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Intel Stock Nears Breakdown From Key Support Levels

 

Intel Stock Nears Breakdown From Key Support Levels

By Justin Kuepper | December 8, 2017 — 11:17 AM EST

Intel Corporation (INTC) shares have been trending lower since making 52-weeks highs of $47.30 in early November. Despite the recent weakness, the company has outperformed many other chipmakers that experienced similar sell-offs over the past month as traders took profit off the table, including Advanced Micro Devices, Inc. (AMD) and NVIDIA Corporation (NVDA). All of these companies had realized strong gains since the beginning of the year.

The positive news is that the industry’s fundamental performance has remained strong. During the third quarter, Intel’s revenue rose 2.3% to $16.15 billion – beating consensus estimates by $420 million – and net income of $1.01 per share beat consensus estimates by 21 cents per share. Management also raised its fourth quarter guidance to revenue of $16.2 billion and net income of 86 cents per share, both of which were above consensus estimates. (See also: Intel Stock Well Positioned for Year-End Rally.)

Technical chart showing the performance of Intesl Corporation (INTC) stock

From a technical standpoint, the stock moved sharply lower from its highs made earlier this year to trendline and S1 support around $43.38. The relative strength index (RSI) moderated to neutral levels of around 44.98, while the moving average convergence divergence (MACD) remains in a bearish downtrend dating back to mid-November. The stock remains significantly higher than its 52-week lows despite the recent downturn.

Traders should watch for a breakdown from the 50-day moving average at $42.88 to S2 support at $41.91 or to close the gap to around $41.00. If the stock rebounds from these levels, traders should watch for some resistance at around $44.50 or a move to the pivot point at around $45.23. Traders should maintain a bullish long-term bias on Intel but a bearish short-term bias, especially if the stock breaks down from current support levels. (For more, see: Why Intel and Broadcom Are Still Cheap.)

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

Published at Fri, 08 Dec 2017 16:17:00 +0000

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Lululemon: A Hot Stock in Yoga Pants

by Free-Photos from Pixabay

Lululemon: A Hot Stock in Yoga Pants

By Richard Suttmeier | December 6, 2017 — 8:35 AM EST

Lululemon Athletica Inc. (LULU) makes and retails athletic apparel and accessories, including the forever popular yoga pants that many women love to wear both at the gym and on casual outings.

The stock closed Tuesday at $66.36, up 2.1% year to date and solidly in bull market territory at 39.3% above its post-election low of $47.64 set on May 30. The stock set its post-election high of $72.70 on Dec. 8, 2016, and is 8.7% below this level. Lululemon shares have had a volatile ride since trading as high as $81.81 on Aug. 25, 2016, then trading as low as $47.26 on May 31, 2017. This price movement can be evaluated using Fibonacci retracements of the decline from this high to this low.

Analysts expect Lululemon to post earnings per share between 52 cents and 55 cents when it reports results after the closing bell on Dec. 6. Wall Street looks for revenue growth to continue as margins improve on new designs to make you look great while you sweat at the gym. (See also: Lululemon Stock Could Head Into Long-Term Breakout.)

The daily chart for Lululemon

Daily technical chart showing the performance of Lululemon Athletica Inc. (LULU) stockCourtesy of MetaStock Xenith

The daily chart for Lululemon shows horizontal lines that represent the Fibonacci retracement levels of the 42% decline from the August 2016 high to the low seen on May 31, 2017. The five price gaps lower or higher were in reaction to the past five earnings reports, so traders and investors should beware of the risk/reward this afternoon. The chart clearly shows a neutral zone between the 50% retracement of $64.55 and the 61.8% retracement of $68.61.

The weekly chart for Lululemon

Weekly technical chart showing the performance of Lululemon Athletica Inc. (LULU) stockCourtesy of MetaStock Xenith

The weekly chart for Lululemon is positive but overbought, with the stock above its five-week modified moving average of $64.72, and Lululemon has been above its 200-week simple moving average, or “reversion to the mean,” which is currently at $57.86, since the week of June 30. The 12 x 3 x 3 weekly slow stochastic reading is projected to end this week at 84.90, solidly above the overbought threshold of 80.00.

Given these charts and analysis, my trading strategy is to buy weakness to my semiannual value level of $41.17 and to reduce holdings on strength to my quarterly risky level of $72.92. My monthly pivot (or magnet) is $67.42. (For more, see: Top 4 Consumer Cyclical Stocks for 2017.)

Published at Wed, 06 Dec 2017 13:35:00 +0000

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First Solar Stock Showing Unusual Strength

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First Solar Stock Showing Unusual Strength

By Alan Farley | December 6, 2017 — 9:35 AM EST

First Solar, Inc. (FSLR) stock is sticking like glue to fourth quarter highs despite a series of bear raids intended to drop the Tempe, Arizona-based solar giant into an intermediate decline. This unusual strength suggests that the stock will head much higher in the first quarter of 2018, perhaps adding another 25% to dramatic gains posted since it bottomed out in April at a four-year low. As a result, market players should watch resistance at $62.50 for a breakout that sets off profitable buying signals.

The company raised 2018 earnings per share estimates above expectations in a Dec. 5 Analyst Day meeting, forcing many short sellers to cover positions. The bullish metrics eased newly bearish sentiment following passage of the Senate’s tax reform bill, which limits alternative energy credit provisions. On the flip side, a recent ruling on solar panel dumping by the the U.S. International Trade Commission (ITC) should underpin profits at the largest U.S. panel manufacturer starting in the first quarter of 2018. (See also: First Solar and SunPower: Effects of Solar Panel Tariffs.)

FSLR Long-Term Chart (2006 – 2017)

The company came public on the Nasdaq exchange in November 2006, opening at $24.50 and taking off in a powerful uptrend that reached $283 at the end of 2007. The stock’s value was nearly cut in half in the next 30 days, dumping to $143 ahead of an equally vigorous recovery wave that posted an all-time high at $317 in May 2008. A modest pullback accelerated during the economic collapse, dropping the stock through the prior low and into a 52-week low in the mid-$80s.

It bounced back above $200 in May 2009, stalling at the 50% sell-off retracement level while marking the highest high in the past eight years. A slow-motion decline followed, posting a series of lower highs and lower lows into a dramatic 2011 breakdown through the 2008 bear market low. The subsequent decline crushed remaining shareholders in a vertical impulse that reached an all-time low at $11.43 in June 2012.

A sturdy bounce into 2014 ended in the mid-$70s, marking major resistance that remains in force more than three years later. The stock then eased into a trading range, with support at $40 holding into a 2015 breakdown that ended at a higher low in the mid-$20s in April 2017. Committed buyers entered in force a few weeks later, generating a new uptrend that mounted broken range support in July. It stalled just above $60 in November and has spent the past five weeks consolidating impressive annual gains in a narrow range price pattern. (For more, see: The History of First Solar.)

FSLR Short-Term Chart (2016 – 2017)

A Fibonacci grid stretched across the 2016 into 2017 decline organizes two-sided price action, with the rally since April stair-stepping through harmonic resistance levels into the .786 retracement in the low $60s. Many bounces end at this critical level, while breakouts can be dramatic, generating momentum-fueled advances that complete V-shaped patterns. The 2016 high in the mid-$70s could be reached quickly if the bullish scenario plays out, offering sizable profits as long as exits are taken promptly.

On-balance volume (OBV) lifted to an all-time high at the start of 2016 and rolled into a distribution wave that ended at the same time the stock posted the deep April 2017 low. Healthy accumulation since that time has nearly reached the prior high, generating a bullish divergence, predicting that price will play catch up in the coming weeks. This bodes well for a breakout above harmonic resistance in the low $60s and a rapid ascent into the mid-$70s. (See also: First Solar Tops Q3 Earnings, Raises ’17 EPS Outlook.)

The Bottom Line

First Solar is holding close to fourth quarter highs while the Nasdaq-100​ sells off, signaling resiliency that should translate into higher prices. A breakout above horizontal resistance at $62.50 could set this rally wave into motion, targeting six-year resistance in the mid-$70s. (For additional reading, check out: Top 3 Solar Stocks as of December 2017.)

Published at Wed, 06 Dec 2017 14:35:00 +0000

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Apple may not need this supplier. Its stock crashes 23%

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Dialog Semiconductor is finding out what happens when you put most of your eggs (or apples, perhaps) in one basket.

Shares in the British-German tech company plunged 23% on Monday, after it acknowledged that Apple(AAPL, Tech30) — by far its biggest customer — can now develop the power management chips Dialog produces.

Dialog shares had already slumped in April on fears that Apple could drop the company as a supplier, and Monday’s crash took the stock’s losses this year to more than 40%.

The company has previously tried to play down those concerns. Monday was the first time it has publicly acknowledged Apple could eventually replace its chips with in-house production.

“Dialog recognizes Apple has the resources and capability to internally design a [power management integrated circuit]and could potentially do so in the next few years,” the company said in a statement.

A lot is at stake. Apple accounted for74% of Dialog’s sales in 2016, according to the company’s annual report.

“This is a major disaster,” said Tim Wunderlich, analyst at Hauck & Aufhauser.

“I would expect Dialog to experience declining sales from 2019 onward, intensifying gross margin pressure, (and) brain drain as uncertainties make the company a far less appealing employer for top talent,” he added.

The Nikkei Asian Review reported last weekthat Apple could start using its own power management chips as early as next year.

Dialog said it had no information to suggest Apple was getting ready to start making its own chips that soon.

It is working with Apple on plans for 2019 products, and will have a better idea about its future contracts with Apple by March, the company added.

Apple did not respond to a request for comment.

Another company, Imagination Technologies,(IGNMF) saw its stock drop more than 70% in April, after Apple said it was planning to stop licensing the firm’s technology in about two years.

Imagination has since been sold to China-backed Canyon Bridge Capital Partners for £550 million ($740 million), well below the £2 billion ($2.7 billion) it was worth at its peak in 2012.

Published at Mon, 04 Dec 2017 16:27:57 +0000

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Autozone Stock: Look for ‘Golden Cross’ on Positive Beat

 

Autozone Stock: Look for ‘Golden Cross’ on Positive Beat

By Richard Suttmeier | December 4, 2017 — 1:52 PM EST

AutoZone, Inc. (AZO) is a retailer of after-market auto parts and accessories. These products are usually cheaper than the automakers’ branded parts and are made for do-it-yourself vehicle owners.

The stock opened Monday at $687.37, down 13% year to date but solidly in bull market territory at 40% above its post-election low of $491.13 set on July 20. AutoZone stock set its post-election high of $813.70 on Dec. 8, 2016, and the stock is currently in correction territory at 15.5% below this level. The all-time intraday high of $819.54 was set during the week of July 15, 2016.

Analysts expect AutoZone to post earnings per share of approximately $9.80 when it reports results before the opening bell on Dec. 5. Despite recent share price strength, some say that the company is struggling to protect profits and increase revenue growth, as the year-over-year growth rate has been disappointing. (See also: AutoZone Q4 Earnings and Revenues Top Estimates, Up Y/Y.)

The daily chart for AutoZone

Daily technical chart showing the performance of AutoZone, Inc. (AZO) stockCourtesy of MetaStock Xenith

The daily chart for AutoZone shows that the stock is poised to confirm a “golden cross” in the case of a positive reaction to earnings. A “golden cross” occurs when the 50-day simple moving average (SMA) rises above the 200-day SMA, indicating that higher prices lie ahead. Today, the 50-day SMA is $609.37, closing in on the 200-day SMA of $615.72.

The weekly chart for AutoZone

Weekly technical chart showing the performance of AutoZone, Inc. (AZO) stockCourtesy of MetaStock Xenith

The weekly chart for AutoZone is positive but overbought, with the stock above its five-week modified moving average of $635.17 and having crossed above its 200-week SMA at $664.64 last week. This puts the stock above its “reversion to the mean” for the first time since the week of May 25, when the average was $647.18. The 12 x 3 x 3 weekly slow stochastic reading is projected to end this week at 90.47, up from 89.65 on Dec. 1. This momentum reading is well the overbought threshold of 80.00 and now represents what I describe as an “inflating parabolic bubble” with a reading projected to be above 90.00.

Given these charts and analysis, my trading strategy is to buy weakness to my monthly value level of $498.05 and to reduce holdings on strength to my annual risky level of $866.89. My quarterly pivot (or magnet) is $692.68. (For more, see: AutoZone Chosen by Region 4 Center as Parts Provider.)

Published at Mon, 04 Dec 2017 18:52:00 +0000

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Bank of America Rally Could Accelerate in 2018

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Bank of America Rally Could Accelerate in 2018

By Alan Farley | December 1, 2017 — 11:02 AM EST

Tax cut optimism and an expected December interest rate hike have lifted commercial banks to multi-year highs, in expectations of record profits through greater business activity and wider yield spreads. Bank of America Corporation (BAC) stock has attracted strong buying interest in this bullish wave, breaking out to a nine-year high in the upper $20s. More importantly, it has now opened the technical door to more rapid upside that could reach the upper $30s in the second half of 2018.

Commercial banks have already hit short-term overbought technical readings following a three-day vertical buying impulse, so risk-conscious market players may wish to stand aside right here and wait for an orderly pullback that tests new support. A decline that fills Bank of America’s Nov. 28 gap between $27.50 and $28 might do the trick, offering a low-risk entry ahead of a first upside target at $31.50. (See also: Bank of America Stock Breaks Out After Powell Testimony.)

BAC Long-Term Chart (1989 – 2017)

The stock topped out at a split-adjusted $13.75 in 1989 and sold off to $4.22 in 1990. It took nearly four years for the subsequent uptick to clear resistance at the prior peak, yielding a 1995 breakout that gathered substantial momentum into the July 1998 high at $44.22, when the Asian Contagion triggered a slide into the mid-$20s. The subsequent bounce failed to stir buying interest, yielding a series of lower lows into the first quarter of 2000, when it bottomed out in the upper teens.

A slow-motion recovery wave reached the 1998 high in 2003, ahead of a 2004 cup and handle breakout that generated mixed but positive price action into the November 2006 all-time high at $55.08. The tables then turned in a modest reversal that gathered hurricane force during the 2008 economic collapse, dropping to a 25-year low at $2.53, ahead of a quick upturn that stalled near $20 in the second quarter of 2010.

The stock spent more than six years testing that resistance level, finally breaking out after the November 2016 election and entering a powerful trend advance that stalled at $25.77 in March 2017. It completed a basing pattern at the 50-day exponential moving average (EMA) in September and turned sharply higher, posting new highs in October and again this week. This price action has finally cleared the .618 Fibonacci retracement of the dramatic sell-off wave between September 2008 and March 2009.

You may recall the massive September squeeze when U.S. Treasury Secretary Hank Paulson banned short sales in an effort to stabilize the troubled banking sector, but the politically motived move backfired, printing lower highs ahead of the final collapse. The stock has been retracing that selling wave for many years, finally mounting the critical .618 level in October 2017. In turn, this price action opens the door to the .786 retracement level at $31.50 and 100% retracement at $39.50. (For more, see: Short Goldman Sachs, Buy Bank of America: Bove.)

BAC Short-Term Chart (2016 – 2017)

A furious decline broke three-year support near $15 at the start of 2016, reaching a three-year low at $10.99 in February. It remounted the broken trading range in August, setting off a preliminary buying signal that came to fruition during November’s big breakout. Meanwhile, the price pattern since the deep low has drawn the outline of an Elliott five-wave advance, with the 2017 trading range marking the fourth wave consolidation, ahead of a fifth wave breakout that targets the .786 selloff retracement level in the low $30s. It also suggests that the stock will undergo a deeper correction following this final impulse. (To learn more, see: Elliott Wave Theory.)

The Bottom Line

Bank of America stock has rallied to a nine-year high in the upper $20s and could lift into the lower $30s in the first quarter of 2018, ahead of larger-scale upside that could eventually reach the September 2008 high near $40. (For additional reading, check out: These Sectors Benefit From Rising Interest Rates.)

Published at Fri, 01 Dec 2017 16:02:00 +0000

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Costco Stock Breaks Out After Strong November Sales

 

Costco Stock Breaks Out After Strong November Sales

By Justin Kuepper | November 30, 2017 — 12:50 PM EST

Costco Wholesale Corporation (COST) shares rose more than 3% on Thursday morning after the company’s November sales exceeded expectations. In a recent news release, Costco reported that net sales jumped 13.2% to $11.26 billion in November, with a 10.8% increase in comparable-store sales. Some of the strong performance was due to gasoline prices and currency swings, but even excluding these factors, comp sales rose nearly 8%.

Stifel Nicolaus analysts responded by raising their price target on Costco to $185.00, citing the strong comparable sales growth after Whole Foods’ new pricing strategy. Many analysts and investors had been concerned that Amazon.com, Inc.’s (AMZN) move into the grocery industry would cause a price war that hurt margins and market share. However, positive financial results from many grocers have helped alleviate these fears over the past few days. (For more, check out: Kroger Stock Breaks Out From 200-Day Moving Average.)

Technical chart showing the performance of Costco Wholesale Corporation (COST) stock

From a technical standpoint, the stock broke out from upper trendline and R2 resistance at around $173.49 earlier this week before extending its rally on Thursday. The relative strength index (RSI) moved to significantly overbought levels at 80.60, but the moving average convergence divergence (MACD) extended its move into bullish territory. Traders should maintain a bullish outlook on the stock given these factors.

Traders should watch for some consolidation above trendline support at around $175.00 over the coming sessions, especially because the RSI is firmly in overbought territory. If the stock breaks down below these support levels, traders should watch for a move to retest R1 support levels at $167.05 or the 50-day moving average at $164.83, but the strong fundamental performance makes this a less likely occurrence. (See also: Costco Could Break to New Highs.)

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

Published at Thu, 30 Nov 2017 17:50:00 +0000

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Why would a stock have no par value?

 

Why would a stock have no par value?

By Investopedia Staff | Updated November 30, 2017 — 5:06 PM EST

People often get confused when they read about the “par value” for a stock. One reason for this is that the term has slightly different meanings depending on whether you are talking about equity or debt.

In general, par value (also known as par, nominal value or face value) refers to the amount at which a security is issued or can be redeemed. For example, a bond with a par value of $1,000 can be redeemed at maturity for $1,000. This is also important for fixed-income securities such as bonds or preferred shares because interest payments are based on a percentage of par. So, an 8% bond with a par value of $1,000 would pay $80 of interest in a year.

It used to be that the par value of common stock was equal to the amount invested (as with fixed-income securities). However, today, most stocks are issued with either a very low par value such as $0.01 per share or no par value at all.

You might be asking yourself why a company would issue shares with no par value. Corporations do this because it helps them avoid a liability to stockholders should the stock price take a turn for the worse. For example, if a stock was trading at $5 per share and the par value on the stock was $10, theoretically, the company would have a $5-per-share liability.

Par value has no relation to the market value of a stock. A no-par-value stock can still trade for tens or hundreds of dollars. It all depends on what the market feels the company is worth. (For more about par values, see Bond Basics Tutorial.)

Published at Thu, 30 Nov 2017 22:06:00 +0000

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Boeing to Boost Dividend Next Month: Wells Fargo

Boeing to Boost Dividend Next Month: Wells Fargo

By Shoshanna Delventhal | November 29, 2017 — 6:29 PM EST

Aircraft manufacturer Boeing Co. (BA) has seen its shares gain a whopping 72.6% year-to-date (YTD), trading up 0.4% on Wednesday afternoon at $269.09. By comparison the S&P 500 has increased $17.2% over the same period. One team of analysts on the Street foresees the aerospace stock to continue reaping rewards for shareholders, forecasting a dividend increase likely to come before Christmas. (See also: Boeing Flies Toward Double-Digit Growth: Jefferies.)

Wells Fargo top aerospace analyst Sam Pearlstein and team expect the Chicago-based jet maker to boost its dividend by at least 10% to 15% before its next board meeting, slated for Dec. 11. Pearlstein highlights growing free cash flow thanks to higher 737 airliner production and cost reductions on the 787 Dreamliner program.

Growing Free Cash Flow

“With $10 billion in cash at the end of Q3 and free cash flow growth expected for several years, we believe Boeing can continue to support significant return of cash to shareholders,” wrote the Wells analyst in a note to clients.

Boeing has lifted its dividend for five consecutive years. The dividend hike expected by Pearlstein in December would result in a dividend yield of about 2.4%, compared to the S&P 500’s 1.9% yield. Boeing currently pays an annual dividend of $5.68 per share, yielding 2.1%. With the higher dividend, Wells estimates BA’s payout ratio would reach 49% to 52%. The investment firm also expects BA to expand its share buyback program.

BA stock has had a stellar year so far, surpassing General Electric Co. (GE) in terms of total market capitalization for the first time ever and leading the Dow Jones Industrial Average (DJIA). Last week, a team of analysts at Jefferies offered a bullish outlook for the aircraft leader, foreseeing earnings per share growth in the double-digit rate based on “robust demand” for its commercial aircrafts. (See also: Airbus, Boeing Land Over $75B in Aircraft Orders.)

Published at Wed, 29 Nov 2017 23:29:00 +0000

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U.S. economy posts best growth in three years

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By Buntysmum from PixabayU.S. economy posts best growth in three years

Fed pick: Banks are not too big to fail
Fed pick: Banks are not too big to fail

The U.S. economy picked up more momentum last summer than originally thought.

It grew 3.3% on an annual basis between July and September, according to revised numbers published Wednesday by the Commerce Department. The initial reading on third quarter growth was 3.0%.

That marks the best quarter of growth since in 2014 when the economy grew 5.2% during the same period. An increase in exports, as well as a pick up in business and consumer spending, contributed to the improved growth.

President Trump promises to get U.S. economic growth for an entire year up above 3%, something that hasn’t happened since 2005. Economists say the U.S. will likely not achieve 3% growth for 2017 because the first three months of the year were sluggish. First quarter growth was 1.2%. For the first nine months of this year, the U.S. is averaging 2.5% growth.

The Federal Reserve forecasts that U.S. growth will hover around 2% for the foreseeable future. A mix of factors, such as sluggish wage and productivity growth, along with millions of Baby Boomers leaving the workforce to retire, have held back economic growth since the Great Recession ended in 2009.

Still, the U.S. economy is on sound footing. Unemployment is 4.1%, the lowest since 2000. Jobs have been added for 84 consecutive months, the longest streak on record.

Growth has been slow but steady since 2009, one of the longest expansions in history. Wage growth and inflation haven’t risen as many economists expected they would. The lack of both is considered an economic mystery.

Published at Wed, 29 Nov 2017 15:29:40 +0000

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Twitter Stock: Breakout or Double Top?

 

Twitter Stock: Breakout or Double Top?

By Justin Kuepper | November 22, 2017 — 3:05 PM EST

Twitter, Inc. (TWTR​) shares have risen more than 7% since the beginning of the week in what appears to be a technically driven breakout following a deal with Bloomberg.

Last week, Axios reported that Bloomberg would bring a news network to the social media website with six partnerships averaging $1.5 million to $3 million in price. The first 24-hour news program on the Twitter platform is designed to help Bloomberg better monetize Twitter, with the support of The Goldman Sachs Group, Inc. (GS), CA Technologies (CA) and AT&T Inc. (T) as founding partners. The move could open the door to similar deals with other media companies.

In addition to this partnership, Twitter has been making significant changes to its platform to remain relevant compared with other social media platforms. The company announced that it would double its 140-character limit to attempt to increase followers and engagement after a beta test that lasted throughout September. Last quarter, the company also announced strong financial results that suggest its turnaround is gaining traction. (See also: Twitter Buying Volume Predicts Long-Lasting Bottom.)

Technical chart showing the performance of Twitter, Inc. (TWTR) stock

From a technical standpoint, the stock rebounded from pivot point support at around $19.79 to retest upper trendline resistance at around $22.30. The relative strength index (RSI​) moved to overbought levels at 72.39, but the moving average convergence divergence (MACD​) experienced a bullish crossover after a period of consolidation. Traders should remain cautious on the stock given the lofty RSI reading and the key resistance levels ahead.

Traders should watch for a breakout from trendline and R1 resistance at $22.80 to R2 resistance at $24.97. If the stock fails to break out, traders should watch for a move to pivot point support at $19.79. A breakdown from these levels could validate a double top pattern and signal a move down to lower trendline and S1 support levels at $17.61. Traders should also keep an eye on the volume behind these moves, which has been relatively low during the rally. (For more, see: Twitter Surges on Q3 Results: Log in to These ETFs.)

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

Published at Wed, 22 Nov 2017 20:05:00 +0000

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Top And Bottom Performing Stocks For Week #47

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It is Sunday afternoon and that means we get to review the performance of last week’s historical top and bottom stock symbols in the S&P 500. As you may recall these symbols are the result of parsing a database containing over 50 years worth of statistical performance data. The idea is to extract the prospective top ten winners and losers of the coming week purely based on historical statistics. The result is then sorted by liquidity and any symbol that is scheduled to report earnings or pass ex-dividend is being excluded.

How To Trade Along

Although being no guarantor of success, the long and short candidates posted here each week are intended to perform along their respective historical bias. One way of trading along would be to simply create a small one-week portfolio by buying the long candidates and selling the short candidates on Monday morning shortly after the open. There are no official stops or targets and all transactions are reversed Friday afternoon right before the bell.

For anyone who wants to keep track I have created a new WP category that allows you to pull all pertinent posts up to date. Eventually I’ll be putting together a summary spreadsheet once we have accumulated sufficient stats.

Results For Week # 46

It seems we are back on track as the last week netted us 19.72 relative percent, which means the return of the overall portfolio of 20 stocks is 1/20 of that, or 0.986%. Kudos to phantomflash for correcting my twisted profit calculation 😉

Long Profits: FTR=2.81, MRK=-0.5, ODP=0.31, LUV=2.28, WBA=0.37, MNST=1.65, IBM=-0.13, HRL=2.44, FLO=5.78, CPB=4.85

Long Profits Total: 19.86%

Short Profits: AAPL=2.59, C=1.27, MU=-3.08, JPM=-0.65, KEY=-3.8, ABX=-0.64, MRO=3.65, HL=3.96, NEM=-1.94, BBT=-1.5%

Short Profits Total: -0.14%

Combined Profits Total: 19.72%

Published at Sun, 19 Nov 2017 18:14:20 +0000

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Strong Economic Data Fail to Offset Profit Taking in Stocks

 

Strong Economic Data Fail to Offset Profit Taking in Stocks

By Justin Kuepper | November 18, 2017 — 11:22 AM EST

The major U.S. indexes were mixed over the past week. While retail sales hit expectations with a 0.2% jump in October, the gains were largely due to auto purchases in hurricane-hit states. The good news is that industrial production exceeded expectations with a 0.9% increase, and most of that was due to a strong 1.3% gain in manufacturing. The housing market also experienced strong gains, with more housing starts in October than expected.

International markets were lower over the past week. Japan’s Nikkei 225 fell 1.25%; Germany’s DAX 30 fell 1.02%; and Britain’s FTSE 100 fell 0.67%. In Europe, Angela Merkel’s party posted its weakest election results since 1949 as the far-right Alternatives for Germany part gained traction. In Asia, Moody’s upgraded India’s bond ratings, saying that the government has made solid progress in both economic and institutional reform. (See also: India’s Modi Hopes Tax Reform Will Convince US CEOs to Invest.)

The SPDR S&P 500 ETF (ARCA: SPY) fell 0.09% over the past week. After reaching all-time highs near R1 resistance at $259.60 earlier this month, the index moved lower to retest pivot point support at $255.44 this week before rebounding. Traders should watch for a breakout from R1 resistance at $259.60 to trendline resistance or a move lower to trendline support. Looking at technical indicators, the relative strength index (RSI) moderated to neutral levels at 56.67, while the moving average convergence divergence (MACD) remains in a bearish downtrend dating back to earlier this month.

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

The SPDR Dow Jones Industrial Average ETF (ARCA: DIA) fell 0.44% over the past week, making it the worst performing major index. Since reaching all-time highs earlier this month, the index has moved lower to bounce along trendline support. Traders should watch for a rebound to R1 resistance at $237.04 or a breakdown to pivot point support at $230.17. Looking at technical indicators, the RSI is neutral at 57.76, but the MACD remains in a downtrend dating back to earlier this month.

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

The PowerShares QQQ Trust (NASDAQ: QQQ) rose 0.18% over the past week. After moving off of R1 resistance at $154.70 earlier this month, the fund moved higher to retest those levels this week. Traders should watch for a breakout to upper trendline resistance at $156.00 or a move lower to retest trendline support at around $151.00. Looking at technical indicators, the RSI appears a bit lofty at 64.34, but the MACD could be on the verge of a bearish crossover that could signal more downside ahead. (For more, see: Big Tech Stocks Poised to Rise in 2018 on Earnings.)

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

The iShares Russell 2000 Index ETF (ARCA: IWM) rose 1.28% over the past week, making it the best performing major index. After rebounding from S2 support at $145.59, the index rebounded to retest its pivot point at $149.05 this week. Traders should watch for a breakout to trendline and R1 resistance at $150.89 or a move lower to retest S2 support at $145.59. Looking at technical indicators, the RSI appears neutral at 55.22, but the MACD could be on the verge of a bullish crossover after a prolonged downtrend.

 IWM)

The Bottom Line

The major indexes were mixed over the past week, but technical indicators have moved off of overbought levels. Next week, traders will be closely watching many economic indicators, including existing home sales on Nov. 21 and FOMC​ minutes on Nov. 22. The market will also be keeping a close eye on geopolitical events in Germany and the United States that could influence the markets. (For additional reading, check out: US Stocks Poised for 10% Holiday Drop: Raymond James.)

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

Published at Sat, 18 Nov 2017 16:22:00 +0000

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Are Wal-Mart Shares Overbought at Current Levels?

 

Are Wal-Mart Shares Overbought at Current Levels?

By Justin Kuepper | November 17, 2017 — 10:30 AM EST

Wal-Mart Stores, Inc. (WMT​) shares soared more than 10% on Thursday after the company reported better-than-expected third quarter financial results. Revenue rose 4.2% to $123.2 billion – beating consensus estimates by $2.2 billion – and earnings per share of $1.00 beat consensus estimates by three cents per share. Comparable sales increased 2.7% during the quarter compared with consensus estimates calling for just a 1.9% gain.

The most significant developments were in the company’s e-commerce division. Digital sales increased 50%, and gross merchandise volume rose 54% during the quarter. Early analyst reactions have been favorable across the board, and investors are starting to see how the traditional retailer can compete against rising online threats like Amazon.com, Inc. (AMZN​). The fundamental case for Wal-Mart has certainly become a lot stronger. (See also: Wal-Mart Shares Jump on Strong U.S. Sales Growth.)

Technical chart showing the performance of Wal-Mart Stores, Inc. (WMT) stock

From a technical perspective, the stock broke through trendline and R1 resistance levels at $91.78 and R2 resistance levels at $96.25 to new all-time highs. The relative strength index (RSI​) moved into overbought territory with a reading of 81.31, but the moving average convergence divergence (MACD​) experienced a bullish crossover that could suggest a new uptrend. Overall, traders should maintain a bullish bias on the stock.

Traders should watch for some consolidation above R2 support at $96.25 before a further move higher as the RSI moderates to more neutral levels. A breakdown from these levels could lead the stock to retest R1 and trendline support at $91.87, but the favorable third quarter financial results suggest that R2 support should hold. Traders should maintain a bullish bias on Wal-Mart stock over the intermediate term and a neutral outlook over the short term due to consolidation. (For more, check out: Wal-Mart to See Best Year in 3 Decades: Susquehanna.)

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

Published at Fri, 17 Nov 2017 15:30:00 +0000

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Buffalo Wild Wings soars 25% on takeover talk

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5 stunning stats about the fast food industry
5 stunning stats about the fast food industry

 Buffalo Wild Wings soars 25% on takeover talk

  @lamonicabuzz

Fast food chain Arby’s likes to tout in TV ads that it “has the meats.” It’s even introduced venison to the menu. But if Wall Street rumors are to be believed, the company behind Arby’s may soon own a chain famous for something more common — chicken.

Roark Capital, the majority owner of Arby’s, Carl’s Jr and Moe’s Southwest Grill, is reportedly looking to buy Buffalo Wild Wings(BWLD) for $2.3 billion. Shares of the chicken wing and sports bar franchise surged nearly 25% Tuesday on the news.

Spokespeople for Buffalo Wild Wings and Roark Capital, which also has big stakes in Auntie Anne’s, Carvel and Jimmy John’s, were not immediately available for comment.

But Buffalo Wild Wings, known as B-Dubs to its fans, has been struggling due to rising food costs and slumping sales. That could make it vulnerable to a takeover. The stock is still down more than 5% in 2017 — despite Tuesday’s big pop.

Longtime CEO Sally Smith announced in June that she would retire at the end of the year after investors elected three candidates to the company’s board who were backed by activist shareholder firm Marcato Capital. Marcato owns about a 6% stake in Buffalo Wild Wings.

Still, there have been some recent signs of a turnaround at Buffalo Wild Wings.

Shares soared after its most recent earnings report in October. Sales of so-called boneless chicken wings helped boost profits. One of the problems that Buffalo Wild Wings was facing was a spike in the price it paid suppliers for its namesake wings.

By offering cheaper boneless wings, which are really just breast meat cut to look more like wings, Buffalo Wild Wings was able to boost profit margins.

There are still concerns that ratings declines for National Football League games this season are hurting sales though. Papa John’s, the pizza partner of the NFL, has already blamed the National Anthem protests by some players for weak sales.

Same-store sales, which measure the performance at the company’s locations open at least a year, fell 2.3% from a year ago at the company-owned restaurants and were down 3.2% at franchise-run locations.

Buffalo Wild Wings CFO Alexander Ware said during the company’s conference call last month that he expected similar sales declines in the fourth quarter on Thursday nights, Sundays and Monday nights when the NFL plays its games.

So Buffalo Wild Wings may still be a company that, like a defensive back struggling to cover a star wide receiver, gets a lot of penalty flags from Wall Street.

For that reason, several analysts think that Buffalo Wild Wings would be wise to say yes to any deal from Roark.

“We believe Roark’s extensive restaurant experience could aid Buffalo Wild Wing’s turnaround and cash in-hand is difficult to turn down unless investors believe a recovery is already well underway,” said BTIG’s Peter Saleh in a report Tuesday.

Morgan Stanley analyst John Glass added in a report that a deal makes sense since it would give the investors at Marcato a chance to quickly cash in on their investment.

Of course, it remains to be seen whether a takeover actually happens or not.

But a Buffalo Wild Wings acquisition would just be the latest deal in what’s been an incredibly busy year for restaurant mergers. Private equity firms and other investment companies have been hungry for deals.

Oak Hill Capital bought Checkers. Golden Gate Capital ate up Bob Evans Restaurants. And Krispy Kreme owner JAB acquired Panera.

Publicly traded restaurant chains appear eager to grow as well. Burger King parent Restaurant Brands(QSR) scooped up Popeyes Louisiana Kitchen this year while Olive Garden owner Darden(DRI) gobbled up Cheddar’s Scratch Kitchen.

 

Published at Tue, 14 Nov 2017 18:20:54 +0000

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Wall Street heads lower, tax plan doubts weigh

 

Wall Street heads lower, tax plan doubts weigh

(Reuters) – Wall Street was set to open marginally lower on Tuesday as worries about Republican tax plans and the economy’s ability to deal with more rises in interest rates weighed on the mood among investors.

Shares in Home Depot held steady while those in off-price retailer TJX dipped after quarterly reports that bore the impact of a violent U.S. hurricane season.

Buffalo Wild Wings surged 26 percent after a report that the restaurant chain had received a takeover bid at about $2.3 billion from private equity Roark Capital Group.

With the quarterly earnings season winding down, the market has halted after its rally to record highs last week.

Investors were waiting for any signs of compromise on U.S. tax policy after Senate Republicans unveiled a plan last week that would cut corporate taxes a year later than a rival House of Representatives’ bill.

“You’re at the end of the earnings season, economic data is all distorted because of the hurricanes, I don’t think there is going to be any clear picture until we get a firm yes or no for the tax bill,” Scott Brown, chief economist at Raymond James in St. Petersburg, Florida.

“We’ll see a bit of back-and-forth, the market’s got to breathe.”

At 8:32 a.m. ET, Dow e-minis were down 38 points, or 0.16 percent, with 27,263 contracts changing hands.

S&P 500 e-minis were down 5 points, or 0.19 percent, with 176,095 contracts traded.

Nasdaq 100 e-minis were down 5.25 points, or 0.08 percent, on volume of 29,520 contracts.

A Labor Department report showed producer prices increased 0.4 percent in October, after similar gains in September. Economists polled by Reuters had a expected a 0.1 percent rise.

In the 12 months through October, the producer price index jumped 2.8 percent, the largest rise since February 2012.

St. Louis Fed President James Bullard said on Tuesday the Fed should keep its benchmark interest rate at current levels until there is an upswing in inflation.

Investors are concerned that a tightening gap between short and long-term U.S. government bond yields suggests the Federal Reserve may be in danger of hiking rates too much and killing longer term inflation and growth.

Reporting by Sruthi Shankar in Bengaluru; Editing by Anil D’Silva

 

Published at Tue, 14 Nov 2017 14:01:48 +0000

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Buy Kohl’s Ahead of Holiday Season: Baird Upgrades

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Buy Kohl’s Ahead of Holiday Season: Baird Upgrades

By Shoshanna Delventhal | November 13, 2017 — 6:44 PM EST

Shares of department store chain Kohl’s Corp. (KSS) spiked last week on a bullish note from a team of analysts on the Street who see the company as well positioned for the upcoming holiday season. While the retailer initially sank Thursday after posting mixed earnings results in the the third quarter, Baird thinks the stock is a buy thanks to an improving product portfolio and strong loyalty position. (See also: Amazon Could Take $60B in Apparel Retail: Fitch.)

In Q3, Kohl’s reported a slight revenue surprise, indicating that store traffic and sales picked up in late October after a lull in September. Chief Executive Officer Kevin Mansell attributed a gross margin decline to higher shipping costs associated with a boost in online orders, stating that he is “super confident” that the company is set up for a strong year-end finish.

Encouraging Numbers

Following the earnings report, Baird analyst Mark Altschwager upgraded KSS to outperform from neutral. With a price target of $47, he expects the retail stock to gain about 12.6% over the next 12 months.

Cost savings and inventory reduction initiatives should provide strong near-term visibility into KSS’s free cash flow, according to Altschwager. The analyst noted that even if his thesis is wrong, he still views the stock as favorable due to its 5% or higher dividend yield, buybacks and takeout speculation protecting downside. “Looking ahead, we believe a more pragmatic growth outlook from management, aggressive actions on the cost front, and momentum with traffic and omnichannel initiatives result in better risk/reward for shares,” added the Baird analyst.

Trading down 4.6% on Tuesday at $41.08, KSS reflects an approximate 12.1% decline year-to-date (YTD) versus the S&P 500’s 15.5% increase over the same period. (See also: Kohl’s Dips as New Partner Under Armour Prospers.)

 

Published at Mon, 13 Nov 2017 23:44:00 +0000

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GE’s Shrinking Cash Flow Signals Stock’s Tragic Decline

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The ticker and logo for General Electric Co. is displayed on a screen at the post where it’s traded on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., June 30, 2016. REUTERS/Brendan McDermid

GE’s Shrinking Cash Flow Signals Stock’s Tragic Decline

By Mark Kolakowski | November 9, 2017 — 1:30 PM EST

New CEO John Flannery of embattled General Electric Co. (GE) is expected to announce a significant cut to the company’s robust 4.8% dividend, Barron’s reports. This announcement may come either at a major presentation to shareholders scheduled for Monday, November 13, or sometime in advance of that meeting. In any case, investors who focus on free cash flow rather than earnings already are anticipating this move.

The very thought that GE plans cut its dividend is symbolic of the tragic decline of what, once, was one of America’s greatest corporations, founded by legendary inventor Thomas Edison. GE also is the only stock to remain in the Dow Jones Industrial Average (DJIA) from its inception in 1896 to today. But after outperforming the market for much of the 1980s and 1990s, GE’s stock has fallen by nearly two-thirds from its 2000 highs as the conglomerate struggles to restructure. During that period, the stock market soared and left GE’s shares behind.

While there have been many signs of GE’s decline, an often overlooked one on Wall Street is GE’s worsening cash flow.

Watch Cash Flow

In 1975, publisher Herbert S. Bailey wrote a parody of Edgar Allan Poe’s famed poem, “The Raven,” entitling his effort “Quoth the Banker, ‘Watch Cash Flow.'” It soon became required reading in many business school accounting and finance courses. The point is that businesses must pay their operating expenses, their creditors, and their dividends in the form of real, hard cash. The upshot of various accounting conventions is that reported earnings do not necessarily equal the net cash generated by the business in the same period of time. Earnings according to Generally Accepted Accounting Principles (GAAP) may be higher or lower. In the case of GE, earnings are paltry, and free cash flow has been negative in recent quarters.

Operating cash flow represents the cash produced by a company’s normal business operations. Deduct capital expenditures, and the result is free cash flow. Free cash flow, in turn, finances the payment of interest and principal to creditors, and dividends to shareholders. If free cash flow is insufficient, the company must draw down cash holdings, borrow, or issue more stock to make up the deficit. GE is in such a deficit position.

Source: Barron’s

GE’s Cash Crunch

For a detailed look at GE’s cash flow problem, statements provided by Morningstar Inc. are instructive. During the most recent trailing twelve months (TTM), GE generated operating cash flow of $5.147 billion and spent $7.161 billion on capital investments, leaving it with a deficit of $2.014 billion in free cash flow. By contrast, net income available to common shareholders was a positive $7.089 billion, also per Morningstar.

Meanwhile, the company spent $26.686 billion on debt service, and $8.612 billion on dividends. This increased the total cash flow deficit to $37.312 billion. How did the company fill this yawning gap?

GE raised $9.651 from new issues of debt, drew down its cash balances by $15.096 billion (a 27% reduction), and produced the remaining $12.565 billion through a variety of investing and financing activities, including the sale of assets. CEO Flannery has announced that he plans to sell an additional $20 billion of assets in the next year or two, per Reuters.

While slashing the dividend is an obvious and necessary move to address the cash flow gap, this alone is insufficient to fix problem, as Cowen Inc. (COWN) indicates in a research note quoted in another Barron’s article. Curtailing capital investments, for example, may jeopardize future growth. GE’s problems also may stem from the fact, that the company may not be investing wisely, as noted below. (For more, see also: How Stock Investors Can Profit Big From Spinoffs.)

Competing Irrationally

GE is a complex industrial and financial conglomerate with a crazy quilt of transactions between divisions, adding to the difficulty of analyzing its various businesses, according to Stephen Tusa, an analyst with JPMorgan Chase & Co. (JPM), as interviewed by Barron’s. Meanwhile, the industrial side of GE generates a significant portion of its revenue from long-term contracts. Under various accounting conventions, such as the percentage of completion method, the company recognizes revenue either before or after cash payments actually are received from the customer. The ongoing cash flow deficit relative to earnings suggests that accounting conventions are driving the recognition of revenue, on balance, before cash is being received.

Worse yet, Tusa says, GE “is competing irrationally, giving away content and terms that underprice the risk,” per Barron’s. The company enters into many complex contracts involving the sale of both equipment and services, and often with durations of 18 to 24 months, Tusa indicates. Based on his analysis, they tend to bid aggressively on these contracts, underestimating the costs, and thus forcing writeoffs down the road. “That’s a big reason their cash flow has been so weak relative to their earnings,” he tells Barron’s. Additionally, Tusa suggests that “they are making capital allocation decisions with bad or optimistic data.”

The Takeaway

“The best companies in my sector reinvest excess free cash into acquisitions to drive growth,” Tusa comments to Barron’s. Meanwhile, GE is forced to do the opposite, selling off businesses to raise cash. “If you’re not generating free cash, there’s a lack of resources for that,” he continues. The result: “lower growth and lower-quality earnings,” Tusa concludes. (For more, see also: 9 Stocks Outperforming by Investing in Growth: Goldman.)

 

Published at Thu, 09 Nov 2017 18:30:00 +0000

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Nvidia Stock Goes Parabolic Into the Gaming Cloud

Nvidia Stock Goes Parabolic Into the Gaming Cloud

By Richard Suttmeier | November 9, 2017 — 8:45 AM EST

If you want to own Nvidia Corporation (NVDA​), you need to know how trade a momentum stock. A momentum stock typically has an elevated P/E ratio, a paltry dividend yield and extremely overbought momentum (12 x 3 x 3 weekly slow stochastic).

Nvidia stock closed Wednesday at $209.16, up 96% year to date and in bull market territory at 213.3% above its post-election low of $66.76 set on Nov. 16, 2016. The stock set its all-time intraday high of $212.90 on Nov. 7. Here’s my analysis and recommended exit strategy given the stock’s strong but parabolic technical momentum. (See also: Why Nvidia’s Stock Faces a Growth Crisis.)

Nvidia is the third largest component of the iShares PHLX Semiconductor ETF (SOXX​), which has 30 components and mirrors the Philadelphia Semiconductor Index (SOX). The SOX has been the strongest group of stocks so far in 2017, with a gain of 45.7% year to date, but the index is experiencing an “inflating parabolic bubble” that is approaching its March 2000 all-time high of 1,362.10. The momentum reading for the SOX is 97.16 on a scale of 0 to 100, where the overbought threshold is 80, and a reading above 90 indicates an “inflating parabolic bubble.”

Analysts expect Nvidia to post earnings per share between 94 cents and $1.02 when the company reports results after the closing bell on Thursday. Value buyers have no interest in this stock, as its P/E ratio is 60.50 with a dividend yield of just 0.27%. Nvidia provides computer chips for gaming and artificial intelligence applications, which is all the rage these days. The company is well positioned for growth, so traders should look for guidance in the self-driving and machine learning applications, as well as growth in Nvidia’s data center business.

The weekly chart for Nvidia

Technical chart showing the performance of Nvidia Corporation (NVDA) stock

Courtesy of MetaStock Xenith

The weekly chart for Nvidia is positive but extremely overbought, with the stock above its five-week modified moving average of $193.62. The 12 x 3 x 3 weekly slow stochastic reading is projected to rise to 92.89 this week, up from 90.87 on Nov. 3, well above the overbought threshold of 80 and well above 90, which I consider an indication that the stock’s price action is an “inflating parabolic bubble.”

If you are long a stock that appears to be in an inflating bubble, you should always have an exit strategy. My choice is to use a weekly close below the five-week modified moving average as the sell-stop trigger. This average will be rising each week as the stock continues to trade higher.

Given this chart, my trading strategy is to buy weakness to my quarterly and semiannual value level of $175.77 and $129.45, respectively, and to reduce holdings on strength to my monthly and weekly risky levels of $215.52 and $220.73, respectively. (For additional reading, check out: Artificial Intelligence to Drive Nvidia’s Q3 Earnings.)

 

Published at Thu, 09 Nov 2017 13:45:00 +0000

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Asia stocks pause at peaks, ponder U.S. tax muddle

A man looks at a stock quotation board outside a brokerage in Tokyo, Japan, April 18, 2016. REUTERS/Toru Hanai

Asia stocks pause at peaks, ponder U.S. tax muddle

SYDNEY (Reuters) – Asian shares paused at decade peaks and the dollar dipped on Wednesday amid concerns Republican plans for major U.S. tax cuts were running into headwinds even before the Senate releases its own version of the proposals.

A man walks past an electronic stock quotation board outside a brokerage in Tokyo, Japan, September 22, 2017. REUTERS/Toru Hanai

Investors were also keeping a wary eye on Saudi Arabia’s sweeping anti-graft purge and an escalation of tensions with Iran, though oil prices did ease from their highs.

Dealers said EMini futures for the S&P 500 ESc1 slipped 0.2 percent on a report by the Washington Post that Senate Republican leaders were considering a one-year delay in the implementation of a corporate tax cut, a centerpiece of the House plan.

MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS eased 0.05 percent having hit its highest since November 2007 on Tuesday.

Japan’s Nikkei .N225 fell 0.4 percent, though that followed a jump to its best close since 1992.

The main event in Asia will be Chinese trade figures for October which will give a read on the state of global trade and on whether Chinese demand for commodities is holding up.

China’s exports are seen rising 7.2 percent on a year ago, with imports up a solid 16 percent.

Investors will also keep an eye on President Donald Trump as he wraps up his visit to Seoul on Wednesday and then head to China, where he is expected to press a reluctant President Xi Jinping to tighten the screws further on Pyongyang over the reclusive state’s belligerent pursuit of nuclear weapons.

In the currency market, trading was described as a “random walk” by analysts at Citi with no clear trends to follow.

The dollar was a slim 0.1 percent lower at 94.826 .DXY against a basket of currencies, having again failed to clear resistance around 95.150.

It was 0.2 percent lower on the yen at 113.76 JPY=, but well within the 112.96/114.74 range of the past 12 sessions.

The euro touched a four-month trough at $1.1552 overnight in the wake of disappointing German industrial data, but quickly steadied in Asia to around $1.1597 EUR=.

Wall Street had taken a breather on Tuesday after again making record peaks. The Dow .DJI ended up 0.04 percent, while the S&P 500 .SPX lost 0.02 percent and the Nasdaq .IXIC 0.27 percent.

The S&P 500 financial index .SPSY led decliners with a 1.33 percent fall, in part on concerns a flattening yield curve would crimp profits at banks that borrow short to lend long.

The U.S. yield curve has flattened sharply in the last couple of weeks, with the gap between two- and 10-year yields shrinking to just 68 basis points, the smallest since 2007.

The move largely reflects wagers the Fed is determined to hike in December, pushing up short-term yields. Such a move was likely to ensure inflation stays lower for longer, thus pulling down longer-dated yields and flattening the curve.

Flatter curves are sometimes harbingers of slower economic growth, but can also signal excessive risk taking as investors lend for longer and longer in search of better returns.

Oil markets were dominated by Saudi Crown Prince Mohammed bin Salman’s move to shore up his power base with the arrest of royals, ministers and investors, which an official described as part of “phase one” of a crackdown.

Tensions also escalated between OPEC members Saudi Arabia and Iran, which analysts said did more to rattle the oil market than the prince’s purge.

After reaching a two-and-a-half year top on Monday, Brent crude futures LCOc1 had pulled back a touch to $63.69 a barrel. U.S. crude CLc1 was off 14 cents at $57.06.

Editing by Shri Navaratnam

Our Standards:The Thomson Reuters Trust Principles.

 

Published at Wed, 08 Nov 2017 01:08:26 +0000

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