that the company will be applying for recreational marijuana licenses in the state of Nevada. Just a day later, Marapharm announced that the building permits for two modular buildings placed to meet the requirements of licensing have been approved. The news at Marapharm didn’t end here. On Thursday, Marapharm announced that one of their Nevada licenses has received final approval from the state to grow and sell cannabis.

MMJ Phytotech Ltd. (ASX:MMJ)

Shares of MMJ Phytotech Ltd. were up more than 5% this week, closing Friday’s trading at $0.365 AUD per share. This week’s bullish action came without any news from MMJ Phytotech. Australia is currently building out their medical marijuana program after it became legal nationally in November of 2016 and there are quite a few marijuana companies listed on the ASX.

MORE: Top 4 Marijuana Stocks to Watch for May

Tetra Bio-Pharma Inc. (CSE:TBP)(OTC:TBPMF)

Shares of Tetra Bio-Pharma gained more than 20% this week. On Wednesday, Tetra Bio-Pharma signed an agreement with Panag Pharma to develop and commercialize two cannabinoid based formulations for the treatment of pain and inflammation.

Zynerba Pharmaceuticals Inc. (NASDAQ:ZYNE)

Insys Therapeutics Inc. wasn’t the only winner in the cannabinoid biotech space this week, Zynerba Pharmaceuticals Inc. also posted notable gains in this week’s trading. Shares of Zynerba Pharmaceuticals Inc. finished this week up roughly 5%. This week’s bullish action came without any news from Zynerba.
Published at Sat, 27 May 2017 17:09:00 +0000

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BlackBerry Turnaround Catching Fire

by Meditations from Pixabay

BlackBerry Turnaround Catching Fire

By Alan Farley | May 24, 2017 — 12:19 PM EDT

BlackBerry Ltd. (formerly known as Research in Motion Ltd.) (BBRY) is trading at a 2-year high this week, after lifting into double digits for the first time since May 2015. A refocus on software, and licensing fees has underpinned the long overdue turnaround, following a brutal downtrend triggered by market share destruction in the wake of iPhone and Android. While revenues are unlikely to reach lofty levels posted during its smartphone reign, the newer smaller operation could pay dividends for patient shareholders.

The company beat fiscal fourth-quarter profit and revenue estimates in its March release while surprising Wall Street analysts with guidance that expects profitability and positive cash flow into 2018. Enterprise mobility management and security software divisions comprised nearly 84% of total revenues, with those units expected to drive growth in coming quarters.

BBRY Monthly Chart (1999-2017)

BBRY

The Canadian technology company listed on the U.S. exchanges in February 1999, at the height of the Dot.com bubble. It opened at $3.69 and fell sharply, dropping to an all-time low at $1.14 just one month later. A bounce into midyear caught fire, lifting the stock in a vertical rally that topped out at $29.29 in March 2000. It fell more than 80% in the next three months, victimized by the collapse in tech stocks, and bounced back into the lower teens in October.

The wild two-sided action continued into the second half of 2001 when a more persistent downtrend took control. The decline broke yearlong support near $2.59 in May 2002 and entered a climactic phase that ended 25-cents above the 1999 low in October. The subsequent bounce continued the pattern of broad price swings, returning to the 2000 high in 2004 and breaking out in 2006, setting off a final buying spree that posted an all-time high at $148.13 in June 2008.

A bear market decline into the mid-30s generated horizontal support within a multi-year double top that broke to the downside in 2011. The stock plunged into the second half of 2012, finding support near $6.20 in 2012 but selling pressure didn’t end until it posted a deeper low at $5.44 more than one year later. Price action since that time has carved a shallow basing pattern that’s triggered an aggressive reversal each time it’s lifted into double digits.

As a result, the current rally wave has now entered a critical testing phase, highlighted by a series of 2014 and 2015 highs between $11.50 and $12.50. That price zone hides a massive June 2013 gap between $14.48 and $10.98 that remains partially unfilled nearly 4-years later. Also, the 50-month EMA has dropped into that resistance level, setting up a major battle because the stock hasn’t traded above that line-in-the-sand since 2011.

BBRY Weekly Chart (2012–2017)

BBRY

A Fibonacci grid stretched over the 2013 decline brings order to the chaotic basing pattern, with the 2014 into 2015 recovery wave stalling at the 50% retracement level. The stock is now headed into that zone after lifting above the 200-week EMA for the first time since 2011. This combination suggests the upside will flame out in coming weeks, giving way to a bullish consolidation pattern or a major reversal back into single digits.

A trading range between $10 and $13 will set the stage for a secondary assault that could eventually reach the 2013 high above $18. Progress above that level will be difficult due to the massive double top breakdown and intense selling pressure in 2011. Even so, the majority of shareholders impacted by that catastrophic price action have now departed, allowing a new crowd of speculators to take advantage of the turnaround.

The Bottom Line

BlackBerry has rallied to a 2-year high in double digits and is expecting profitable results in the coming year. This positive price action should mark a long-term reversal that generates the first sustained uptrend in many years for the former smartphone giant.
Published at Wed, 24 May 2017 16:19:00 +0000

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Top 5 Alternative Energy ETFs for 2017

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Top 5 Alternative Energy ETFs for 2017

By Ruth Konigsberg | Updated May 23, 2017 — 6:00 AM EDT

The alternative energy space has not been as lucrative as environmentally-conscious investors would like. However, those interested in gaining some exposure to this potentially profitable market can diversify across several companies by buying alternative energy exchange-traded funds. (See also: Alternative Energy ETFs Drop to Key Support.)

The potential for this sector is very large due to growing awareness about global warming and the depletion of oil reserves over time. In addition, with oil prices on the rise again, alternative energy is becoming more attractive to many consumers. This can boost the bottom lines of alternative energy companies.

We selected five alternative energy ETFs based on dividend yield. Investors can expect to earn some income, although the total returns on all of these ETFs are negative. All performance figures are current as of May 18, 2017.

Guggenheim Solar ETF (TAN)

TAN tracks the Mac Global Solar Energy Index. The fund keeps 90% of its investments in securities from the index. This ETF is volatile, and the dividend yield is offset by the negative return. However, TAN would be considered a long-term play for investors who want to be in the alternative energy sector when it finally becomes mainstream.

  • Avg. Volume: 168,942
  • Net Assets: $204.87 million
  • Yield: 4.76%
  • YTD Return: 5.61%
  • Expense Ratio (net): 0.71%

First Trust Nasdaq Clean Edge Green Energy ETF (QCLN)

QCLN is for investors who want to focus on green energy. This ETF tracks the Nasdaq Clean Edge Green Energy Index. In addition to investing 90% of its assets in stocks from the index, QCLN weights its investments so that larger companies have a larger weighting. This is known as market-cap weighting. Despite this effort, the money managers place limits on how much money be put into any given stock to avoid over-exposure to large stocks in the index.

  • Avg. Volume: 11,688
  • Net Assets: $56.32 million
  • Yield: 1.01%
  • YTD Return: 9.18%
  • Expense Ratio (net): 0.60%

VanEck Vectors Solar Energy ETF (KWT)

KWT duplicates the performance of the MVISa Global Solar Energy Index. This index is comprised of companies that have a minimum of 50% of their assets in solar-power enterprises or that receive 50% of their revenues from solar power. This may include companies that provide equipment to solar power enterprises.

  • Avg. Volume: 526
  • Net Assets: $10.98 million
  • Yield: 3.89%
  • YTD Return: 7.91%
  • Expense Ratio (net): 0.65%

VanEck Vectors Global Alternative Energy ETF (GEX)

This ETF tracks the Ardour Global Index. The focus here is companies in any area that is considered alternative energy. The definition of “alternative energy” for this ETF is any company that provides power through environmentally-conscious means. There are small- and mid-cap companies in the portfolio, as well as foreign companies.

  • Avg. Volume: 4,190
  • Net Assets: $73.12 million
  • Yield: 1.88%
  • YTD Return: 13.46%
  • Expense Ratio (net): 0.62%

iShares Global Clean Energy Index Fund (ICLN)

The S&P Global Clean Energy Index is the benchmark for this ETF, which maintains a 90% concentration of assets in securities from the index. Up to 10% of assets may be in futures, options and swap contracts.

ICLN also invests in companies that are not part of the underlying index. There is also a focus on liquidity. The fund seeks clean energy companies that trade at volumes that are high enough to make them easier to trade than some smaller alternative energy stocks.

  • Avg. Volume: 57,001
  • Net Assets: $80.56 million
  • Yield: 3.61%
  • YTD Return: 7.61%
  • Expense Ratio (net): 0.47%

Bottom Line

Alternative energy has yet to produce a highly profitable company, but for investors who are willing to be patient and wait for increased consumer acceptance and government endorsement, alternative energy ETFs can be an attractive way to get into the sector. (See also: Going Green With Exchange Traded Funds.)
Published at Tue, 23 May 2017 10:00:00 +0000

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3 Under-the-radar Momentum Plays

3 Under-the-radar Momentum Plays

By Alan Farley | May 22, 2017 — 10:45 AM EDT

A broad selection of blue-chip and other widely held names have rallied to bull market and all-time highs in recent months, fueled by optimism for a business-pleasing tax cut. Small caps have struggled during this period, but a handful of these under-the-radar stocks are also engaged in fast-moving rallies that can reward well-timed positions. Let’s look at three of the hottest plays, focusing on levels that may offer substantial upside.

Of course, there’s a dark side to playing the momentum game because it’s often necessary to enter positions well above obvious support levels in hopes of selling even higher. This stairstep mechanism exposes less disciplined players to sudden and sizable losses, especially when a large public crowd has discovered the trade, making them vulnerable to stop running by predatory algorithms that feed on human mistakes and skill inadequacies.

AAOI

Applied Optoelectronics, Inc. (AAOI) just crossed the one billion dollar line in market capitalization, underpinned by a powerful rally that’s tripled the stock’s price so far in 2017. It joined the Nasdaq exchange in September 2013 at 10 and posted a new high at $28.01 in March 2014. The subsequent decline found support in single digits in the first quarter of 2015, ahead of a proportional bounce followed by a May 2016 test of the low.

Buyers emerged at that level, generating a double bottom and uptrend that set off a powerful momentum rally in January 2017. The uptick ran into a buzzsaw of selling pressure in March, giving way to a pullback that reached support at the 50-day EMA in April, ahead of an early May bounce that reached a new high about two weeks ago. The stock is now building a base in the lower-60s, with a rally above the red line having the potential to reach the 80s in a vertical buying wave.

CALA

Calithera Biosciences, Inc. (CALA) creates compounds that fight tumor growth. It has risen nearly 500% since that start of 2017, grinding higher in a momentum rally that could eventually reach the 2014 peak in the mid-30s. It posted that all-time high just three months after coming public at $9.40 and turned sharply lower through 2015, with sellers maintaining full control into the October 2016 all-time low at $2.20.

The stock turned higher after the election and lifted into resistance at the 200-day EMA at year’s end. A January breakout built a 3-week basing pattern on top of new support, giving way to a vertical advance that topped out at $14.90 in March. A 2-month rounded correction at the 50-day EMA has now reached the first-quarter high, with a breakout opening the momentum door to a fast rally into the lower-20s.

WTW

Weight Watchers International, Inc. (WTW) rose sharply after Oprah Winfrey announced a large stake in October 2015 and slumped through most of 2016 due to mediocre earnings results. Recent metrics have shown surprising growth, triggering a momentum rally that’s testing the post-Oprah high in the upper-20s. While this level marks resistance that could trigger a sizable reversal, the pullback could offer a low-risk entry ahead of even greater upside.

The stock topped out in the 80s in 2012 and sold off to a 2015 low at $3.67 just ahead of the news. The current rally is testing resistance from that downtrend, with a breakout into the 30s relieving overhead supply while favoring a strong advance into the mid-50s. Market timers wanting to establish pullback positions should keep a close watch on the green 200-day EMA at 20, with a basing pattern at or above that support level setting the stage for quick upside.

The Bottom Line

A selection of small stocks have erupted in 2017 momentum rallies, signaling strong buying interest due to a bullish story, improving metrics or a positive feedback loop, in which one set of shareholders gets rewarded, inducing the next group to come off the sidelines and take exposure, so they don’t miss out on the move.
Published at Mon, 22 May 2017 14:45:00 +0000

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Philly Fed: “Regional manufacturing activity continued to expand” in May

Philly Fed: “Regional manufacturing activity continued to expand” in May

by Bill McBride on 5/18/2017 09:11:00 AM

From the Philly Fed: Current Indicators Reflect Continued Growth

Results from the May Manufacturing Business Outlook Survey suggest that regional manufacturing activity continued to expand this month. The diffusion indexes for general activity and shipments improved notably from their April readings. The indexes for new orders and employment, however, fell modestly from last month but remained at high readings. Although most of the survey’s future indicators fell this month, the readings suggest that most firms still expect growth to continue over the next six months.

The index for current manufacturing activity in the region increased from a reading of 22.0 in April to 38.8 this month. The index has been positive for 10 consecutive months. This month, the index recovered some of the declines of the previous two months, but it still remains slightly below its high reading of 43.3 in February …

Firms reported an increase in manufacturing employment this month, but the current employment index fell 3 points. The index has remained positive for six consecutive months. The percentage of firms reporting an increase in employment was 23 percent, lower than the 27 percent that reported increases in April. Firms also reported an increase in work hours this month: The average workweek index remained positive for the seventh consecutive month and increased 3 points.
emphasis added

Here is a graph comparing the regional Fed surveys and the ISM manufacturing index:

Fed Manufacturing Surveys and ISM PMIClick on graph for larger image.

The New York and Philly Fed surveys are averaged together (yellow, through May), and five Fed surveys are averaged (blue, through April) including New York, Philly, Richmond, Dallas and Kansas City. The Institute for Supply Management (ISM) PMI (red) is through April (right axis).

This suggests the ISM manufacturing index will show solid expansion in May.

Published at Thu, 18 May 2017 13:11:00 +0000

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Baidu Looks to Break Out to New Highs

Baidu Looks to Break Out to New Highs

By Justin Kuepper | May 12, 2017 — 2:57 PM EDT

Baidu Inc. (BIDU) recently announced first quarter financial results that delivered some mixed signals. While revenue was in-line with a 6.5% increase to $2.45 billion, earnings per share increased to $1.00 per share – beating consensus estimates by 13 cents. Shares initially moved lower as investors questioned the company’s new focus on artificial intelligence as it moves to shed its non-search related businesses to narrow its scope.

That said, the company continues to post faster growth rates than comparable U.S. companies like Alphabet Inc. (GOOGL) at a modestly lower revenue multiple. The Chinese market may also have more growth opportunities than the U.S. market in terms of an addressable market for many online services that Baidu has targeted.

From a technical perspective, the stock is making a renewed run towards its reaction highs at around $188.00. A breakout from these levels could lead to a run-up to its September highs of around $198.00 – a 6.1% gain from its current levels.

However, the relative strength index (RSI) is pointing to overbought conditions at 65.55 while the moving average convergence-divergence (MACD) doesn’t show a definitive trend higher quite yet. A clean breakout on above-average volume could help provide the push needed, but traders may want to wait for some additional consolidation below trend line resistance before such a move occurs.

Charts courtesy of StockCharts.com. Author holds no position in stock(s) mentioned except through passively-managed index funds.
Published at Fri, 12 May 2017 18:57:00 +0000

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Snap! $5 Billion in Value Disappears

Snap! $5 Billion in Value Disappears

By Justin Kuepper | May 12, 2017 — 2:59 PM EDT

Snap Inc. (SNAP) shares fell more than 20% after posting its first quarter earnings report, which shaved more than $5 billion off its market capitalization.

The company reported revenue that increased 285.8% to $149.65 million – missing consensus estimates by $8.33 million – and a net loss of $2.31 per share. While the app reached 166 million daily active users (DAUs), the modest addition was insufficient to reach analyst estimates calling for 168 million DAUs. Average revenue per user (ARPU) and hosting costs per DAU were also unfavorable versus the prior quarter – although up year-over-year.

From a technical standpoint, the stock broke down below its S2 support at $18.56 to fresh all-time lows. Thursday’s candlestick suggests a lot of indecision in the market with long shadows and a small real body, which means that the market is unsure about how to value the stock following the earnings announcement. This indecision means that traders could see a period of sideways price movements before a definitive new trend in either direction.

Technical indicators suggest that the stock may be approaching oversold levels with a relative strength index (RSI) of 34.94, although the stock has only been trading since early February, which means the indicator may have limited reliability. The moving average convergence-divergence, on the other hand, points to a renewed bearish downtrend as the stock resumes its downward trend following its initial public offering earlier this year.

Charts courtesy of StockCharts.com. Author holds no position in the stock(s) mentioned except through passively-managed index funds.
Published at Fri, 12 May 2017 18:59:00 +0000

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These stocks are getting left out of the Trump rally

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The Trump rally, 100 days in
The Trump rally, 100 days in

The stock market pulled back a bit Thursday, but the Dow, S&P 500 and Nasdaq are still not far from their all-time highs.

It seems safe to say that the Trump trade is still on. Wall Street remains hopeful about the potential for tax reform, deregulation and economic stimulus from President Trump — even if the timing for all of this could get pushed to later this year, or early 2018.

But many stocks have been left out of the Trump rally. As of the closing bell on Thursday, there were 168 companies in the S&P 500 whose stock prices have declined since the inauguration on January 20.

And many of these companies are in sectors that were expected to be big beneficiaries of Trump policies, particularly oil and finance.

Energy companies Transocean(RIG), Range Resources(RRC), Anadarko Petroleum(APC) and Helmerich & Payne(HP) have all plunged more than 25% after Trump took office. That makes them among the worst 10 performers in the S&P 500 since late January.

Noble Energy(NBL), Halliburton(HAL), Devon Energy(DVN), Schlumberger(SLB) and Marathon Oil(MRO) have all dropped by more than 15% too.

Banks have also been left out of the big market rally. Shares of Capital One(COF), Discover Financial Services(DFS), Fifth Third(FITB), MetLife(MET) and scandal-plagued Wells Fargo(WFC) have all fallen.

So have shares of Goldman Sachs(GS), the alma mater of several key members on Trump’s financial team — most notably Treasury Secretary Steven Mnuchin and National Economic Council director Gary Cohn.

Other companies that have surprisingly lagged? Real estate firms. Trump, after all, made his name (and his wealth) from being a landlord.

But having one of their own in the Oval Office has done little good for real estate investment trusts. There are 14 REITs in the S&P 500 whose stock prices have fallen since January 20.

Several mining companies have fallen too, even though many on Wall Street predicted that Trump’s inflationary policies — and unpredictability — could be good for gold.

Trump also hasn’t done any wonders for retailers, despite a surge in consumer confidence since his election.

Bed Bath & Beyond(BBBY), Kohl’s(KSS), Victoria’s Secret owner L Brands(LB), Macy’s(M) and Target(TGT) have all fallen in the past few months. But a lot of that has to do with the shifting landscape in retail and the dominance of Amazon(AMZN, Tech30) and Walmart(WMT).

Media companies aren’t benefiting either, even though the Trump’s ability to constantly generate headlines has been great for clicks and ratings.

Shares of CBS(CBS), Comedy Central owner Viacom(VIAB) and Trump’s favorite media company Fox(FOXF) have all fallen since he took office.

For now, the broader market is still holding up well — thanks in large part to strong results from tech leaders like Apple(AAPL, Tech30), Google parent company Alphabet(GOOGL, Tech30), Amazon(AMZN, Tech30) and Microsoft(MSFT, Tech30).

The S&P 500 has gained more than 5% since Trump moved into the White House.

But Craig Sterling, head of US equity research for Pioneer Investments, said that investors need to keep in mind that other parts of the market could pull back too if Trump is unable to push any of his economic proposals through Congress.

And the longer that the James Comey firing and other circus-like aspects of the White House dominate the news cycle, the tougher it will be for Trump to actually get anything meaningful accomplished.

“The Trump trade was ahead of itself,” Sterling said. “The market priced in a near certainty of lower taxes, less regulation and higher economic growth.”

But Wall Street is quickly learning, like the rest of America, that nothing is certain in Washington.

Published at Fri, 12 May 2017 06:03:54 +0000

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Why Are Symantec Shares Sinking?

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Why Are Symantec Shares Sinking?

By Shoshanna Delventhal | May 11, 2017 — 10:44 PM EDT

Cybersecurity industry pioneer Symantec Corp. (SYMC) saw its shares dip after posting its most recent quarterly earnings report and current-quarter guidance. Symantec stock recovered slightly before closing down about 5.1% at a price of $31.46 per share on Thursday.

While the tech giant posted fiscal fourth-quarter earnings and revenues in line with expectations, investors were disappointed with Q1 forecasts below the Street’s estimates.

Fiscal Q4 In Line with Expectations

The Mountain View, Calif.-based software security vendor reported a fiscal Q4 adjusted loss of $0.28 per share on revenues of $1.14 billion. In the full year, the company posted a loss of $0.17 per share, with sales coming in at $4.02 billion. Moving forward into the firm’s first quarter, ending July, Symantec foresees earnings per share (EPS) of $0.30 on revenue of $1.2 billion at the midpoint. The Street had forecast earnings of $0.38 per share on $1.27 billion in sales.

Chief Executive Officer (CEO) Greg Clark says investors should not to worry about lower-than-expected forecasts in the current quarter. Clark indicates that a rise in cloud computing software sales will lead to a large amount deferred revenue streams in the future, while only depressing revenue in the near term.

CEO: Better Quarters Ahead

“We are seeing the same levels of business,” said Clark, “but revenue in a period is less and goes into our deferred revenues, which makes future quarters better.”

The tech giant’s CEO also told Barron’s in an interview that the firm is “meeting expectations in the middle of a pretty big integration of Blue Coat and LifeLock assets.” Amidst a disrupted industry, Symantec spent $6.5 billion to buy up its two smaller rivals in efforts to boost its cloud-based enterprise and consumer security offerings. (See also: Behind Symantec’s Recent Buyout Spree.)

Other tech giants have gone the same route in trying to carve out a piece of the growing cybersecurity market. Legacy enterprise IT leader Cisco Systems Inc. (CSCO) has gobbled up a number of security businesses in the recent period. Shares of Symantec have lifted 90.8% over the 12-month period and 31.7% year-to-date (YTD).
Published at Fri, 12 May 2017 02:44:00 +0000

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Yikes! Yelp’s 2017 Guidance Raises Questions

by 3844328 from Pixabay

 

Yikes! Yelp’s 2017 Guidance Raises Questions

By Justin Kuepper | May 10, 2017 — 2:58 PM EDT

Yelp Inc. (YELP) shares fell nearly 20% on Wednesday after reporting first quarter financial results that missed estimates and cutting its outlook.

Yelp reported revenue that increased 24.4% to $197.32 million missing consensus estimates by $1.28 million and earnings of $0.19 per share beating consensus estimates by $0.03. Despite the relatively solid performance, the company’s second quarter guidance of $202 million to $206 million in revenue fell well-short of consensus estimates of $215.3 million while EBITDA of $32 million to $35 million missed expectations of $36.9 million.

CFO Lanny Baker believes that the company remains strong despite the lower guidance for the second quarter, saying, “Sales productivity has rebounded, transactions revenue has accelerated, and we’ve seen promising results from our newly expanded retention efforts, giving us confidence in our ability to grow and scale in 2017 and beyond.”

From a technical standpoint, the stock broke down from its long-term trend line support at around $32.00 and S2 support at $29.84. The stock reached a low of $25.00 before rebounding to near its opening price of $27.91 on extremely heavy volume. Technical indicators suggest that the stock may be oversold with a relative strength index (RSI) reading of 25.31, although the moving average convergence-divergence (MACD) moved into bearish territory.

Traders should watch for some consolidation at these new levels before re-testing S2 resistance at $29.84 on the upside. If the stock moves lower, traders can look for trend line support at around $23.00. The knee-jerk reaction to the earnings announcement, however, could lead to a period of consolidation before a move higher or lower as the market sorts out the long-term meaning of the bearish second quarter and full year guidance.

Charts courtesy of StockCharts.com. Author holds no positions in the stock(s) mentioned except in passively-managed index funds.
Published at Wed, 10 May 2017 18:58:00 +0000

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Cisco Downgraded by BMO Capital

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Cisco Downgraded by BMO Capital

By Shoshanna Delventhal | May 9, 2017 — 6:09 PM EDT

Enterprise IT leader Cisco Systems Inc. (CSCO) saw its shares close down about 1.1% on Tuesday after a bearish note from analysts at investment bank BMO Capital. On Monday, shares reached a new 52-week high by a slim margin before cooling off later in the day. (See also: Credit Suisse Upgrades Cisco on Trump Tax Plan.)

Analysts downgraded shares of the San Jose, Calif.-based networking hardware vendor from outperform to market perform ahead of Cisco’s first-quarter earnings slated for May 17.

The investment firm also cut its price target on Cisco stock to $35 from $37, indicating an approximate 3.2% upside from its current valuation. Analysts’ one-year target estimate remains at $35.86. BMO Capital’s Tim Long warns investors that the legacy tech firm faces significant “share losses in switching and a struggling router market,” along with a “contracting” data center business.

Analysts Highlight Declining Core Business

While Cisco is hedging against declines in its core networking hardware businesses by doubling down on an acquisition spree and investing in high-growth segments such as cybersecurity​ and the Internet of Things (IoT), routing and switching still comprise a majority of revenues. Cisco bears point to difficultly with Cisco’s core businesses as a drag on future growth as the firm loses out to newer cloud-based networking competitors such as Arista Networks Inc. (ANET) and Juniper Networks Inc. (JNPR).

Last week, analysts at Credit Suisse issued a double upgrade on shares of Cisco, suggesting a new Trump tax plan could boost the firms M&A activity and drive long-term EPS growth.

Trading at a price of $33.90 per share, CSCO reflects an approximate 32.4% gain over the 12-month period and a 12.2% gain year-to-date (YTD). (See also: Cisco Rivals Post Q1 Earnings.)
Published at Tue, 09 May 2017 22:09:00 +0000

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Nvidia Revenue Will Be Boosted By Nintendo Switch Success

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Nvidia Revenue Will Be Boosted By Nintendo Switch Success

By Donna Fuscaldo | May 9, 2017 — 8:40 AM EDT

It’s not only Nintendo (NTDOY) that is making money off of its new game console. Graphics chip maker is as well Nvidia Corp. (NVDA).

That’s according to RBC Capital Markets analyst Mitch Steves who said this week Nvidia could make $300 million to $400 million in its fiscal year 2018 all because of the Switch game console. In a research note to clients covered by Yahoo Finance, the analyst said Nintendo will double production of the Switch console to 16 million units from 8 million units, creating a situation when Nvidia earns even more off of the game console.

“We think the incremental 6-8M units could add $300-400M to the top line (3-4% growth to annual revenue on a $50 ASP),” wrote RBC Capital Markets analyst Mitch Steves according to Yahoo Finance. “This is a notable metric given that the Wii U sold ~13.5M units since its release in 2012 and 10M+ in the first 12 months are unlikely reflected in current estimates.” Nvidia makes a customized Tegra X1 chip for the Switch device. (See more: Nintendo Sold Close to a Million Switch Systems in March)

Ever since Nintendo rolled out the much anticipated Switch game console, which is a portable gaming system and home console rolled into one, it has been selling out all over the globe. Nintendo Switch uses a dock when it functions as a console. It switches to portable mode when lifted out of the dock. The strong response to the device has prompted Nintendo to increase the number of units produced with the Wall Street Journal reporting in March that companies that assemble the Nintendo Switch plan to manufacture 16 million more units. Originally, the plan was to assemble 8 million units.

In March alone, Nintendo said it sold close to 1 million Switch units in the U.S. The Japanese game maker said the Switch has sold faster at its launch than any other video game system in the company’s history, which bodes well for Nvidia and other component suppliers.

While Nvidia has long been one of the leading graphic chip makers, concerns about saturation in its core market have been cropping up. (See more: Is the Nvidia Growth Story Over?)

In an effort to move beyond the PC and gaming markets, Nvidia has been branching into new areas the past couple of years such as providing chips for the automotive market, data centers and for artificial intelligence. AI may be a big growth opportunity for Nvidia as the burgeoning technology starts to get adopted more by the masses.
Published at Tue, 09 May 2017 12:40:00 +0000

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Stocks End Mixed Despite Positive Employment Report

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Stocks End Mixed Despite Positive Employment Report

By Justin Kuepper | May 5, 2017 — 5:15 PM EDT

The major U.S. indexes were mixed over the past week after large employment gains. According to the Bureau of Labor Statistics, U.S. job growth rebounded sharply in April with 211,000 jobs added following a measly 79,000 gain in March. The headline unemployment rate fell to a 1-year low of 4.4% with substantial gains in leisure and hospitality, healthcare, and social assistance, as well as business and professional services payrolls. The gains support the notion that the 0.7% first quarter GDP growth was merely a transitory issue.

International markets were mixed over the past week. Japan’s Nikkei 225 rose 4.43%; Germany’s DAX 30 rose 5.55%; and, Britain’s FTSE 100 rose 2.47%. In Europe, equity indexes moved largely higher as France wraps up its presidential election this weekend with the centrist Emmanuel Macron leading the polls. In Asia, the risk of conflict in North Korea appears to have decreased, and Japanese equities recovered a lot of lost ground, although some risk remains and investors remain cautious in the region.

The S&P 500 SPDR (ARCA: SPY) rose 0.68% over the past week. After trending below last month’s R1 resistance levels, the index moved marginally higher toward its new R1 resistance level at $240.90. Traders should watch for a breakout from these levels toward R2 resistance at $243.73 or a move lower to its pivot point at $236.71. Looking at technical indicators, the RSI is getting lofty at 65.70, while the MACD remains in a bullish uptrend.

The Dow Jones Industrial Average SPDR (ARCA: DIA) rose 0.33% over the past week. After breaking out from its descending triangle chart pattern, the stock has trended sideways over the past couple of weeks. Traders should watch for a breakout to re-test its prior highs near R1 resistance at $211.85 or a move lower to its pivot point and 50-day moving average near $207.39. Looking at technical indicators, the RSI appears lofty at 63.68, but the MACD remains in a bullish uptrend dating back to late-April.

The PowerShares QQQ Trust (NASDAQ: QQQ) rose 1.13% over the past week, making it the best performing major index. After breaking out from its price channel, the index continued to make gains toward R1 resistance at $138.09. Traders should watch for a breakout from these levels toward R2 resistance at $140.20 or a move lower to its trend line support at around $135.75. Looking at technical indicators, the RSI appears massively overbought at 77.31, but the MACD shows a continuation in the bullish reversal dating back to late-April.

The iShares Russell 2000 Index ETF (ARCA: IWM) fell 0.05% over the past week making it the worst performing major index. After briefly hitting R1 resistance at $142.70, the index moved lower to the middle of its price channel and the pivot point at $138.18. Traders should watch for a move higher to re-test R1 resistance or a move lower to the lower trend line and S1 support at around $134.54. Looking at technical indicators, the RSI appears neutral at 55.36, but the MACD could see a near-term bearish crossover.

The Bottom Line

The major U.S. indexes were mixed over the past week with small-caps underperforming and technology stocks outperforming. Next week, traders will be watching several key economic indicators including jobless claims on May 11 and retail sales and consumer sentiment data on May 12. Investors will also be closely watching the French elections for any upset where the nationalist Marine Le Pen might secure a victory and potentially destabilize the euro area.

Note: Charts courtesy of StockCharts.com. As of the time of writing, the author had no holdings in the securities mentioned.
Published at Fri, 05 May 2017 21:15:00 +0000

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Yum Brands Headed for Breakout After Earnings

by Goodfreephotos from Pixabay

 

Yum Brands Headed for Breakout After Earnings

By Alan Farley | May 5, 2017 — 11:52 AM EDT

Restaurateur Yum Brands, Inc.’s (YUM) 2016 decision to spin off its Chinese operations into Yum China Holdings, Inc. (YUMC) is finally bearing fruit, with the parent company beating EPS and revenue estimates in Wednesday’s first quarter earnings report while reiterating lofty 2019 guidance of $3.75/share. The bullish metrics have triggered a strong advance that’s now testing two-year resistance in the upper-60s.

The spinoff is firing on all cylinders as well after breaking out above 5-month resistance at 30 in April and heading into a month-long string of new highs. Taken together, these worldwide purveyors of Taco Bell, KFC, and Pizza Hut are set to post outsized gains for the rest of 2017, despite a challenging restaurant environment that’s posted weak comparative sales in the last two years.

YUM Long-Term Chart (1997–2017)

YUM

The company came public in October 1997 at $5.59, after adjustment for three stock splits, and took off in a 1998 uptrend that reached $13.28 in April 1999. It then turned tail, losing points at an equally vigorous pace until posting an all-time low at $4.24 in August 2000. A bounce off that level stalled two points under the prior high in 2002, denying a breakout until the second half of 2004 when the stock took off in a major uptrend.

The rally peaked just above $29 in 2007, giving way to sideways action that broke to the downside during the 2008 economic collapse. Selling pressure settled at a 4-year low in November while a 2009 support test completed a double bottom reversal, ahead of a strong recovery wave that reached a new high in 2010. Good vibes intensified into 2015 when the stock finally topped out in the upper-60s and sold off in a major correction.

The decline found support in February 2016 at the 2013 low in the mid-40s and took off in a strong recovery wave that stalled in September just 3-points below 2-year resistance. The November 2 spinoff yielded a major low, ahead of a bounce that gained steam into February 2017 when the stock reached the 2015 high. Price action since that time has carved a rounded pullback that’s now completed a multi-year cup and handle breakout pattern.

YUM Short-Term Chart (2015–2017)

YUM

The 2015 decline unfolded through a series of volatile waves that trapped long and short-term traders on both sides of the aisle. High volatility continued into the first quarter of 2016, highlighting an intense conflict finally won by bulls in March when the stock exited the 5-month basing pattern into an uptrend that recaptured support at the 200-day EMA just a few sessions later.

The second half of 2016 proved tough for profit-building because the spinoff news triggered confusion and second-guessing, with Wall Street analysts worried the new company would undermine the parent’s performance. Institutions and the public set aside those fears after the November offering, generating a strong rally back to steep 2015 resistance in the upper-60s.

There’s still work to do because On Balance Volume (OBV) has failed to match price action, topping out in October 2016 and drifting lower into April 2017, even though the stock is now trading near a 2-year high. However, this volume-based indicator may be generating false readings due to the spinoff, which included a complicated split formula that may not reflect actual investor demand in the last six months.

The Bottom Line

Yum has charged back to resistance at the 2015 high after a strong first quarter earnings report, completing a cup and handle breakout pattern that supports a rally to $90 as a measured move target. Market timers may choose to ignore a bearish volume divergence due to complex accounting in the Yum China spinoff and jump in ahead of an expected breakout.
Published at Fri, 05 May 2017 15:52:00 +0000

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