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Facebook’s rise in profits, users shows resilience after scandals

Facebook’s rise in profits, users shows resilience after scandals

(Reuters) – Facebook Inc (FB.O) shares rose on Wednesday after the social network reported a surprisingly strong 63 percent rise in profit and an increase in users, with no sign that business was hurt by a scandal over the mishandling of personal data.

After easily beating Wall Street expectations, shares traded up 7.1 percent after the bell at $171, paring a month-long decline that began with Facebook’s disclosure in March that consultancy Cambridge Analytica had harvested data belonging to millions of users.

The Cambridge Analytica scandal, affecting up to 87 million users and prompting several apologies from Chief Executive Mark Zuckerberg, generated calls for regulation and for users to leave the social network, but there was no indication advertisers immediately changed their spending.

“Everybody keeps talking about how bad things are for Facebook, but this earnings report to me is very positive, and reiterates that Facebook is fine, and they’ll get through this,” said Daniel Morgan, senior portfolio manager at Synovus Trust Company. His firm holds about 73,000 shares in Facebook.

Facebook’s quarterly profit beat analysts’ estimates, as a 49 percent jump in quarterly revenue outpaced a 39 percent rise in expenses from a year earlier. The mobile ad business grew on a push to add more video content.

Facebook said monthly active users in the first quarter rose to 2.2 billion, up 13 percent from a year earlier and matching expectations, according to Thomson Reuters I/B/E/S.

The company reversed last quarter’s decline in the number of daily active users in the United States and Canada, saying it had 185 million users there, up from 184 million in the fourth quarter.

The results are a bright spot for the world’s largest social network amid months of negative headlines about the company’s handling of personal information, its role in elections and its fueling of violence in developing countries.

Facebook, which generates revenue primarily by selling advertising personalized to its users, has demonstrated for several quarters how resilient its business model can be as long as users keep coming back to scroll through its News Feed and watch its videos.

It is spending to ensure users are not scared away by scandals. Chief Financial Officer David Wehner told analysts on a call that expenses this year would grow between 50 percent and 60 percent, up from a prior range of 45 percent to 60 percent.

Much of Facebook’s ramp-up in spending is for safety and security, Wehner said. The category includes efforts to root out fake accounts, scrub hate speech and take down violent videos.

Facebook said it ended the first quarter with 27,742 employees, up 48 percent from a year earlier.

 

“So long as profits continue to grow at a rapid rate, investors will accept that higher spending to ensure privacy is warranted,” Wedbush Securities analyst Michael Pachter said.

It has been nearly two years since Facebook shares rose 7 percent or more during a trading day. They rose 7.2 percent on April 28, 2016, the day after another first-quarter earnings report.

Net income attributable to Facebook shareholders rose in the first quarter to $4.99 billion, or $1.69 per share, from $3.06 billion, or $1.04 per share, a year earlier.

Analysts on average were expecting a profit of $1.35 per share, according to Thomson Reuters I/B/E/S.

Total revenue was $11.97 billion, above the analyst estimate of $11.41 billion.

The company declined to provide some details sought by analysts. It has not shared the revenue generated by Instagram, the photo-sharing app it owns, and it declined to provide details about time spent on Facebook. Facebook also owns the popular smartphone apps Messenger and WhatsApp.

Tighter regulation could make Facebook’s ads less lucrative by reducing the kinds of data it can use to personalize and target ads to users, although Facebook’s size means it could also be well positioned to cope with regulations.

Facebook and Alphabet Inc’s (GOOGL.O) Google together dominate the internet ad business worldwide. Facebook is expected to take 18 percent of global digital ad revenue this year, compared with Google’s 31 percent, according to research firm eMarketer.

The company said it was increasing the amount of money authorized to repurchase shares by an additional $9 billion. It had initially authorized repurchases up to $6 billion.

Facebook shares closed at $185.09 on March 16, the day that the Cambridge Analytica scandal broke after the bell on a Friday. In the days immediately afterward, the company lost more than $50 billion in market value.

The Cambridge Analytica scandal, which has sparked government investigations globally, was mentioned only once on an hour-long conference call between analysts and Facebook management, when one analyst asked Zuckerberg what he learned from testifying in U.S. congressional hearings.

Zuckerberg said the two days of hearings this month were “an important moment for the company to hear the feedback, and to show what we’re doing.”

Reporting by David Ingram in San Francisco and Munsif Vengattil in Bengaluru; Editing by Lisa Shumaker

Published at Thu, 26 Apr 2018 03:27:08 +0000

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Global banks fear China

Global banks fear China

HONG KONG/SHANGHAI (Reuters) – Western banks are seeking clarification from China’s securities watchdog on proposals to allow them to take over their onshore securities ventures, amid concerns about high asset value requirements and limits to ownership by non-financial investors.

 Giving foreign financial firms a controlling stake in their China securities joint ventures is a key part of China’s pledge to ease foreign ownership curbs, especially in the country’s trillion-dollar financial sector.

But draft rules released for consultation last month by the China Securities Regulatory Commission (CSRC) could have the opposite effect and stymie broadening participation, people with knowledge of the matter warned.

Under the proposed rules, controlling shareholders must have a net asset value (NAV) of at least 100 billion yuan ($16 billion), and non-financial Chinese investors would be limited to a one-third shareholding.

If the NAV rule applied to the Western banks’ local units, as opposed to the global entity, most international banks would be ruled out.

Bankers are rushing to submit requests for clarification of the rules by Sunday, when the consultation period closes.

Lyndon Chao, head of equities at the Asia Securities Industry and Financial Markets Association (ASIFMA), which represents global banks in Asia, said that while China had opened the door to foreign capital it appeared to be reluctant to welcome overseas securities firms.

“(The door) welcoming foreign securities firms to enter China onshore on a level playing field appears less open than what we had originally thought, based on the second consultation and the net asset value requirement for firms seeking majority ownership,” he said.

Bankers are unhappy too with the one-third limit on non-financial Chinese investors, which means that if a Western bank linked up with such an investor, it would still need to find another partner for the remaining 16 percent.

“That doesn’t fly with the spirit of what was intended based on the comments from different Chinese regulators,” said one person with knowledge of the proposed rule changes. “Three may be a crowd.”

The people who spoke to Reuters declined to be named due to sensitivity of the issue. They said the final rules, expected to be announced by end June, could change to reflect their concerns.

CSRC did not immediately respond to a Reuters request for comment.

China surprised bankers and lobbyists in November when it said foreign investment banks could raise stakes to 51 percent in their securities joint ventures, which offer underwriting and trading services, from a 49 percent cap.

Banks including Goldman Sachs (GS.N), Morgan Stanley (MS.N) and UBS (UBSG.S) run joint ventures with varying degrees of operational control but all have pushed for majority ownership. In 2016, a lack of control was a factor in JPMorgan’s (JPM.N) decision to sell out of its joint venture.

($1 = 6.3125 Chinese yuan renminbi)

Reporting by Sumeet Chatterjee and Engen Tham; Editing by Jennifer Hughes and Stephen Coates

Published at Wed, 25 Apr 2018 10:09:37 +0000

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Billionaire investor: It’s time to short Facebook

Zuckerberg says his personal data was shared
Zuckerberg says his personal data was shared

Billionaire investor: It’s time to short Facebook

Jeff Gundlach, the billionaire investor, isn’t buying Mark Zuckerberg’s apology tour.

Gundlach, known as the king of the bond market, urged investors to bet against Facebook(FB) stock because of the risk that the company’s user data crisis will trigger a government crackdown.

“Equity bubbles get popped by regulation,” he said on Monday at the Sohn Investment Conference in New York.

Gundlach, the chief investment officer of DoubleLine Capital, pointed to how tobacco and biotech stocks “tanked” following increased regulation in those industries.

“What’s happened in the past will happen again and again and again,” Gundlach said.

Facebook(FB) shares turned negative for the day after he spoke. The stock has lost about 10% since the scandal erupted last month.

That selling pressure eased when Zuckerberg navigated questions from nearly 100 lawmakers during 10 hours of hearings this month. They quizzed him about how Cambridge Analytica, a data firm with ties to President Trump’s campaign, improperly accessed the data of tens of millions of users.

Zuckerberg mostly got high marks for his performance. But Gundlach pointed to quotes that he said suggested Zuckerberg was dodging responsibility.

For instance, he noted that Zuckerberg told CNN’s Laurie Segall last month: “I’m really sorry that this happened.” And Zuckerberg told Congress: “It was my mistake and I’m sorry.”

Gundlach said to laughter: “What’s ‘it’? Sounds like Bill Clinton. ‘It depends on what the meaning of “is” is.'”

Facebook bulls argue that its lucrative advertising business is supported by its 2.2 billion monthly active users.

“When I hear that,” Gundlach said, “I hear 2.2 billion compliance breaches.”

Facebook has promised to alert everyone whose data was accessed by Cambridge Analytica, create safeguards and hire thousands more employees to prevent a repeat.

Gundlach urged investors to pair the short Facebook trade with a bullish bet on oil drilling companies. Specifically, he endorsed the SPDR S&P Oil and Gas Exploration ETF(XOP), which he said is “looking really good.”

The price of crude oil has surged because of production cuts by OPEC and Russia, conflicts in the Middle East and concerns about President Trump’s threats to reinstall sanctions on Iran.

But while crude has jumped 14% this year, to the highest price since late 2014, energy stocks have lagged. The ETF that Gundlach likes is only up 5%.

Gundlach is betting that will change. He warned that inflation tends to rise before economic downturns.

“As the next recession approaches, commodities should have a big gain,” Gundlach said.

Gundlach was speaking to financial professionals who paid $5,000 to hear the best ideas from superstar investors. The event raised more than $3 million to treat and cure pediatric cancer.

Published at Mon, 23 Apr 2018 20:12:28 +0000

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Verizon Is a Cheap Stock With a 5% Dividend

Verizon Is a Cheap Stock With a 5% Dividend

By Richard Suttmeier | April 23, 2018 — 9:17 AM EDT

Telecommunications giant Verizon Communications Inc. (VZ) is a component of the Dow Jones Industrial Average. This stock is the cheapest among the 30 stocks in the average, with a P/E ratio of just 6.51 and a dividend yield of 5%, making it the leader of the 2018 “Dogs of the Dow.” Verizon Wireless is one of the top smartphone platforms in the country. The company is set to report earnings before the open on April 24.

Verizon stock closed Friday at $47.90, down 9.5% year to date and in correction territory at 12.5% below its 2018 high of $54.77 set on Jan. 26. The stock set its 2018 low of $46.20 on March 23. The stock is underperforming the Dow 30, which is down 1% year to date and is 8.1% below its all-time high set on Jan. 26.

Analysts expect Verizon to post earnings per share of $1.11 when it reports first quarter results on Wednesday. Investors will have a watchful eye on the revenue line as Verizon missed estimates on this metric in the fourth quarter. One key will be revenues from wireless services, which rose in the third and fourth quarters. Verizon owns AOL and Yahoo, which could increase growth potential, as might the roll-out of 5G services. (See also: How Verizon Built a Customer Base of 150M.)

The daily chart for Verizon  

Daily technical chart showing the performance of Verizon Communications Inc. (VZ) stockCourtesy of MetaStock Xenith

Verizon is below its 50-day and 200-day simple moving averages at $48.30 and $48.78, respectively, but weakness to $46.20 on March 23 lines up with my second quarter value level of $46.51. The stock has been below my semiannual pivot of $50.48 since Feb. 8. These two levels are shown as horizontal lines on the daily chart.

The weekly chart for Verizon

Weekly technical chart showing the performance of Verizon Communications Inc. (VZ) stockCourtesy of MetaStock Xenith

The weekly chart for Verizon is negative but oversold, with the stock below its five-week modified moving average at $48.27. The stock is also below its 200-week simple moving average, or “reversion to the mean,” at $49.07, which has been tested nearly each week since the week of Feb. 9. The 12x3x3 weekly slow stochastic reading ended last week at 16.97 and has been below the oversold threshold of 20.00 since the week of March 30.

Trading strategy: Buy weakness to my quarterly value level of $46.51 and reduce holdings on strength to my semiannual and monthly risky levels of $50.48 and $50.84, respectively. (For more, see: Verizon’s Stock Breakout May Lead to 12% Gain.)

Published at Mon, 23 Apr 2018 13:17:00 +0000

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Qualcomm is laying off more than 1,500 people

 

Kudlow on what a trade war looks like: 'I don't know. You tell me.'
Kudlow on what a trade war looks like: ‘I don’t know. You tell me.’

Qualcomm is laying off more than 1,500 people

Qualcomm is axing more than 1,500 jobs across California and an undisclosed number in other parts of the United States and around the world.

The San Diego-based chipmaker says the cuts are part of a $1 billion cost-reduction plan that it announced in January.

A company spokesperson said the layoffs include full- and part-time employees. Documents filed with California’s Employment Development Department identify 289 layoffs in San Jose and 1,231 in San Diego.

“We concluded that a workforce reduction is needed to support long-term growth and success, which will ultimately benefit all our stakeholders,” the spokesperson said in a statement.

Qualcomm(QCOM) declined to say how many people it currently employs or how many people it’s laying off outside California. It had 33,800 employees worldwide as of September, according to its website.

Related: China is holding up a $44 billion US tech deal

The chipmaker, whose technology is widely used by smartphone makers, was recently the subject of a $117 billion bid from its rival Broadcom(AVGO).

But Broadcom officially gave up on the attempted takeover last month, days after President Donald Trump blocked the deal over national security concerns. His administration said it was concerned the takeover would hinder Qualcomm’s 5G research and development and also delay the deployment of a 5G wireless network in the United States, giving Chinese competitors an advantage.

Qualcomm is facing difficulties related to China at a time of escalating trade tensions between Beijing and Washington.

The Chinese government is holding up Qualcomm’s proposed $44 billion takeover of NXP Semiconductors(NXPI), citing antitrust issues. On Thursday, Qualcomm and NXP announced they would extend the deadline for completing the deal to July 25.

Earlier this week, the US government banned Chinese tech company ZTE from buying technology from American companies for seven years. ZTE is a major Qualcomm customer that uses the US firm’s chips in its smartphones.

Published at Fri, 20 Apr 2018 02:35:27 +0000

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Airline Bounce Unlikely to Gain Traction

Airline Bounce Unlikely to Gain Traction

By Alan Farley | April 19, 2018 — 10:05 AM EDT

 United Continental Holdings, Inc. (UAL) led a broad recovery rally on Wednesday, lifting nearly 5% to a five-week high after beating first quarter earnings estimates by nine cents and raising the low end of fiscal year 2018 guidance. The carrier triggered a major sector decline in January when it told analysts that it would increase capacity 4% to 6% per year for the next three years, raising fears of an industry price war.

Rival American Airlines Group Inc. (AAL) rose over 4% but could lose ground after next week’s earnings because United’s plans could affect 2018 growth and profits. However, ticket prices have been rising so far in 2018, and there are few signs of airline overcapacity in the strong economic environment. Delta Air Lines, Inc. (DAL) reinforced that theme earlier this week, also meeting estimates and confirming guidance. (See also: Airline Stocks Are a Cheap Buy: Bernstein.)

United Continental Holdings, Inc. (UAL) shares topped out in the low $70s in February 2015 after a multi-year uptrend and sold off in a multi-wave correction that found support in the low $40s in June 2016. The stock completed a round trip into the prior high six months later and stalled out, grinding sideways into a May 2017 breakout. That rally failed immediately, trapping bulls in a steep decline that ended in the mid-$50s in the fourth quarter.

The stock turned higher once again in November, but the uptick ended with a high-volume gap at the .786 Fibonacci sell-off retracement level in January 2018, right after the capacity announcement. It ground sideways into April, failing to fill the gap while investors awaited this week’s earnings report. The post-news rally reached within 1.5 points of the big hole, which will take considerable buying power to mount.

On-balance volume (OBV) topped out at the 2010 high in 2014, well ahead of the 2015 top, and lost ground into the middle of June 2016. It surged higher into February 2017, stalled once again at resistance and dropped like a rock into September. Buying power since that time has failed to pierce the midpoint of the 2017 swoon, indicating weak institutional sponsorship that lowers the odds for a 2018 breakout.

[Learn more about Fibonacci retracements in Chapter 6 of the Technical Analysis course on the Investopedia Academy]

American Airlines Group Inc. (AAL) adopted U.S. Air’s long-term chart following the 2012 merger. The stock topped out in the mid-$50s in January 2015 and entered a decline that hit a two-year low in the mid-teens in June 2016. The subsequent recovery wave made quick progress up to $50 and eased into a shallow rising channel that took more than a year to reach resistance at the prior high.

A January 2018 breakout failed in less than two weeks, triggering a gap between $55.50 and $57.50. The subsequent decline found support in the mid-$40s in February, triggering a bounce that stalled after filling the gap. The stock sold off into April, cutting through the first quarter low before bouncing this week at November 2017 support near $45. It is now trading well below the 200-day exponential moving average (EMA) but is still holding channel support, offering bulls an opportunity to gain ground into next week’s earnings report.

OBV topped out in March 2015 after a vertical burst and ground sideways into the middle of 2016, despite the 30-point sell-off. It has been stuck in an oscillating pattern since that time, with alternative waves of bull and bear power. The last buying wave fizzled out below the 2017 peak in January 2018, while this week’s rally impulse has barely moved the indicator, suggesting that it will take a major bullish catalyst to generate a new uptrend. (For more, see: 4 Oversold Stocks Poised to Soar on Earnings.)

The Bottom Line

United Continental and American Airlines have failed to break out above 2015 resistance, despite the historic bull market, and the stocks offer little value to buyers at this time. (For additional reading, check out: Why Airlines Aren’t Profitable.)

Published at Thu, 19 Apr 2018 14:05:00 +0000

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The Big Face Off

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By geralt from Pixabay

The Big Face Off

by The MoleApril 17, 2018

The bulls are getting more energized now with hopes that the worst for this year is now behind us. But the big face off is still looming ahead and if a major punch burning the shorts is to happen then it better happen now, this week:

As you may remember from previous posts, week #15 statistically is the most bullish week of the year – by far I may add. But wait there is more:

Weekly SKEW suggests that this upside bias is in fact NOT due to outliers as this week’s reading is near the zero mark.

Which is why the weekly % positive panel also shows us the highest reading of the year – a whopping 80%!

Now it’s Tuesday morning and we’ve got another four session to go until we close the books on this week. When I referred to the big face off in my intro then it was due to the support zone that’s been developing on the VIX over the past few months.

A drop to the 15 mark and perhaps a bit below is where the bears will be looking at a take down. Or we once again run out of buyers, whatever happens first 😉

Either way I’ll be collecting 1R here from last week’s speculative entry as my trail has now been lifted to near 2670.

On the crypto side things have been looking a bit iffy yesterday but so far so good as BTC has returned to our entry range with hourly Bollingers now being massively pinched. A resolution here should be swift and forceful. Nothing to do until then.

Gold isn’t looking so stellar unfortunately as it appears that we’re in for more chop chop chop…

Silver fortunately seems to be the most bullish in the sector as it looked like we had lift off yesterday but then reverted to our entry zone. Nothing has changed here frankly and I would be taking this entry today had I not done so yesterday.

Published at Tue, 17 Apr 2018 10:05:23 +0000

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Caterpillar Stock Sets Off Buying Signals

Caterpillar Stock Sets Off Buying Signals

 By Alan Farley | April 18, 2018 — 10:26 AM EDT

Dow component Caterpillar Inc. (CAT) has broken out above a three-month trendline and could challenge January’s bull market high in the coming weeks. The most reliable entry in this technical scenario may come on a pullback to new support near $150 rather than jumping in blindly, hoping momentum carries the position into a profit. As a result, a review of key price levels could be useful in getting the most advantageous trade execution.

This cyclical security has performed poorly so far in 2018, losing more than 2% since the first trading day of January, with the political drumbeat of tariffs and trade wars capable of derailing an impressive multi-year growth track. It rose nearly 70% in 2017, marking the strong annual performance since the heavy equipment giant dug out of a deep hole following last decade’s bear market.

A stronger trend move might need to wait until April 24, when the company is expected to report fiscal third quarter earnings per share of $2.09 on $12.1 billion in revenue. The full-year outlook could have a greater impact on price action than quarterly metrics, with executives forced to comment on the company’s massive China footprint and the potential impact of a trade war. (See also: Will Caterpillar Stock Break Down From Descending Triangle?)

CAT Long-Term Chart (1993 – 2018)

The stock cleared 1987 resistance at $9.34 in 1993 and entered a powerful uptrend that continued into 1997, when it topped out in the lower $30s. The 1998 and 1999 breakout attempts failed, generating a steep downtrend that found support at $14.50 in the third quarter of 2000. That marked the lowest low for the next 17 years, ahead of a steady uptick that generated strong buying momentum through the middle of the decade.

The rally stalled in the lower $80s in 2006, giving way to a triple top pattern that broke to the downside in September 2008. The stock lost two-thirds of its value in the next six months, coming to rest near $20 in March 2009. It took just 20 months for the subsequent recovery to reach the prior high, triggering a breakout that topped out above $116 in 2011. Price action then entered a long period of sub-par performance, grinding sideways to lower for the next five years.

The January 2016 low marked a historic buying opportunity, with the subsequent uptrend breaking out above 2011 resistance in September 2017. It posted exceptional gains into January 2018, hitting an all-time high at $173.24 and turning sharply lower with the broad market, which got spooked by tariff and trade fears. The April 4 low at $138.05 tested the 200-day exponential moving average (EMA), raising the odds that the intermediate correction has now come to an end.

CAT Short-Term Chart (2017 – 2018)

The sequence of lower highs since January has carved a trendline with resistance now aligned at the 50-day EMA near $150. The stock broke out above that level earlier this week and traded up to $155.54 in Tuesday’s session. Short-term overbought signals are now going off, suggesting that the rally wave will fizzle out and generate a pullback that tests new support. That technical event could offer an excellent entry, ahead of a trip back to the January high in the $170s.

On-balance volume (OBV) topped out in 2011 and entered a brutal distribution wave that continued to post lower lows into the start of 2016. Buying pressure since that time has been impressive, but the indicator still hasn’t reached the prior high. It topped out once again in January 2018 but bottomed out quickly, with committed buyers returning after the deep slide through $140 earlier this month. This reversal bodes well for bullish action in coming weeks. (For more, see: Caterpillar: 6 Things You May Not Know.)

The Bottom Line

Caterpillar has mounted a three-month trendline, establishing new support at $150 that could offer a low-risk buying opportunity during a pullback. (For additional reading, check out: 9 High-Return Stocks for a Shaky Market: Goldman.)

Published at Wed, 18 Apr 2018 14:26:00 +0000

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American Express Could Face ‘Death Cross’ on Negative Earnings

American Express Could Face ‘Death Cross’ on Negative Earnings

By Richard Suttmeier | Updated April 18, 2018 — 8:59 AM EDT

American Express Company (AXP) is a financial services giant and a component of the Dow Jones Industrial Average. The company offers credit cards, charge cards and travelers’ cheques in the United States and around the world. American Express is set to report first quarter earnings after the close on April 18.

Amex stock closed Tuesday at $93.86, down 5.5% year to date and 8.3% below its 2018 high of $102.38 set on Jan. 16. The stock is also in recovery mode at 7.2% above its Feb. 9 low of $87.54. The stock is underperforming the Dow 30, which is up 0.3% year to date and is 6.9% below its all-time high set on Jan. 26. The average is up 6.2% from its April 2 low.

Analysts expect Amex to post earnings per share of $1.72 when it reports results on Wednesday. Zacks Equity Research expects first quarter results to reflect increased worldwide billings for all business segments. The important credit cards billed business is estimated at $275 billion, up 9.1% year over year. A beat on this metric would be considered a positive for the stock. (See also: How American Express Makes Its Money.)

The daily chart for American Express

Daily technical chart showing the performance of American Express Company (AXP) stockCourtesy of MetaStock Xenith

American Express has been above a “golden cross” since Aug. 26, 2016, when the stock closed at $64.79. A “golden cross” occurs when the 50-day simple moving average rises above the 200-day simple moving average, indicating that higher prices lie ahead. Today, the stock is above its 200-day simple moving average at $92.61 and below its 50-day simple moving average of $94.61, which was tested at Tuesday’s high. The key level to hold on weakness is the horizontal line, which is my weekly pivot at $92.27.

[Check out Investopedia’s of the Technical Analysis course on the Investopedia Academy to learn about analyzing stock charts using moving averages.]

The weekly chart for American Express

Weekly technical chart showing the performance of American Express Company (AXP) stockCourtesy of MetaStock Xenith

The weekly chart for American Express ended last week negative, with the stock below its five-week modified moving average of $94.17. The stock is well above its 200-week simple moving average at $79.11, which is “reversion to the mean,” last tested at $77.56 during the week of June 2, 2017. The 12x3x 3 weekly slow stochastic reading ended last week at 41.12, down from 44.06 on April 6. A positive reaction to earnings that results in a close on Friday above $94.17 will upgrade this chart to positive if the stochastic reading rises above 41.12.

Given these charts and analysis, my trading strategy is to buy Amex shares on weakness to my weekly value level of $92.27 and reduce holdings on strength to my quarterly risky level of $102.72. (For more, see: Why American Express Shares May Jump 14%.)

Published at Wed, 18 Apr 2018 12:59:00 +0000

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Netflix Stock Breaks Out to All-Time Highs

Netflix Stock Breaks Out to All-Time Highs

By Justin Kuepper | April 18, 2018 — 9:55 AM EDT

Netflix, Inc. (NFLX) shares rose more than 9% on Tuesday after the company reported better-than-expected first quarter financial results. Revenue rose 40.2% to $3.7 billion – beating consensus estimates by $10 million – and net income of 64 cents per share beat consensus estimates by one cent per share. In addition to the strong financial results, subscriber growth was strong, with 1.96 million new subscribers blowing past estimates.

Analysts reacted very favorably to the first quarter financial results. Morgan Stanley maintained its Overweight rating and $370 per share price target, saying that the results are a rare combination of a subscriber beat and margin guidance boost. Meanwhile, GBH Insights called the subscriber count “eye popping” and maintained its Attractive rating and $375 per share price target on the stock given the favorable results. (See also: Netflix Skyrockets on Higher Subscriber Growth.)

Technical chart showing the performance of Netflix, Inc. (NFLX) stock

From a technical standpoint, the stock broke out from prior highs made in early March to fresh all-time highs of $338.62 during Tuesday’s session. The relative strength index (RSI) appears a bit lofty with a reading of 66.26, but the moving average convergence divergence (MACD) experienced a bullish crossover that could signal further upside. These indicators suggest that the stock could see a short-term pullback before resuming its uptrend.

Traders should watch for a continued breakout from prior highs and a move toward R2 resistance at $359.82 on the upside. If the stock breaks back below its prior highs, the stock could move to retest the pivot point and 50-day moving average at around $295.48. Traders should maintain a bullish bias on the stock given its solid fundamental performance and technical momentum moving into the second quarter. (For more, see: Why These 4 Big Tech Stocks Are Bargains.)

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

Published at Wed, 18 Apr 2018 13:55:00 +0000

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Traders Are Turning Bullish on Agriculture

Traders Are Turning Bullish on Agriculture

By Casey Murphy | April 17, 2018 — 8:58 AM EDT

One of the primary tenets of technical analysis is the idea that uptrends consist of a series of higher highs and higher lows, while conversely, a downtrend is defined as a series of lower highs and lower lows. Active traders who try to capitalize on trend reversals will scour the market for scenarios in which there is a recognizable change in the price structure.

More specifically, in the case of an uptrend, traders will watch for where a series of higher highs and higher lows reverses into a downtrend by changing to a series of lower highs and lower lows. In the case of a downtrend, traders will watch for scenarios where the price structure changes to a series of higher highs and higher lows. In this article, we use these basics of trend analysis to take a look at the state of agriculture, which appears to be in the early stages of a newly defined uptrend. (To learn more about trend reversals, check out: Retracement or Reversal: Know the Difference.)

PowerShares DB Agriculture Fund (DBA)

One of the most popular exchange-traded funds used by active traders for gaining exposure to agriculture is the PowerShares DB Agriculture Fund. In case you aren’t familiar, this fund follows a rule-based index composed of futures contracts on some of the most liquid and widely traded agricultural commodities such as wheat, corn, soybeans, cocoa, live cattle, sugar and coffee.

Taking a look at the chart below, you can see that the price has recently notched a higher lower and is trading near an interesting level of short-term resistance, as shown by the dotted trendlines. Recent price action combined with the bullish crossover between the moving average convergence divergence (MACD) and its signal line (blue circle) suggest that the bulls are in control, and this traditional buy sign could act as a catalyst for upside momentum over the days and weeks to come. Active traders will likely set their target prices near the March highs and protect against a sudden sell-off by placing stop-losses below $18.60. (For further reading, see: 3 Charts That Suggest Now Is the Time to Invest in Agriculture.)

Technical chart showing the performance of the PowerShares DB Agriculture Fund (DBA)

[Learn more about recognizing reversal patterns and developing your trading strategy in Chapter 5 of the Technical Analysis course on the Investopedia Academy]

Wheat

With a weighting of nearly 14%, wheat futures make up the largest component of the DBA fund. Active traders who look for a purer way to trade wheat often look to exchange-traded products such as the Teucrium Wheat Fund (WEAT). As you can see from the chart, the trend reversal pattern looks nearly identical to that shown on DBA above. The established swing low near $6 creates a clear line in the sand for traders looking for where to place their buy and stop orders. The current risk-to-reward ratio due to the pullback in recent sessions is creating a lucrative entry point, and the crossover between the MACD and its signal line suggests that we could see a bounce higher over the coming weeks. (For more, see: Trend Following Tips for ETF Investors.)

Technical chart showing the performance of the Teucrium Wheat Fund (WEAT)

Soybeans

The bullish trend reversal under way in the soybean market is further along than wheat and most other soft commodities. Taking a look at the chart of the Teucrium Soybean Fund (SOYB), you can see that the bulls were able to push the price above the long-term resistance of its 200-day moving average (red line). The shift in direction of this long-term moving average is one clear sign that the momentum is changing, and the recent bounce suggests that this level will now likely be used as a key area of support. Active traders will likely look to buy as close to the dotted trendline or 200-day moving average as possible in an attempt to maximize the risk/reward. Again, the bullish crossover between the MACD and its signal line could be used as a catalyst for a move higher over the coming days. (For further reading, see: Introduction to Swing Trading.)

Technical chart showing the performance of the Teucrium Soybean Fund (SOYB)

The Bottom Line

Spotting trend reversals is one of the primary goals of many traders, and long-term shifts in major segments such as agriculture don’t come around very often. A shift in price structure of the ETFs discussed above suggests that there is a fundamental shift under way, and most traders will look to get positioned to profit from the move. Based on the nearby support levels, it wouldn’t be surprising to see active traders buy near current levels to maximize the risk/reward setup. Stop-loss orders will likely be placed below the identified swing lows, which if broken would signal a resumption of the downtrend. (For more, see: Keep It Simple and Trade With the Trend.)

Charts courtesy of StockCharts.com. At the time of writing, Casey Murphy did not own a position in any of the assets mentioned.

Published at Tue, 17 Apr 2018 12:58:00 +0000

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Coiled Up Ready To Strike

Coiled Up Ready To Strike

April 10, 2018

Despite being a discretionary trader I am not much of a gambler. As a matter of fact I hate gambling with the same passion I devote to trading. Which may sound strange to some as game theory inherently adopts many of the disciplines and statistical approaches employed in trading the financial markets.

Thus I recognize that the line between gambling and trading is blurry at best. Which however makes it even more crucial to constantly monitor one’s action and to err on the conservative side when taking a trade is even remotely close to constituting a gamble.

Although I do grant myself the occasional ‘lottery ticket’ it is always backed up by technical analysis giving it a better than 30% chance for a high payoff. What I do not ever do, no matter how convincing the technical evidence, is to bet the bank on a directional move.

In the end of course all of this is highly debatable and it seems that everyone needs to draw that fine line on their account. Which sort of reminds me of the difficulties in defining pornography.

In 1964, Justice Potter Stewart tried to explain “hard-core” pornography, or what is obscene, by saying, “I shall not today attempt further to define the kinds of material I understand to be embraced… [b]ut I know it when I see it …”

My modus operandi is to use the same approach when it comes to the difference between trading and gambling 😉

So why the long intro? Well, because quite frankly the current formation developing all across equity indices constitutes one of the nastiest churn zone of the past few years. It’s got all the right ingredients to make life hell for anyone but the most stone cold hard nosed swing traders:

  • Explosive changes in both directions.
  • Long wicks on the hourly panel marking turns on a dime.
  • Confusing price action in general due to intra-day volatility.
  • Overlapping candles taking turns on the daily.
  • Event risk looming ahead (see below).

Unfortunately it’s that time of the month again for everyone – tomorrow we are graced with this month’s FOMC minutes followed by the ECB accounts the morning after.

Which means that resolution of the current churn zone will most likely happen somewhere between those two events and most likely explosively.

And that in turn means getting sucked into a directional trade anywhere near the center of the current churn zone is tantamount to gambling. And you now know my perspective on that.

Crude is making a run for it, which is the type of move I was hoping of catching. However once again we are looking at a market that turns on a dime and doesn’t give you much time once it explosively takes off.

A retest lower would constitute a high probably entry opportunity in my book but the odds for that are low. Traditionally crude keeps running once it switches into short squeeze mode.

We may however get a nice entry opportunity in the bond futures after Wednesday afternoon. Before that I wouldn’t want to test my luck inside the current rising channel on the daily.

As the pickings are slim right now I’m keeping my two favorite charts of the day for my intrepid subs:

Published at Tue, 10 Apr 2018 12:13:06 +0000

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JPMorgan Stock Stuck in Neutral Ahead of Earnings

JPMorgan Stock Stuck in Neutral Ahead of Earnings

By Alan Farley | April 11, 2018 — 12:05 PM EDT

Dow component JPMorgan Chase & Co. (JPM) fires the opening shot of first quarter earnings season in Friday’s pre-market, with the banking giant expected to report earnings per share of $2.29 on $27.7 billion in revenues. The bank beat expectations in the fourth quarter but missed on revenues, with Wall Street analysts once again overestimating the impact of U.S. economic strength on the banking sector.

That mixed theme may prevail this time around as well, even though last year’s historic tax cuts were expected to supercharge 2018 economic growth. That didn’t happen in the first quarter, with the Atlanta Fed now expecting mediocre 2.0% GDP growth. As a result, potential investors should lower their expectations and wait to see how the stock trades following results. If past is prologue, a buy-the-news reaction could fizzle out quickly. (See also: JPMorgan Chase & Co.: The Big Bank.)

JPM Long-Term Chart (1990 – 2018)

The stock fell to an all-time low in single digits in 1990 and turned higher, entering an uptrend that broke nine-year resistance in the upper teens in 1996. Buying pressure then accelerated, generating impressive gains into March 2000, when it topped out at $67.20. That peak marked the highest high for the next 15 years, ahead of a bear market decline that reached a seven-year low at $15.26 in October 2002.

An Elliott five-wave rally stalled just under the .786 Fibonacci sell-off retracement level in 2007, marking a cyclical top ahead of the 2008 economic collapse. The stock outperformed its peers during that troubling period, with the company maintaining a healthy balance sheet throughout a descent that undercut the 2002 low by 30 cents. That climax finally ended the nine-year downtrend, giving way to a mixed recovery wave that took more than four years to clear the mid-$40s.

A 2013 breakout generated a modest uptrend that finally reached the 2000 high in June 2015. The stock reversed at resistance, carving a volatile diagonal pattern that held support in the low $50s, ahead of a breakout following the 2016 presidential election. The uptick paused in the lower $90s in the first quarter of 2017 and cleared that level in September, igniting a powerful rally wave that posted an all-time high at $119.33 in February 2018.

JPM Short-Term Chart (2017 – 2018)

Price action in the past three years has carved strong support in the upper $60s and low $90s, lowering the odds for a repeat of 2008. However, it hasn’t carved a major pullback since May 2017, raising the odds for a correction that drops the stock into the double digits. The March downturn completed a monthly stochastic crossover, signaling the first long-term sell cycle in nearly a year while telling market players to pay close attention to this week’s confessional.

A Fibonacci grid stretched across the uptrend that started in May 2017 organizes short-term price action, with the February and April declines testing the .382 retracement level. The 50% retracement has aligned with the psychological $100 level, making that an obvious downside target if the stock breaks support now located between $105 and $107. Meanwhile, the .618 retracement is situated within two points of the September cup and handle breakout, offering a potential low-risk buying opportunity if the downside gathers momentum.

On-balance volume (OBV) fell to an all-time low in 2012 and entered an accumulation phase, reaching 2011 resistance (blue line) in March 2017. It posted a higher low a few months later and broke out above the contested level in February 2018. However, weak price action since that time has been testing new support, with an indicator breakdown setting off another round of long-term sell signals. (For more, see: JPMorgan Is ‘Best in Class,’ Buy on the Dip: KBW.)

The Bottom Line

JPMorgan stock has been stuck in a trading range since January 2018, with an aborted February breakout reinforcing resistance near $120. Relative strength indicators have rolled into sell cycles, but the stock could recover quickly if U.S. economic numbers pick up in the second quarter. As a result, there isn’t much to gain from long or short positions at this time. (For additional reading, check out: JPMorgan: Dimon Sees Ample Growth Opportunities.)

Published at Wed, 11 Apr 2018 16:05:00 +0000

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The week ahead in stocks: 5 things to watch

JPMorgan exec: Trump's rhetoric may change
JPMorgan exec: Trump’s rhetoric may change

The week ahead in stocks: 5 things to watch

1. Big banks are ready for their close-up: Stocks have gyrated wildly in the past month, mainly because of headlines about possible trade wars and not because of any real data about how companies are doing. That’s about to change.

Investors will soon find out how big banks did in the first three months of the year. They’ll also get some hints about what these financial giants expect for the remainder of 2018.

Money manager BlackRock(BLK), which owns the popular iShares family of ETFs, will report earnings on Thursday morning. And then more results come Friday morning: Jamie Dimon’s JPMorgan Chase(JPM) and scandal-ridden Wells Fargo(WFC) are the highlights. Citigroup(C) and PNC(PNC) will also release earnings Friday.

Banks won’t be the only ones reporting earnings next week. Delta(DAL), Bed Bath & Beyond(BBBY) and Rite Aid(RAD) are also due out.

Results will probably be very strong. Wall Street is predicting that earnings for the S&P 500 will rise 17% from a year ago, and the banks should do even better.

 Analysts are forecasting quarterly profit gains of about 20% from a year ago for BlackRock and Citigroup and a nearly 40% jump for JPMorgan Chase.

One reason: Ironically enough, the breakneck moves in the market are good for banks with big investment businesses. People tend to trade more in volatile markets, which boosts revenue for the financial firms. (Wells Fargo, which has less exposure to Wall Street, is expected to report just a 7% increase in profit.)

“Strip away the headlines and look beneath the surface and you’ll see financials should help lead profits higher,” said Jack Ablin, chief investment officer with Cresset Wealth Advisors.

But investors will also be looking for clues from the big banks about whether the recent market turmoil will become more of a problem.

Dimon, who typically talks to reporters and financial analysts after JPMorgan Chase reports its earnings, has already issued a stern warning to political leaders in Washington.

He wrote in his annual shareholder letter last week that “retreating from the world is not the solution, nor is burning down the current system and starting anew.”

Dimon added that “people don’t think about the challenges in their everyday lives as being Democratic or Republican issues — and our political leaders need to stop thinking that way. We need a well-performing, competent government to thrive as a nation.”

It will be interesting to see whether Dimon has anything more to say about this — and whether the heads of the other big banks will weigh in with their thoughts on the possibility of a trade war and other big geopolitical issues.

2. Zuckerberg goes to Washington:Mark Zuckerberg will testify before a joint hearing the Senate Judiciary and Commerce committees on Tuesday and then the House Energy and Commerce Committee on Wednesday.

Lawmakers have been insisting that Zuckerberg take their questions since the Cambridge Analytica scandal broke last month, raising concerns about how Facebook handles personal data. There’s a lot to talk about.

Initial reports said that the data analytics firm had improper access to the data of about 50 million users. Then Facebook said this week that up to 87 million users may have been affected. It also confirmed that it uses automated tools to scan Messenger chats for abuse. Australia also announced this week that it is launching a formal investigation into Facebook(FB).

Some think Zuckerberg’s appearance could encourage other tech CEOs, like the heads of Twitter(TWTR) and Google(GOOG), to finally testify.

3. More tariff drama ahead? The United States and China are inching closer to a trade war. President Trump threatened Thursday to impose tariffs on $100 billion more worth of goods, leading the Chinese government to warn that it is willing to take “new comprehensive measures” in response.

The back-and-forth has already been dizzying for Wall Street. The Dow swung 700 points on Thursday, and re-entered a correction on Friday. If escalations continue, the market could react strongly.

4. Inflation watch: The Labor Department will release the producer price index for March on Tuesday, and the consumer price index for March on Wednesday. The Fed will release the minutes from its March 20-21 meeting on Wednesday.

PPI and CPI are measures of inflation. Investors fear that if inflation takes off, the Federal Reserve could raise interest rates faster than it plans to. The indexes, and the details of the Fed meeting, could help investors figure out what to expect.

5. Coming this week:

Monday — CBO budget outlook

Tuesday — Equal Pay Day; Zuckerberg testifies; PPI

Wednesday — Zuckerberg testifies; Fed minutes; CPI; Bed Bath & Beyond earnings

Thursday — BlackRock, Delta, Rite Aid earnings

Friday — Citi, JPMorgan, PNC, Wells Fargo earnings

Published at Mon, 09 Apr 2018 04:57:49 +0000

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Delta Air Lines Stock Could Break Major Support

Delta Air Lines Stock Could Break Major Support

By Alan Farley | April 6, 2018 — 10:10 AM EDT

Delta Air Lines, Inc. (DAL) reaffirmed first quarter profit estimates earlier this week while forecasting revenues at the high end of expectations. Projected unit growth at 5% seems reasonable, given the strong world economy and continued growth in consumer spending. Market players now await the official release on April 12, when analysts have an opportunity to grill executives on urgent short-term issues such as the company’s large China exposure.

The pre-announcement had a limited impact on the stock price, which is struggling to hold support in the low $50s. That follows the bearish trajectory of rivals American Airlines Group Inc. (AAL) and United Continental Holdings, Inc. (UAL), which have underperformed since the tariff mantra began in January. Given the likelihood that trade disputes will continue through 2018, shareholders may wish to pull up stakes and rotate capital into less-exposed sectors. (See also: Why Airlines Aren’t Profitable.)

DAL Long-Term Chart (2007 – 2018)

The stock’s current incarnation began in May 2007 when it emerged from bankruptcy and back onto the public markets in the low $20s, yielding dull sideways action into a July breakdown that found support in the mid-teens a month later. It tested new resistance at the start of 2008 and got sold aggressively, entering a steep decline that hit an all-time low at $3.51 in March 2009. A bounce into the new decade stalled at the 2007 low, which also marked the 50% sell-off retracement level.

A 2013 rally wave finally cleared 2010 resistance, generating an exceptionally strong trend advance that reached the lower $50s in the first quarter of 2015. Aggressive sellers then hit the bids, carving a trading range and 2016 breakdown that posted a 52-week low in the low $30s following the Brexit referendum. Dip buyers then entered into control, posting a strong recovery that reached range resistance at year end.

Price action eased into a shallow rising channel at the start of 2017, with a June breakout failing to attract momentum buying interest. An uptick into January 2018 suffered a similar fate, ending before breakout buyers had time to cash in. Two-sided trading into the second quarter has knocked the stock back to 2015 levels, but the channel pattern remains fully intact. Even so, the monthly stochastics oscillator has just rung the first sell signal since October 2017, predicting that bears will control the tape into the second half of 2018.

DAL Short-Term Chart (2016 – 2018)

Three 2015 highs carved a ragged price zone between $50 and $53 that has come into play repeatedly in the past three years. The 200-day exponential moving average (EMA) has slowly worked its way up to those levels, marking an alignment that could decide Delta’s fate in coming months. The rally into January 2018 finally cleared the barrier, but the decline into February broke support once again, raising the odds that the stock is carving a long-term top.

Price action since 2016 has drawn a rising trendline that has now lifted into the same price zone, indicating that a breakdown through $50 would set off major sell signals and a quick trip down to channel support, now located in the upper $30s. That level has aligned with the .786 Fibonacci retracement level of the uptrend since 2016, offering a reward target for aggressive short sales if support breaks.

On-balance volume (OBV) has held up well since breaking out above the 2015 peak in early 2017 and posted a new high in March 2018, indicating strong institutional buying interest. However, shareholders haven’t gotten paid for their efforts and could hit the exits if the stock doesn’t hold support in the low $50s. Conversely, bulls need a rally that fills the January gap between $57 and $60 to generate more aggressive buying interest. (For more, see: Who Are Delta Airlines’ Main Competitors?)

The Bottom Line

Delta Air Lines is struggling to hold long-term support despite pre-reporting strong first quarter results. It appears that the China trade dispute is keeping potential buyers on the sidelines, where they could stay for the rest of 2018. (For additional reading, check out: Delta’s 3 Key Financial Ratios.)

Published at Fri, 06 Apr 2018 14:10:00 +0000

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Stocks Edge Lower as Trade Tensions Grow

Stocks Edge Lower as Trade Tensions Grow

By Justin Kuepper | April 6, 2018 — 6:49 PM EDT

The major U.S. indexes moved lower this week amid rising trade tension. President Trump threatened to impose tariffs on another $100 billion worth of Chinese imports on Thursday, which sparked concerns of an escalating trade war between the world’s largest economies. On Tuesday, the U.S. indicated that it would impose a 25% tariff on $50 billion worth of Chinese imports, and China responded with $50 billion worth of tariffs for U.S. goods in its market.

International markets were higher over the past week. Japan’s Nikkei 225 rose 0.59%; Germany’s DAX 30 rose 2.03%; and Britain’s FTSE 100 rose 1.63%. In Europe, momentum slowed to its weakest levels in more than a year, judging by a nearly two-point drop in March’s Purchasing Managers Index. In Asia, Japan’s economy could lose some of its momentum if consumer spending continues to slow amid growing trade friction.

The SPDR S&P 500 ETF (ARCA: SPY) fell 1.09% over the past week. After briefly testing prior lows made in early February, the index rebounded to its pivot point at $266.67 and has trended sideways over the past two weeks. Traders should watch for a breakout from the pivot point to the 50-day moving average at $269.83 or a breakdown from trendline support to S1 support at around $254.22. Looking at technical indicators, the relative strength index (RSI) appears neutral at 41.96, but the moving average convergence divergence (MACD) remains in a bearish downtrend that could signal more downside ahead. (See also: Where to Invest for a Trade War: Goldman’s View.)

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

The SPDR Dow Jones Industrial Average ETF (ARCA: DIA) fell 0.5% over the past week, making it the best performing major index. After briefly breaking out from the pivot point at $243.50 earlier this week, the index moved lower to end the week just above trendline support at around $233.50. Traders should watch for a breakdown from these levels to S2 support at around $224.10 or a move higher to test upper trendline resistance at around $247.99. Looking at technical indicators, the RSI appears neutral at 43.94, but the MACD could see a bullish crossover.

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

[Learn more about supplemental technical indicators like the RSI and MACD in Chapter 4 of the Technical Analysis course on the Investopedia Academy]

The PowerShares QQQ Trust (NASDAQ: QQQ) fell 1.48% over the past week, making it the worst performing major index. After briefly retesting its prior lows from early February, the index rebounded toward its pivot point at $163.70 before turning lower once again. Traders should watch for a breakdown from trendline support at around $154.00 to S1 and 200-day moving average support at around $152.62 or for a rebound to retest the pivot point and 50-day moving average near $164.68. Looking at technical indicators, the RSI appears neutral at 40.41, but the MACD remains in a prolonged downtrend. (For more, see: Chip Stocks That Will Thrive on the AI Boom.)

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

The iShares Russell 2000 Index ETF (ARCA: IWM) fell 0.77% over the past week. After nearing its prior lows from early March, the index rebounded to its pivot point and 50-day moving average at $153.13 before moving lower. Traders should watch for a breakout from these levels toward R1 resistance at $158.49 or for a breakdown from lower trendline support to S2 support at $141.37. Looking at technical indicators, the RSI appears neutral at 44.67, but the MACD remains in a bearish downtrend that could suggest more downside ahead.

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

The Bottom Line

The major indexes moved lower in a choppy week of trading, but technical indicators remain neutral to bearish looking out. Next week, traders will be closely watching several key economic indicators including the FOMC minutes and consumer price index on April 11, jobless claims on April 12, and consumer sentiment data on April 13. Of course, the market will also be closely watching for potential developments in U.S.-China relations following the turbulent week. (For additional reading, check out: Stocks to Move Higher By End of 2018: Analyst.)

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

Published at Fri, 06 Apr 2018 22:49:00 +0000

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Dow tumbles 572 points as trade war fears pummel stocks

 

Dow tumbles as trade war fears pummel stocks
Dow tumbles as trade war fears pummel stocks

Dow tumbles 572 points as trade war fears pummel stocks

Stocks tumbled Friday as trade tensions between the United States and China heated up.

The Dow closed down 572 points, a drop of 2.3%, after President Trump threatened to escalate a confrontation with China over trade. It fell as much as 767 points earlier in the day. The S&P 500 and the Nasdaq each declined more than 2%.

Friday’s losses wiped out gains for the week, and the Dow sank back into correction territory — 10% below its all-time closing high in January.

Trump said late Thursday that he was considering tariffs on $100 billion more in Chinese exports, which would triple what the United States is already planning.

“The fear of a policy mistake on trade is increasing,” said Art Hogan, chief market strategist at B. Riley FBR.

All 30 companies on the Dow lost ground on Friday. Caterpillar(CAT), Boeing(BA) and Nike(NKE), giants with heavy exposure in China, were among the biggest losers in the index.

“The ratcheting up of trade tensions clearly carries risks. The tariff threats, even if only intended as bargaining tools, will be difficult to back down from if talks fail to deliver results,” Capital Economics’ Julian Evans-Pritchard wrote in a research note Friday.

Anxiety returned to Wall Street after three days of gains. The VIX,(VIX) a measure of market volatility, spiked 12%. CNNMoney’s Fear and Greed index sank further into “extreme fear” territory.

Wary investors had been holding out hope that the two sides will reach a deal before the proposed trade barriers go into effect.

White House officials, including top economic adviser Larry Kudlow, have sought in recent days to soothe business leaders’ fears of a trade war that would constrain economic growth.

Earlier this week, the Trump administration announced plans for tariffs on $50 billion worth of Chinese goods in retaliation for China’s alleged theft of US intellectual property. Beijing fired back hours later by threatening tariffs on $50 billion worth of US goods, including cars, planes and soybeans.

The market had been interpreting Trump’s proposed tariffs as negotiating tactics meant to extract concessions out of China rather than a rigid position. But Wall Street began to reassess that view as the administration sent conflicting signals throughout the day.

“We’ve gone from Larry Kudlow trying to calm the markets down to the administration saying, ‘Hey, ignore the markets,'” Hogan said.

In a radio interview Friday morning, Trump said, “I’m not saying there won’t be a little pain, but the market has gone up 40%, 42%, so we might lose a little bit of it.”

Kudlow, speaking to reporters shortly after the markets opened, said, “Now, we’re not running a trade war.” He stressed that the US tariffs on China were simply proposals, still to be vetted by trade officials and open to public comment.

Selling accelerated later in the day after Treasury Secretary Steve Mnuchin told CNBC, “There is the potential of a trade war.”

Investors had been operating under the assumption China and the United States were negotiating to avoid a trade conflict, but Mnuchin avoided questions about whether the two countries were actively talking.

“As no one came out to pull this back, there was a gradual realization that this was something that might be a little more serious,” said Brad McMillan, chief investment officer for Commonwealth Financial Network.

Analysts said the market also responded to Federal Reserve Chair Jerome Powell, who said that the US economy was growing and a turbulent stock market would not change the Fed’s course to gradually raise interest rates.

The Fed is on track to raise rates three times this year, but it could speed up the increases to keep the economy from overheating.

“Markets are forced to confront the idea that rates are going up and the stock market is not going to derail that process,” McMillan said.

Stocks were mostly unaffected by the March jobs report, which showed that the US economy added 103,000 positions, down from a much bigger gain in February and well below what analysts were expecting.

Wages grew 2.7% in March compared with a year earlier, in line with expectations. Investors were watching that number because it’s a barometer of inflation. In February, an unexpected jump in wage growth set off inflation alarm bells and caused stocks to plunge.

The combination of the hiring slowdowns and modest wage growth temporarily eased Wall Street’s concerns that the economy was getting too hot.

The yield on the 10-year US Treasury note, which has been steadily climbing as investors’ inflation expectations rise, dipped to 2.78% after the jobs report.

“Investors breathed a sigh of relief,” said Sam Stovall, chief investment strategist at CFRA Research. “Now we only have one issue to deal with, and that’s trade.”

—CNNMoney’s Paul R. La Monica contributed to this report.

Published at Fri, 06 Apr 2018 20:06:15 +0000

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Instamine

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By Gellinger from PixabayInstamine

DEFINITION of ‘Instamine’

New cryptocurrencies inevitably search for one or more features that will hook a potential investor or user base. These features run the gamut from structural elements to gimmicky offers, with everything in between. In the flurry of new cryptocurrency launches which have dominated the space over the past several months, some of the unique features that have emerged have become controversial. The concept of “instamine” (or “instamining”) is one of these problematic ideas. Put simply, instamining is a process that allows coins to be distributed in an unfair or uneven manner. Typically, a cryptocurrency that undergoes an “instamine” period offers up a large portion of the total mineable quantity of coins or tokens over a short period of time just after the digital currency launch, when investor interest is likely to be at a high point.

BREAKING DOWN ‘Instamine’

Instamining may take place unintentionally or on purpose. Some cryptocurrencies have experienced gluts of supply immediately after launch as a result of imperfect mining algorithms which fail to adjust the difficulty level associated with the generation of new coins in a predictable, controlled fashion. It can also take place because of nefarious coding on the part of one or more developers. Other cryptocurrencies have toyed with the idea of building in an instamine period into the launch of the currency as an incentive to early investors.

There are a number of potential issues with instamining. First, investors and analysts cite it as a potential area for fraudulent activity or unfair business practices. If a particular individual or group is able to secure an outsized portion of tokens relative to the amount of time, energy, and other resources they dedicate toward the mining procedure, that individual or group can then turn around and sell off those tokens. If this happens quickly enough after an ICO, when investor interest in the digital currency is at a high point, this large seller can dump a significant quantity of tokens for a high price, negatively impacting the health of the overall market for that currency.

Among existing cryptocurrencies today, perhaps the most famous case of instamining took place following the initial coin distribution of Dash. The algorithms responsible for adjusting mining difficulty for Dash did not adjust as they were supposed to, resulting in the issuance of about 2 million coins in a period of just 2 days following the launch of the currency. Two million coins accounted for roughly 15% of the total Dash supply to ever be issued. As the supply of coins overwhelmed investors, most coins were sold across various exchanges, often for extremely low prices. In this case, a single seller was not able to dump a large holding of Dash coins, so the overall damage to the cryptocurrency market and ecosystem was minimal.

While Dash managed to emerge from its unintended instamining fiasco relatively unscathed, the same cannot be said for all digital currencies. Indeed, instamining can take place upon the launch of any new cryptocurrency. If this does happen, it’s likely that the owners of large quantities of those coins will hold onto them for an extended period of time, selling them once the price of the coin is sufficiently high. After that massive sale, it’s not uncommon for the price of the coin to drop precipitously, potentially even bringing about the downfall of that coin.

Instamining is occasionally used interchangeably with the term “premining,” although these are somewhat different concepts. Instamined coins are those that have been the victim of a glitch (either deliberate or accidental) in the mining algorithm, which allows them to be generated at an accelerated rate following a launch. Premined coins, on the other hand, have been generated before the launch itself takes place. Most cryptocurrencies are premined to a certain controlled extent, typically by developers who retain a share of the coin supply upon launch. Premines can also be nefarious, however; an exchange might ask a new cryptocurrency to provide a private supply of premined coins in exchange for a place in its list of offered currency pairs.

How can an investor determine whether a particular cryptocurrency has been premined or instamined? Unfortunately, at the time of the launch it can be very difficult to assess what the situation is. The frenzy that takes place surrounding highly-anticipated launches makes this an especially opportune time for individuals looking to take advantage of errors in mining protocols. It’s typically only after the fact, as the coin attempts to establish itself for the longer term, when this comes to light. Coins that experience massive sales of tokens and then which decline in price immediately thereafter may have been subjected to instamining activity. In many other cases, though, it may be impossible for an investor to determine whether instamining was a factor in the overall health of a new digital currency.

Published at Tue, 03 Apr 2018 16:43:00 +0000

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Bull Versus Bear

Bull Versus Bear

April 3, 2018

Once again we are staring down the abyss and given a decade filled with bearish disappointments it’s easy to resort to recency bias and once again expect a long reversal. And right out of the gate let me assure you that the odds probably still favor the bulls here.

BUT, and it’s a big but as you can see – the bears do have a small but real chance right now and right here to inflict some major damage. As always the Mole doesn’t make lofty claims without backing them up with a bit of technical evidence. So if you don’t mind – shall we?

Let’s start with the low hanging fruit which is the Zero which I consider the ultimate market participation indicator. Clearly the Friday session was nothing but a massive sell off and we can see ever increasing selling pressure on the right 5-min signal.

Yesterday however there were hints that buying pressure was making itself felt again, especially into the close. The E-Mini has managed to cling to its meager gains overnight and we may see a more confident push higher during today’s session.

That said, until ES 2650 is breached any rips higher IMO are nothing but short selling opportunities. The odds for conclusion may be low but the payoff could be massive.

BTW, if you’re not a Zero or Gold sub then now would be a great time to remedy this unfortunate situation. Point your browser here to get access to more in-depth market analysis and many juicy setups on a daily basis.

Okay, now that I told you the how let me show you the why.

Let me start you off with the most bullish momo chart in my current arsenal. The VIX:VXV ratio over the past few years and usually I use that one for long reversals. Except that there isn’t one right now, given that the upper BB has punched so much higher.

What I’m seeing however here is a formation that in 2015 which resembles today’s quite a bit. The main difference is that what preceded the prior one was a lot less exuberant than what we saw all the way into late 2017.

And of course that in some ways also bolsters the bearish case, but it would be foolish to discard the fact that a similar formation resulted in a massive short squeeze that lasted almost a month.

The same ratio but this time a little zoomed in and inverted, so we are looking at the VXV:VIX. The reason why I do that is that it better visualizes the type of formations I’m mostly interested in. And in this case what I am interested in are long reversal opportunities.

Do we have one right now? We sort of got one over a week ago but it was reversed this week by another dip < the lower BB. That’s pretty damn bearish if you’d ask me. Which you do by reading this I guess 😉

Published at Tue, 03 Apr 2018 12:44:10 +0000

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Alphabet Lost Momentum After Missing Q4 Earnings

Alphabet Lost Momentum After Missing Q4 Earnings

By Richard Suttmeier | April 2, 2018 — 10:35 AM EDT

Internet content giant and Google parent company Alphabet Inc. (GOOGL) had a volatile ride in the first quarter of 2018. The stock set its all-time intraday high of $1,198.00 on Jan. 29, then gapped lower following a negative reaction to earnings released after the closing bell on Thursday, Feb. 1. Back then, Alphabet was a strong momentum stock and was showing characteristics of an “inflating parabolic bubble” on its weekly chart.

The parabolic bubble popped, and on Feb. 9, the stock tested its 200-day simple moving average of $1,003.38, down 16% from the high and into correction territory. Shares of Alphabet rallied from the 200-day simple moving average and traded as high as $1,178.16 on March 12, up 17%. This rally “filled the price gap” to the Feb. 1 low of $1,169.36. (See also: Alphabet’s Stock Price May See a Sharp Rebound.)

The overall technology bubble popped as the Nasdaq Composite set its all-time intraday high of 7,637.27 on March 13. This day turned out to be a daily “key reversal” as the Nasdaq closed March 13 below the March 12 low.

Alphabet stock joined the tech correction, declining below its 200-day simple moving average and setting a new 2018 low of $984.00 on March 28, down 16% once again. This was a trading opportunity to buy the stock at my semiannual value level of $987.07. Alphabet shares closed March at $1,037.14, down 1.5% year to date and in correction territory at 13.4% below the all-time high of $1,198.00 set on Jan. 29. The stock is 5.4% above its March 28 low.

In recent company news, Alphabet’s self-driving car unit Waymo recently announced a deal with Jaguar Land Rover to expand its autonomous ride-hailing program. The company is also commercializing its artificial intelligence DeepMind business four years after acquiring this business unit. (For more, see: How Artificial Intelligence Will Boost These 8 Stocks.)

The daily chart for Alphabet

Daily technical chart showing the performance of Alphabet Inc. (GOOGL) stockCourtesy of MetaStock Xenith

The horizontal lines in the middle of the chart show my semiannual and annual value levels of $987.07 and $966.02, respectively. My new quarterly and monthly risky levels are $1,054.64 and $1,146.05, respectively.

[Want to learn the basics of analyzing stock charts? Check out Chapter 1 of the Technical Analysis course on the Investopedia Academy.]

The weekly chart for Alphabet

Weekly technical chart showing the performance of Alphabet Inc. (GOOGL) stockCourtesy of MetaStock Xenith

The weekly chart for Alphabet is negative, with the stock below its five-week modified moving average of $1,085.96. The 12 x 3 x 3 weekly slow stochastic reading ended March declining to 51.49, down from 59.24 on March 23.

Given these charts and analysis, investors should buy Alphabet shares on weakness to my semiannual and annual value levels of $987.07 and $966.02, respectively, and should reduce holdings on strength to my quarterly and monthly risky levels of $1,054.64 and $1,146.05, respectively. (For additional reading, check out: GOOGL, FB Overdue for Govt. Oversight: Jim Mellon.)

Published at Mon, 02 Apr 2018 14:35:00 +0000

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