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Premarket: 5 things to know before the bell

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Premarket: 5 things to know before the bell

1. Tariff time?: President Donald Trump could formalize new tariffs on steel and aluminum imports on Thursday.

Or not.

There was confusion late Wednesday over whether the paperwork would be ready in time for the planned signing around 3:30 p.m. ET. There’s also confusion about whether some countries would be exempt.

“The expectation is that the order enacting the tariffs will be signed by the end of the week, but the details remain elusive,” said Mike O’Rourke, chief market strategist at JonesTrading.

The tariffs are expected to lead to retaliatory measures from other countries, raising concerns about an all-out trade war.

China’s Foreign Minister Wang Yi said Thursday that “in the event of a trade war — China will make a justified and necessary response.” The European Union is preparing tariffs on US products, including orange juice.

US stock futures were a bit soft.

European markets were mixed in early trading. Asian markets ended the day with gains.

2. Healthy acquisition environment: Shares in Cigna(CI) and Express Scripts(ESRX) could be on the move after the Wall Street Journal reported the insurer and pharmacy-benefit manager are in talks.

The newspaper said Cigna was “nearing a deal” to buy Express Scripts in a transaction that could be worth over $50 billion.

It would be the latest in a series of major health care deals.

3. Earnings:Kroger(KR), Embraer(ERJ) and American Eagle(AEO) will release earnings before the open. El Pollo Loco(LOCO) will follow after the close.

Kroger, the largest grocery chain in the US, announced last week that it would stop selling guns and ammunition to customers under the age of 21. The chain sells weapons and ammunition at 45 Fred Meyer stores.

The grocer may face questions from investors about its decision on guns, and its reported talks with Chinese e-commerce giant Alibaba(BABA).

4. Economics: The European Central Bank will announce a decision on interest rates and hold a news conference on Thursday.

Investors will be watching to see if the central bank gives any hints about its plans to wind down its stimulus program. Concerns over weak inflation and a potential trade war could force the ECB to keep its foot on the gas.

5. Coming this week:

Thursday — International Women’s Day;Kroger(KR) earnings; Trans-Pacific Partnership Agreement set to be signed in Santiago de Chile; Geneva Motor Show opens to the public
Friday — US monthly jobs report

Published at Thu, 08 Mar 2018 09:59:59 +0000

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Micron Stock Breaks Out but Could See Near-Term Consolidation

Micron Stock Breaks Out but Could See Near-Term Consolidation

By Justin Kuepper | March 7, 2018 — 9:41 AM EST

Micron Technology, Inc. (MU) shares rose nearly 10% this week after Bank of America Merrill Lynch analysts upgraded their assessment for semiconductor stocks. Analyst Vivek Arya noted that semiconductor sales were up 23% over the prior year in January, led by analog, discrete and DRAM, and he believes that there will be broad sales improvements throughout the supply chain during the second quarter.

Goldman Sachs analyst Mark Delaney also raised his price target on Micron shares from $55.00 to $58.00, saying that he expects second quarter financial results and third quarter guidance to come in ahead of Street expectations given positive DRAM trends. The options market has been extremely active following these analyst comments, with a five-to-one ratio of call options to put options during Tuesday’s session. (See also: Micron May Rise 12% as Analysts Grow More Bullish.)

Technical chart showing the performance of Micron Technology, Inc. (MU) stock

From a technical standpoint, the stock broke out from its prior highs earlier this week to reach fresh multi-year highs. The relative strength index (RSI) moved into overbought territory with a reading of 74.26, but the moving average convergence divergence (MACD) remains in a strong bullish uptrend. These indicators suggest that there may be some near-term consolidation, but the trend still remains very skewed toward the upside.

Traders should watch for some consolidation between trendline support at $50.00 and R2 resistance at $57.20 over the coming week. A breakout from R2 resistance could lead to fresh multi-year highs, while a breakdown below trendline support could lead to a move down to the pivot point at $45.26. According to NASDAQ, Micron is expected to report its second quarter earnings on March 22 after the market closes. (For more, see: Why Chip Stocks Will Keep Rising.)

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

Published at Wed, 07 Mar 2018 14:41:00 +0000

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Stocks soar as trade war fears ease

Trump official: Tariffs won't hurt the economy
Trump official: Tariffs won’t hurt the economy

Stocks soar as trade war fears ease

Fears of a trade war eased on Wall Street — for a day, at least.

The Dow climbed 336 points on Monday after House Speaker Paul Ryan and other top Republicans broke with the White House over President Trump’s planned steel and aluminum tariffs.

“We are extremely worried about the consequences of a trade war and are urging the White House to not advance with this plan,” Ryan spokeswoman AshLee Strong said in a statement Monday morning.

Investors seemed to be betting that GOP opposition could soften Trump’s position.

“You’re starting to get blowback not just from Corporate America but from Trump’s own party,” said Michael Block, chief market strategist at Rhino Trading Partners. “He’s getting pushback and a reminder that if markets and the economy don’t go the right way, it’s going to endanger the GOP’s chances in November.”

Caterpillar(CAT) and Boeing(BA), two companies that would take hits if the tariffs led to a rise in steel prices, led the Dow on Monday. The average snapped a four-day losing streak and turned positive on the year.

Trump announced on Thursday that his administration would impose a 25% tariff on steel imports and a 10% tariff on aluminum.

Top American allies, including Canada and the European Union, have pledged to retaliate if Trump follows through on the plan. White House trade adviser Peter Navarro said on CNN’s “State of the Union” on Sunday that no countries will be excluded from the tariffs.

Wall Street was spooked by the tariffs and the potential that they will set off a global trade war. The Dow lost 491 points on Thursday and Friday. Trump escalated those fears on Friday by writing on Twitter, “Trade wars are good, and easy to win.”

Asked about Ryan’s position on Monday, Trump told reporters, “No, we’re not backing down.”

Published at Mon, 05 Mar 2018 21:15:40 +0000

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U.S. Treasury to close ‘carried interest’ loophole in new tax law

U.S. Treasury to close ‘carried interest’ loophole in new tax law

WASHINGTON (Reuters) – The U.S. Treasury said on Thursday it will close an unintended loophole created by the Republican tax overhaul that let some Wall Street financial managers dodge new limits on“carried interest” by operating as businesses known as S-corporations.

Carried interest refers to a longstanding Wall Street tax break that let many private equity and hedge fund financiers pay the lower capital gains tax rate on much of their income, instead of the higher income tax rate paid by wage-earners.

President Donald Trump vowed to close the loophole during the 2016 presidential election campaign.

Republican tax legislation signed into law by Trump in December required fund managers to hold investments for at least three years before becoming eligible for the lower capital gains rate, but it exempted corporations.

Media reports soon followed saying that some investment funds were setting up pass-through entities known as S-corporations in the hopes of qualifying for the corporate exemption and skirting the carried interest restriction.

On Thursday, the Treasury and its tax-collecting Internal Revenue Service announced that forthcoming regulations will prevent S-corporations from taking advantage of the carried interest exemption.

S-corporations are a form of business entity that passes profits on to business owners as personal income.

New Treasury rules are expected to specify that the exemption applies only to C-corporations, including publicly traded companies, which pay income tax before distributing net profits to shareholders as dividends.

“We worked expeditiously to take this first step to clarify that S corporations are subject to the three-year holding period for carried interest,” Treasury Secretary Steven Mnuchin said in a statement.

The American Investment Council, which represents private equity investors, welcomed Treasury’s guidance, saying in a statement that the government’s position“correctly clarifies the intent of the law.”

Reporting by David Morgan; Editing by Kevin Drawbaugh

Published at Thu, 01 Mar 2018 17:45:13 +0000

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Housing Industry Concerned about Tariffs

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By cjweaver13 from Pixabay

Housing Industry Concerned about Tariffs

by Bill McBride on 3/04/2018 10:28:00 AM

On Thursday, NAR chief economist was quoted in Inman News: Trump tariffs on steel and aluminum will be a blow to the construction industry

“Tariffs could measurably raise the cost of building materials and hinder home construction of affordable homes,” said Yu. “But more importantly, tariffs and restrictions to international trade will hold back economic growth and job creations. A better way to raise GDP growth is to produce more homes. Job growth and additional housing inventory will greatly help American workers and American consumers.”

And from the NAHB: Statement from NAHB Chairman Randy Noel on New Steel and Aluminum Tariffs

“Given that home builders are already grappling with 20 percent tariffs on Canadian softwood lumber and that the price of lumber and other key building materials are near record highs, this announcement by the president could not have come at a worse time.

“Tariffs hurt consumers and harm housing affordability.”

As a noted in When the Story Changes, Be Alert, housing is facing several headwinds in 2018: higher mortgage rates, a negative impact from tax changes, higher labor costs, and higher material costs (especially lumber), and now tariffs on steel and aluminum.

Read more at http://www.calculatedriskblog.com/2018/03/housing-industry-concerned-about-tariffs.html#PutQ2se4SBrewMhC.99

 

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Stocks Plummet Amid Fears of a Trade War

Stocks Plummet Amid Fears of a Trade War

By Justin Kuepper | March 2, 2018 — 5:33 PM EST

The major U.S. indexes moved sharply lower over the past week after President Trump announced plans to impose a 25% tariff on steel imports and a 10% tariff on aluminum imports. After the Commerce Department found that steel and aluminum imports posed a risk to national security, the Trump administration gained the authority to establish import tariffs and promised to rebuild the American steel and aluminum industries.

International markets were lower over the past week. Japan’s Nikkei 225 fell 3.25%, Germany’s DAX 30 fell 4.57%; and Britain’s FTSE 100 fell 2.26%. In Europe, European Central Bank (ECB) President Mario Draghi indicated that slack in the Eurozone economy may be larger than initially estimated and noted the slow rise of inflation. In Asia, China voted to end term limits for President Xi Jinping in a move that has some investors and human rights activists concerned. (See also: Where Does the U.S. Import Steel From?)

The SPDR S&P 500 ETF (ARCA: SPY) fell 2.04% over the past week. After briefly reaching February’s pivot point levels, the index moved sharply lower to March’s pivot point levels at $269.21. Traders should watch for a breakout above these levels to retest the 50-day moving average at $273.08 or upper trendline resistance at around $278.00, or a move lower to retest reaction lows at around $258.00. Looking at technical indicators, the relative strength index (RSI) fell to slightly oversold levels of 46.00, while the moving average convergence divergence (MACD) could see a near-term bearish crossover.

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

The SPDR Dow Jones Industrial Average ETF (ARCA: DIA) fell 2.99% over the past week, making it the worst performing major index. After briefly hitting its February pivot point at around $258.00, the index moved sharply lower. Traders should watch for a move down to reaction lows or S1 support at $243.83 or a rebound higher past its pivot point at $248.53 to the 50-day moving average at $252.07. Looking at technical indicators, the RSI appears modestly oversold at 42.62, while the MACD could see a near-term crossover. (For more, see: 6 Reasons for Another $6 Trillion Stock Market Correction.)

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

The PowerShares QQQ Trust (NASDAQ: QQQ) fell 1.30% over the past week. After briefly hitting its prior highs of around $170.00, the index moved sharply lower before rebounding from its pivot point and 50-day moving average at around $163.22. Traders should watch for a further rally to retest prior highs or a breakdown from the pivot point and 50-day moving average to reaction lows at around $155.00. Looking at technical indicators, the RSI appears neutral at 52.94, but the MACD could see a bearish crossover.

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

The iShares Russell 2000 Index ETF (ARCA: IWM) fell 1.06% over the past week, making it the best performing major index. After nearly reaching February’s pivot point, the index moved sharply lower to its March pivot point at $150.00 before rebounding. Traders should watch for a rally past the 50-day moving average at $153.91 to R1 resistance at $157.54 or a move lower to retest reaction lows and the 200-day moving average at $145.60. Looking at technical indicators, the RSI appears neutral at 49.62, but the MACD could turn bearish.

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

The Bottom Line

The major indexes moved lower over the past week, with neutral RSI readings and bearish MACD readings predicting further downside. Next week, traders will be watching several economic indicators, including employment data due out on March 9. The market will also be closely watching how China and other trade partners react to President Trump’s new tariffs for steel and aluminum imports. (For additional reading, check out: Tariff Talk May Signal NAFTA Exit: Goldman Sachs.)

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

Published at Fri, 02 Mar 2018 22:33:00 +0000

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The Squeeze Is On

Finance Photo
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By geralt from Pixabay

The Squeeze Is On

by The MoleFebruary 26, 2018

Happy Monday everyone! I am happy to report that several of the entry opportunities I posted last Friday are faring well with hopefully more ill-gotten gains beyond the horizon. On the equities side the E-Mini is getting ready to put the squeeze on whoever remains short at this point. And let me tell you right now – if you are a bear, or are still holding short, you are probably not going enjoy this post.

About 2/3 of the late January sell off has already been recaptured and in my mind the recent spike high near 2750 was the final line in the sand for the short term perspective. Every tick higher henceforth now adds additional defensive context for the longs and increasingly reduces the odds of another leg lower. At least on a short term medium term basis. Long term I have a few more thoughts below the fold.

The Zero indicator (you are a sub I hope!) showed us weak but consistently positive participation on Friday, further bolstering our long perspective.

A continued vega squeeze on the VIX has been leading the charge higher as visualized by our trusted SPX:VIX ratio – here plotted against just the SPX. At least short term everything is pointing higher.

Thus it is not surprising that I entered long the ES on a breach of 2731.25 as planned (in the subscriber section – sorry I can’t give it all away). It is now time to advance my stop to break/even.

Crude was slow going at first but now seems to be picking up the pace. I’m advancing my trail to < 62.50. The formation on the daily panel suggests continuation higher.

Gold was another juicy entry last week and I’m now advancing my stop a few ticks < break/even (I didn’t correct the comment on the chart) which is near the 100-hour SMA right now. Reason is that it’s quite possible that we’re going to see another retest of that one which is why I’m putting it < 1332.4.

My BTC campaign wasn’t as lucky and immediately proceeded to ISL after entry. There currently is a new attempt to produce a short term floor but it would be too premature to enter here. The medium term trend still supports the longs here but if they continue to be unable to drag the horse across the 11,800 mark then bad things may happen. That said – a convincing spike low with a retest would put me into another long campaign.

LTC on the other hand is holding steady and I just advanced my trail to the recent spike low. As you can see, no drama, no rumors, no excitement here – simply entries taken as we would in any other market vertical.

More entries and a few additional market perspectives below the fold:

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

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Published at Mon, 26 Feb 2018 13:31:27 +0000

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Weight Watchers Stock Extends Impressive Rally

 

by TeroVesalainen from Pixabay

Weight Watchers Stock Extends Impressive Rally

By Justin Kuepper | February 28, 2018 — 10:45 AM EST

Weight Watchers International, Inc. (WTW) shares rose nearly 10% in early trading on Wednesday after the company reported better-than-expected fourth quarter financial results. Revenue rose 16.9% to $312.5 million – beating consensus estimates by $4.93 million – and net income of 37 cents per share beat consensus estimates by six cents per share. Management anticipates full-year revenue of $1.55 billion versus a consensus of $1.44 billion and earnings per share of $2.40 to 2.70 versus a consensus of $1.90.

Weight Watchers stock has risen more than 75% over the past three months after the company implemented a turnaround plan that has more than doubled profits over the past two years. After the launch of the Freestyle program in December, the company ended the fourth quarter with 2 million online subscribers and 3.2 million total subscribers. (See also: Oprah’s Weight Watchers Bet Finally Paying Off.)

Technical chart showing the performance of Weight Watchers International, Inc. (WTW) stock

From a technical standpoint, the stock rebounded from lower trendline support toward the middle of its price channel  earlier this week. The relative strength index (RSI) moved toward overbought levels at 62.88, while the moving average convergence divergence (MACD) remains in a slight bearish downtrend. These dynamics suggest that the stock could see some consolidation above R1 resistance at $73.68 in the near term.

Traders should watch for a breakout toward upper trendline and R2 resistance at $83.06, which would put the stock at its all-time highs. If the stock breaks down below lower trendline support at $70.00, traders should watch for a move to the 50-day moving average at $60.93 or the pivot point support at $59.49, although this scenario seems less likely. (For more, see: Weight Watchers Stock Breaks Out of 4-Week Base.)

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

Published at Wed, 28 Feb 2018 15:45:00 +0000

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Volatility Begets Volatility

Volatility Begets Volatility

Markets never move in a straight line and the 12% correction in the S&P 500 in late January sent an IV shockwave through the financial system from which it is still attempting to recover. What usually follows a large volatility event is a counter reaction followed again by smaller events until either the old market regime re-asserts itself or something even more dire happens.

We now find ourselves at that very threshold at which the market direction for the remainder of this year will be determined.  And that incidentally not only applies to equities but also to the FX and crypto space. What happens here will set the stage for whatever transpires over the rest of this year and beyond, so we’d better pay attention.

I best speak in charts, and I usually put my money where my mouth is. Which is why I just grabbed a long position here with a stop below 2705.25. For one the formation on the short term panel is looking very bullish to me, so does the sequence of higher highs and higher lows on the daily. Until I see a breach < 2682 I have to be long here.

Should we breach below that then I would have to get confirmation via a breach and retest of the 100-day SMA. Only a spike high below that mark would get me to take on short positions. The exception being that I see very concerning divergences on my momo charts and of course our trusted Zero indicator:

Which by the way consistently pointed downwards during yesterday’s sell off. However I don’t see any major warning signs on the hourly panel (left). It is slightly divergent but not sufficiently yet to warrant short positions. If you are a short here then I suggest you trail your positions and keep an eye on the Zero signal (in case we get a bullish divergence today or tomorrow). By the way if you trade the E-mini and you are not a subscriber yet then sign up here – you’ll be glad you did.

Now on the currency front the EUR/USD has been somewhat weakening recently and then stabilized in a ‘wait and see’ formation in anticipation of Powell’s speech. I wasn’t even aware that he was scheduled to speak until sometime Friday when I checked the event schedule for the coming week. Which once again speaks to the power of simple price action to tell you what’s up without having to follow a ton of fundamental or macro-economic data.

Since Jerome Powell’s slightly hawkish hearing in Congress the Euro has once again descended lower and in the process managed to trigger a short position I had proposed sometime last week (to the subs that is). It’s a bit too early to move my stop to break/even as price action is choppy and there may be another push higher. As a matter of fact I don’t think the odds are great for this campaign and it only was presented as the potential payoff could be large due to a potential long squeeze scenario. My target range for this campaign would be near 1.2 from where its 100-day SMA currently hails.

Crude is a stop out at about 1R of profits – not much given the time it was active but we always need to adjust our time horizons to the price action and not the other way around. Some symbols move slowly but steadily, some more volatile (BTC sends its regards), and some do both for extended times. Crude isn’t in an easy market regime right now and trading it takes patience. However when it starts trending then it usually makes a b-line for its target range – hopefully we’ll see it switch back to that soon again.

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

Please login or subscribe here to see the remainder of this post.

Published at Wed, 28 Feb 2018 12:32:49 +0000

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Penny Stocks to Watch for March 2018

Penny Stocks to Watch for March 2018

By Alan Farley | Updated February 28, 2018 — 11:00 AM EST

Volatility rose sharply in the first half of February, driven by rising Treasury yields and growing odds that the Federal Reserve will raise interest rates. It’s projected that the Fed will increase rates at least three times in 2018. Major stock indices plummeted in early Feb but eventually found their footing and have now recouped the majority of losses. Even so, it’s likely the broad market has entered a correction or rangebound phase that encourages profit-taking and rotation into new instruments.

The Russell-2000 small-cap index fell more than 11% during the selloff and has now settled in the upper half of a trading range in place since September. Selling pressure spared the majority of penny stocks and low-priced stocks, with profit-taking focused on high growth plays that rallied to unsustainable levels in the January uptrend. A healthy share of freed up capital could rotate into these issues in coming weeks, as speculative appetite returns to normal levels.

February’s watch list performed well given volatile cross-currents. In February, Viking Therapeutics, Inc. (VKTX) was a top penny stock pick and advanced by 30%. Digital Turbine, Inc. (APPS) added more than 16% during the month while Safe Bulkers, Inc. (SB) rose more than 10%. These issues have returned in the March list, along with two February plays that have drawn bullish consolidation patterns. Given the relatively strong performance of industrial plays, the new penny stocks to watch list also includes two stocks that should benefit from new infrastructure spending and the strengthening world economy.

Penny Stocks to Keep Watching

1. Viking Therapeutics, Inc. (VKTX)

Viking Therapeutics, Inc. (VKTXposted an all-time high at $10.23 just a few sessions after coming public at $8.50 in April 2015. The junior biotech stock then turned sharply lower, losing ground into the second half of 2017 when it posted an all-time low at 88-cents. The stock finally ended the multi-year downtrend when it broke out above a trendline of lower lows in September and has now entered a healthy uptrend that could eventually reach the IPO print above $8.00.

2. Westport Fuel Systems, Inc. (WPRT)

Westport Fuel Systems, Inc. (WPRTtopped out at an all-time high in the low-50s in 2012 and rolled over, entering a brutal decline that continued into March 2017’s all-time low at 82-cents. A bounce into October stalled at $4.09, giving way to a rectangular trading range that’s holding support at the 200-day EMA near $2.70. The next bounce could gain traction, lifting the stock back to range resistance, ahead of a breakout that targets the 2015 high at $6.74.

3. Tuesday Morning, Corp. (TUES)

Tuesday Morning, Corp. (TUESended a multi-year uptrend in the low-20s in the fourth quarter of 2014 and entered a decline that reached a 9-year low at $1.60 in June 2017. The stock built a basing pattern at that level and turned higher in August, stalling at the 200-day EMA near $3.00 in September. Two breakout attempts have failed while price action has carved a rectangle pattern with support at $2.40. It’s just rallied to a 4-week high and could break out in coming weeks, reaching broken 2015 support near $5.00.

4. Safe Bulkers, Inc. (SB)

Safe Bulkers, Inc. (SBhit a 5-year high at $11.48 in March 2014 and carved a topping pattern, ahead of a breakdown that escalated in the fourth quarter of 2015, dropping the stock to an all-time low at 30-cents. The subsequent recovery wave eased into a rising channel in April 2016, with that pattern still in force nearly two years later. The uptick stalled at $3.50 in September 2017, generating two failed breakout attempts ahead of a successful February 2018 advance that could now reach channel resistance above $5.00.

5. Digital Turbine, Inc. (APPS)

Digital Turbine, Inc. (APPSgot crushed between 2008 and 2010, dropping from the low-30s to just 75-cents. A recovery rally into 2013 stalled at $6.00, generating a double top pattern and 2015 breakdown that undercut 2010 support, posting an all-time low at 56-cents in November 2016. Constructive price action since that time has reached double top resistance near $2.50 while impressive buying power predicts an eventual breakout. That trend advance has the potential to double the stock’s price in coming months.

New Penny Stock Picks for March

6. Gerdau SA ADS (GGB)

Gerdau SA ADS (GGBposted an all-time high at $26.22 in 2008 and sold off into single digits during the economic collapse. A bounce into 2010 stalled at $17.99, yielding a downtrend that picked up steam between 2013 and 2016, dropping the stock to a 13-year low at 79-cents. The subsequent recovery stalled at $4.30 in December 2016, giving way to an inverse head and shoulders pattern that broke to the upside earlier this month. This breakout could gain traction in coming weeks, underpinned by the likelihood of U.S. steel tariffs and infrastructure legislation.

7. HTG Molecular Diagnostics, Inc. (HTGM)

HTG Molecular Diagnostics, Inc. (HTGMcame public at $14 in May 2015 and topped out quickly at $19.75. The subsequent decline generated a single bounce into February 2017, posting an all-time low at $1.20. A dramatic March buying surge reached $13.25 before rolling over in a long correction that found support near $1.60 in August. The stock turned higher once again in January 2018 and just reversed at the .382 Fibonacci selloff retracement level above $5.00. Look for buyers to return at or above $3.70, igniting a buying surge that could eventually reach the .618 retracement at $8.80.

8. PolyMet Mining, Corp. (PLM)

PolyMet Mining, Corp. (PLMfound support at 46-cents in 2009 following a steep decline from $4.50. The subsequent uptick ended at $3.79 in 2010, yielding 8-years of rangebound action between those price levels. The stock tested range support in 2015 and again in 2017, finally turning higher in December. The rally gained traction into February 2018 and stalled at $1.34, generating a narrow triangle pattern that could yield a rally into the 2011 high at $2.65. Buying power has escalated in recent months, offering the potential for even stronger gains.

9. Civeo, Corp. (CVEO)

Civeo, Corp. (CVEOturned sharply lower just three months after coming public in the low-20s in June 2014, descending in a vertical decline that finally ended at an all-time low under a buck in January 2016. A bounce into 2017 stalled just above $3.50, giving way to a rounded correction that’s now completed an inverse head and shoulders pattern. A breakout will target the unfilled December 2014 gap between 5 and eight but is unlikely to fill the big hole on the first attempt. As a result, taking profits within that price zone makes perfect sense.

10. Telaria, Inc.(TLRA)

Telaria, Inc. (TLRAgapped down between $9.25 and $5.10 in November 2013, establishing a resistance zone that remains in force more than four years later. The subsequent decline posted an all-time low at $1.29 in February 2015, ahead of a base-building period that yielded an August 2017 breakout. The stock reached gap resistance in October and eased into a rectangular pattern that’s still in play. This week’s failed breakout attempt will test bulls’ resolve, with support at $3.52 likely to hold and generate more bullish second-quarter price action.

The Bottom Line

March’s penny stock watch list features many industrial plays that could benefit from U.S. tax cuts, infrastructure spending and strong economic growth around the world.

Published at Wed, 28 Feb 2018 16:00:00 +0000

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Cronos, a marijuana producer, starts trading on the Nasdaq

Sessions to rescind Obama-era marijuana policy
Sessions to rescind Obama-era marijuana policy

Cronos, a marijuana producer, starts trading on the Nasdaq

Canadian marijuana producer Cronos Group started trading on the Nasdaq on Tuesday, marking a big step for the cannabis industry.

Cronos is the first pot producer and seller to trade on Wall Street, though other companies with indirect relations to cannabis are trading.

“We’re the only pure play marijuana company” to be traded on a U.S. exchange, Cronos CEO Mike Gorenstein told CNN.

Analysts called the development a milestone for both Toronto-based Cronos and the entire cannabis industry.

“We imagine the SEC would have gone through a very thorough review/vetting process before allowing a cannabis company to list on a major U.S. exchange,” Vahan Ajamian, an analyst for Beacon Securities, wrote in a note to investors.

Cronos is only involved with countries that do not have a federal ban on marijuana, like Israel, Australia, Germany and Canada, and that probably helped them get approved for the Nasdaq, he said.

Gorenstein said that Cronos exports marijuana to Germany, and is building facilities to grow cannabis in Australia and Israel.

Cronos shares dropped more than 2% on their first day. “Like with any new asset class there’s certainly a lot of volatility,” said Gorenstein, noting that the stock jumped 10% on the Toronto exchange on Monday, and then dipped 2% on Tuesday.

Ajamian said the Nasdaq launch is a big deal for Wall Street because “it alerts the U.S. investors that there’s a federally legal sector [for marijuana] they can invest in.”

Some investors already have. Constellation Brands of New York, an alcohol beverage company with 76 brands including Corona, paid $190 million last year for a 10% stake in Canopy Growth Corp., a Canadian cannabis producer.

Canada is expected to legalize the retail sale of recreational marijuana in August. Gorenstein said his company will produce recreational marijuana when that happens.

Cronos isn’t the only pot-related company to trade on the Nasdaq. The British GW Pharmaceutical(GWPH) has a cannabidiol treatment for epilepsy, and there are several other pot-related stocks, like Innovative Industrial Properties(IIPR), a real estate developer and lessor to pot farmers.

Recreational marijuana is legal in 9 U.S. states and also Washington, D.C., and medical marijuana is legal in 30 states. It’s prohibited by the federal government.

Published at Tue, 27 Feb 2018 23:20:33 +0000

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Nike Stock Hits All-Time High Ahead of March Report


By Alan Farley | February 27, 2018 — 8:38 AM EST

Dow component Nike, Inc. (NKE) shares surged to an all-time high on Monday, rallying above resistance at the December 2015 high. Speculation about March 22 earnings could add to gains between now and then, but the stock has a tendency to shake out buyers after the news, forcing market players to choose their entry prices wisely. Even so, the stars are aligning for a historic breakout that could lift the apparel giant into Dow leadership for the first time since 2014.

The company beat fiscal second quarter EPS and revenue estimates in December’s report but fell more than four points after the news, signaling caution ahead of the March confessional. North American sales growth declined 5% in the prior quarter, but impressive Asian and Latin American metrics made up the shortfall and should keep growth on the fast track throughout 2018. (See also: Inside Billionaire Bill Ackman’s $365 Million Nike Investment: 13F.)

NKE Long-Term Chart (1990 – 2018)

A multi-year uptrend ended out at a split-adjusted $2.82 in 1992, yielding a deep correction that found support at $1.35 in the fourth quarter of 1993. The stock turned sharply higher into the second half of the decade, reaching $9.55 in 1997 and pulling back in a rounded pattern that posted a deep low at $3.22 at the start of the new millennium. Nike shares traded in a narrow trading range during the internet bubble bear market, more than doubling in price but failing to reach the prior decade’s high.

The stock completed the round trip in 2004 and broke out, but momentum failed to develop, generating sideways action into 2006, when it took off in a trend advance. It topped out in the upper teens in 2008 and held up relatively well during the economic collapse, posting a two-year low at $9.56 in March 2009. A quick bounce to a new high in 2010 set the stage for an impressive uptrend that posted returns in excess of 300% into December 2015, when the stock topped out near $70.

Aggressive sellers took control into the second half of 2016, carving a volatile decline that held above the August 2015 low at $47.25. The March 2017 swing high completed the outline of a symmetrical triangle, ahead of a December breakout that has generated an impressive surge into 2015 resistance. This buying power has registered on relative strength indicators, lifting the monthly stochastics oscillator into the first overbought technical reading in more than two years. (For more, see: Nike Declares It Is a Growth Company.)

NKE Short-Term Chart (2016 – 2018)

The correction into 2017 generated four failed attempts to rally above $60, establishing a line in the sand that broke in December 2017. The stock rallied quickly into 2015 resistance and dropped into a small-scale inverse head and shoulders pattern ahead of this week’s buying surge. This classic pattern should resist selling pressure, but a pullback could trade as low as $63 without undermining the bullish long-term outlook.

On-balance volume (OBV) ended a three-year accumulation phase at the end of 2015 and rolled into a distribution phase that continued into October 2017. Buying pressure since that time has failed to reach the prior high and is now flashing a bearish divergence, signaling weak institutional sponsorship. This deficit may increase March volatility and shake out weak hands while adding a cautious note to the upcoming earnings report and its sell-the-news tendency.

Price action since December has carved a rising channel that is easier to visualize on a logarithmic scale chart than an arithmetic scale chart. This pattern establishes short-term support at $63 and short-term resistance at $72. Informed market players will be watching those levels into earnings to gauge buying power and to look for buying opportunities. Conversely, a decline through channel support would have bearish implications, possibly triggering a long-term double top. (See also: Why Netflix, Nike and Starbucks Are Breaking Out.)

The Bottom Line

Nike rallied to an all-time high this week and could gain additional ground ahead of a late March earnings release that may test the resolve of newly minted shareholders. (For additional reading, check out: 12 Stocks That Can Thrive as Economy Gains Speed: Goldman.)

Published at Tue, 27 Feb 2018 13:38:00 +0000

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Global stocks firm, dollar dips before big week for central banks

Global stocks firm, dollar dips before big week for central banks

LONDON (Reuters) – Global stocks notched further gains on Monday and the dollar stayed on the back foot, as investors bet the new head of the U.S. Federal Reserve will steer a steady course on policy when he addresses lawmakers this week.

MSCI’s index of world stocks was up 0.3 percent, with the pan-European Stoxx 600 up 0.6 percent.

Asian markets also rose, with Chinese stocks up 1.2 percent after the ruling Communist Party set the stage for President Xi Jinping to stay in office indefinitely.

Much of the market’s focus during the coming week will be on monetary policy, with the heads of the European Central Bank and Bank of England set to give speeches. But they are likely to be overshadowed by Fed chair Jerome Powell.

U.S. stock markets calmed on Friday after the Fed said it saw steady economic growth continuing and no serious risks on the horizon, a trend that looks set to continue on Monday.

Dow Jones futures pointed to the index opening 0.6 percent higher, with S&P 500 futures up 0.4 percent.

Investors also seem to be wagering that Powell will stick to that script at his first appearance before the House on Tuesday, followed by testimony to the Senate on Thursday.

“Given he’s speaking on behalf of the committee it would be a big surprise to see much deviation from recent Fed commentary, but much will probably be made of how he handles the scrutiny,” said Jim Reid, a macro strategist at Deutsche Bank.

STERLING, EURO GAIN

The expected lack of policy surprises from Powell saw yields on U.S. 10-year Treasuries back off to 2.86 percent and away from a four-year top of 2.957 percent, dragging down the dollar.

The currency surrendered early gains to dip 0.2 percent against a basket of currencies to 89.68. That followed a 0.8 percent bounce last week.

Sterling was up 0.5 percent on Monday after Bank of England deputy governor Dave Ramsden said the bank might need to raise interest rates somewhat sooner than he had expected if wage growth picked up early this year.

The pound also benefited from hopes that Britain’s exit from the European Union might be less disruptive than feared, after opposition leader Jeremy Corbyn gave a speech on Monday backing a new customs union with the bloc.

The euro was 0.3 percent firmer on the back of dollar weakness, though investors largely held back from taking big positions ahead of a national election in Italy and the conclusion of coalition talks in Germany.

ECB President Mario Draghi is also set to appear before the European Parliament later in the day, while BoE governor Mark Carney speaks in Edinburgh on Friday.

In commodities, oil prices steadied after hitting their highest level in nearly three weeks, supported by comments from top exporter Saudi Arabia that it would continue to curb shipments in line with the OPEC-led effort to cut global supplies.

Reporting by Alasdair Pal, Additional reporting by Wayne Cole in Sydney; Editing by Matthew Mpoke Bigg

Published at Mon, 26 Feb 2018 12:39:53 +0000

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Avoid FANG Stocks Until Summer

Avoid FANG Stocks Until Summer

By Alan Farley | February 23, 2018 — 9:10 AM EST

FANG stocks sold off with the broad market into February, caught in a profit-taking wave after months of positive price action. They’ve bounced strongly off monthly lows in the past two weeks but are unlikely to reward newly minted shareholders with breakouts. More likely, the fabulous quartet has entered a consolidative phase that limits gains into the third quarter, making it tough to recommend opening or adding to positions.

Amazon.com, Inc. (AMZN) and Netflix, Inc. (NFLX) have bounced higher than Apple Inc. (AAPL) or Facebook, Inc. (FB), but don’t be fooled by minor thrusts to new highs. V-shaped patterns rarely generate new trends immediately, often reversing as soon as weak hands forget their discipline and take exposure. Deep pullbacks can follow, often testing prior lows before strong-handed buyers retake control. (See also: Hedge Fund Billionaires Bullish on FANG and Retail Stocks: 13F.)

Amazon stock broke out above a six-year rising trendline in January 2018 and surged higher, gaining more than 300 points in just five weeks. It then dropped 230 points in six sessions, trapping late-to-the-party trend followers. The subsequent bounce exceeded the prior high by five points and stalled out, ready to generate a fresh trend advance or downswing that traps complacent bulls.

The sell-off found support at the 50-day exponential moving average (EMA), which has jumped nearly 50 points to $1,330 in the past nine sessions and will soon reach the .618 Fibonacci rally retracement at $1,350. That harmonic zone looks like a minimum target for the next pullback, if it comes, with a bounce generating a strong uptick and breakout while a failure would signal the next leg of a correction that targets $1,100. (For more, see: Amazon Launches Its Own Line of OTC Drugs.)

Netflix shares broke out above October resistance at $205 in early January and took off on a trend advance that added more than 80 points. The decline into February relinquished 50 points, ahead of a bounce that stalled at range resistance earlier this week. The stock fell to a four-day low on Thursday, posting a minor sell signal that could presage a trip down to $250 in the coming weeks.

The Jan. 23 gap between $228 and $248 is partially unfilled and could act as a magnetic target, bringing the Feb. 9 low back into play. Alternatively, a narrow range consolidation lasting another one to three weeks could negate the bearish scenario, yielding a secondary breakout into the $300s. Whatever the outcome, there’s no good reason to jump on board right here, given volatile cross-currents. (See also: The Top 3 Netflix Shareholders.)

Apple stock plunged from an all-time high to a four-month low, bouncing at September support near $150 on Feb. 9. It has squeezed short sellers in the past week, carving a vertical bounce that has stalled at the .786 Fibonacci sell-off retracement level just above $170. A week of narrow range action has failed to move the needle, establishing a deadlock that favors a downturn into the Feb. 15 gap between $167.50 and $169.50.

That level has aligned with fourth quarter range support and the 50-day EMA, establishing a line in the sand that bulls need to hold at all costs or risk a slide back to the monthly low near $150. On-balance volume (OBV) has taken a major hit since topping out in November, signaling the reluctance of institutions to add exposure, given the company’s slowing growth curve. The recent bounce has failed to alleviate this bearish divergence. (See also: Apple Wants to Buy Cobalt Directly From Miners: Report.)

Facebook shares have carved the weakest pattern in the quartet, turning sharply lower after posting an all-time high at $195.32 on Feb. 1. The stock failed a channel breakout two sessions later, dropping nearly 30 points to a four-month low at the 200-day EMA. The subsequent bounce stalled under the 50-day EMA a week ago, with that level now aligned at the 50% sell-off retracement.

The recovery effort could reach stronger resistance in the $180s or roll over here, generating a test of the corrective low. The stock has not traded under the 200-day EMA in 14 months, adding importance to that support level, with a breakdown opening the door to $150. Given the high stakes, informed market players will likely keep their powder dry, allowing other traders to risk their hard-earned capital. (For more, see: Why Facebook’s Rally Is Lagging the Techs.)

The Bottom Line

FANG stocks have bounced off corrective lows but are unlikely to enter new uptrends in the coming weeks. More likely, they’ll carve range-bound patterns into the second half of 2018, working off overbought technical readings following months of higher prices. (For additional reading, check out: Facebook and Google’s Days Are Numbered: Soros.)

Published at Fri, 23 Feb 2018 14:10:00 +0000

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First Solar Breaks Down but Could See Near-Term Support

First Solar Breaks Down but Could See Near-Term Support

By Justin Kuepper | February 23, 2018 — 2:56 PM EST

First Solar, Inc. (FSLR) shares fell nearly 8% by midday on Friday after the company reported worse-than-expected fourth quarter financial results. Revenue rose 2.5% to $339.18 million – missing consensus estimates by $120.74 million – while net losses of 25 cents per share beat consensus estimates by six cents per share. Despite the lower systems and third-party module sales, the company raised its guidance on full-year revenue, EPS and shipments.

Analysts remain bullish on the stock despite the somewhat-expected drop in revenue. Deutsche Bank analyst Vishal Shah believes that the stock has “plenty of upside left” with the S6 ramp-up on track and sold-out production through the first half of 2020. He also indicated that there could be further earnings upside in 2019 through 2020 and reiterated the firm’s Buy rating on First Solar shares with a $75.00 price target, which represents a 23% premium to the current $61.00 market price. (See also: 6 Favorite Buys of a Top-Rated Stock Picker.)

Technical chart showing the performance of First Solar, Inc. (FSLR) stock

From a technical standpoint, the stock nearly touched the 50-day moving average at around $68.00 earlier this month before taking a turn lower. The relative strength index (RSI) fell near oversold levels of 35.13, while the moving average convergence divergence (MACD) experienced a bearish crossover. Although the price action has been bearish, the stock has some near-term support levels that could suggest consolidation ahead.

Traders should watch for some consolidation above trendline and S2 support levels at around $59.37 before a potential move higher. If the stock rebounds from these levels, traders should watch for a breakout from S1 resistance at $63.27 to retest the 50-day moving average. If the stock breaks down from these levels, traders should watch for a move to the 200-day moving average at $52.52, where it could see some support. (For additional reading, check out: The History of First Solar.)

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

Published at Fri, 23 Feb 2018 19:56:00 +0000

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With $116 billion cash, Buffett says Berkshire needs ‘huge’ deals

With $116 billion cash, Buffett says Berkshire needs ‘huge’ deals

NEW YORK (Reuters) – Warren Buffett on Saturday lamented his inability to find big companies to buy and said his goal is to make “one or more huge acquisitions” of non-insurance businesses to bolster results at his conglomerate Berkshire Hathaway Inc.

In his annual letter to Berkshire shareholders, Buffett said finding things to buy at a “sensible purchase price” has become a challenge and is a major reason Berkshire is awash with $116 billion of low-yielding cash and government bonds.

Buffett said a “purchasing frenzy” binge by deal-hungry chief executives employing cheap debt has made that task difficult. Berkshire typically pays all cash for acquisitions.

“Our smiles will broaden when we have redeployed Berkshire’s excess funds into more productive assets,” Buffett wrote. “Berkshire’s goal is to substantially increase the earnings of its non-insurance group. For that to happen, we will need to make one or more huge acquisitions.”

The letter was considerably shorter than in recent years, a little over 8,000 words compared with more than 14,000 last year, and did not discuss major Berkshire stock holdings such as Apple Inc and Wells Fargo & Co. Buffett often invests in stocks when he cannot find whole companies to buy.

It was also short on faulting excesses of Wall Street and Washington, and said nothing about Berkshire’s plan to create a healthcare company with Amazon.com Inc and JPMorgan Chase & Co.

At age 87, “he doesn’t want to make any enemies,” said Bill Smead, chief executive of Smead Capital Management in Seattle, a Berkshire investor.

Berkshire also posted a record $44.94 billion annual profit, though $29.1 billion stemmed from the slashing of the U.S. corporate tax rate, which reduced the Omaha, Nebraska-based conglomerate’s deferred tax liabilities. Book value per share, measuring assets minus liabilities, rose 23 percent in 2017.

ABEL, JAIN

It has been more than two years since Buffett made a major purchase, the $32.1 billion takeover of aircraft parts maker Precision Castparts Corp, and his advancing age gives him less time to find more of the “elephants” he prefers.

But he has given himself and longtime Vice Chairman Charlie Munger, 94, more freedom to focus on investing and allocating capital.

Neither has signaled any intention of stepping down soon, though Berkshire last month named two additional vice chairmen who could eventually succeed Buffett as chief executive.

Gregory Abel, who had run Berkshire Hathaway Energy, is now overseeing Berkshire’s non-insurance businesses such as the BNSF railroad and Dairy Queen ice cream, all of which employ 330,000 people, while insurance specialist Ajit Jain oversee the Geico auto insurer and other insurance businesses, employing 47,000.

“Berkshire’s blood flows through their veins,” Buffett wrote.

APPLE

While the Wells Fargo investment has struggled in recent months because of scandals over how it treats customers, Apple has performed better.

Buffett revealed in his letter that Berkshire was sitting at year end on a $7.25 billion paper profit on what has become a 3.3 percent stake in the iPhone maker, worth $28.2 billion.

Some Berkshire stock investments are made by deputies Todd Combs and Ted Weschler, who Buffett said together manage about $25 billion, up from $21 billion a year ago.

Buffett also warned long-term investors including pension funds, college endowments and “savings-minded individuals” that even with U.S. stock prices near record highs, it would be a “terrible mistake” to assume bonds are safer.

“Often, high-grade bonds in an investment portfolio increase its risk,” he wrote.

Fourth-quarter net income quintupled to $32.55 billion, or $19,790 per Class A share, from $6.29 billion, or $3,823 per share, a year earlier.

Operating profit, which Buffett considers a better gauge of performance, fell more than analysts expected in the fourth quarter, and slid 18 percent for the year to $14.46 billion.

Full-year results suffered from Berkshire’s first full-year insurance underwriting loss since 2002, hurt by Hurricanes Harvey, Irma and Maria and wildfires in California.

Even so, insurance float, or premiums collected before claims are paid, and which give Buffett more money to invest, rose 25 percent last year, to $114.5 billion.

Reporting by Trevor Hunnicutt and Jonathan Stempel; Editing by Jennifer Ablan and Diane Craft

Published at Sun, 25 Feb 2018 15:15:56 +0000

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Walmart Stock Nears Key Support After Earnings Miss

Walmart Stock Nears Key Support After Earnings Miss

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

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

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

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

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

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

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

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

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Stocks Post Strong Recovery Following Market Drop

Stocks Post Strong Recovery Following Market Drop

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

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

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

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

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

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

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

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

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

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

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

The Bottom Line

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

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

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

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Gauging the Strength of a Market Move

Gauging the Strength of a Market Move

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

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

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

Opening Range

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

040704_1.gif

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

Monthly and Half-Yearly Opening Range

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

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

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

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

Pivot Vs. Pivot Range

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

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

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

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

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

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

040704_2.gif

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

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

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

Three-Day Rolling Pivot

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

040704_3.gif

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

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

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

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

Putting It All Together

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

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

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

The Bottom Line

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

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

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

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

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

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

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

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

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

The big question is: what comes now?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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