Indices Technical Analysis - page 10
You are missing trading opportunities:
- Free trading apps
- Over 8,000 signals for copying
- Economic news for exploring financial markets
Registration
Log in
You agree to website policy and terms of use
If you do not have an account, please register
Forum on trading, automated trading systems and testing trading strategies
Press review
mazennafee, 2014.07.30 15:31
Why It Is Often Better To Follow, Not Fight, Trends: Windstream Holdings
At the time of writing, Windstream Holdings, Inc. (NASDAQ:WIN) is surging 23.3% on news that the company received a favorable ruling from the IRS to convert to a REIT. From the press release:
WIN is a high-dividend paying stock that has been on a tear since early February and a nasty five-year low. This punctuated a downtrend in place since early January, 2011 and accelerated in May, 2012. The two trends are great examples of the benefits of following trends with the uptrend providing the best opportunity.
On the downtrend, WIN moved widely from lows to highs and shorts had to have stomachs of steel to hang on. As is often the case with shorting, fading at resistance worked best for this downtrend channel. The uptrend that finally developed was a distinct contrast with its orderly march higher and very neat and successful retests of important support at the 50 and 200-day moving averages (DMAs). I have the benefit of hindsight of course, but if I were short the stock, the extended trading range for most of 2013 would have encouraged me to bail at some point. Bolder shorts who were patient enough to hold on for the 2014 low could have bailed just based on the stock’s history of swinging wildly from lows to highs. Certainly, the breakout above the 50 and then 200DMA should have put shorts on notice with the first successful retest being the final warning. The last 50DMA breakout was different than the others in 2013 as it was accompanied by heavy buying volume – an early warning signal.
A persistent, yet highly volatile, downtrend until 2014′s low….
A high-volume breakout was an early signal of the high likelihood of the end of the downtrend(s)
Source: FreeStockCharts.com
The downtrend caught the attention of a growing number of shorts. In almost two years, shares short grew about 44%. Soon after the 2014 low, shorts finally began to back off; these early exiters perhaps saw the writing on the wall. Perhaps they bailed on the technical signal of 2013′s consolidation range breaking to the upside.
After a steady surge, aggressive shorts finally began to back-off WIN after the 2014 low
To make things interesting and more complicated, some ill-timed bear(s) or someone looking for major protection, sent the put/call ratio soaring in June. Open interest on the August $9 put soared from near nothing to over 10,000 on June 18th. This formed a distinct contrast to the 14,000 options of open interest in the January $10 call. These calls were in steady accumulation from early 2013 and well into this year.
An ill-timed move as the open interest put/call ratio surges in June
A rush to bet on a collapse or for protection…?
Slow and steady, traders/investors in long-term call options win the day
Source for options charts: Etrade.com
The trader(s) loading up on puts last month made a classic error in fighting the trend. However, I can imagine if I saw it happen in the moment, I might have jumped to the conclusion that someone “knows” something very bearish to WIN. Yet, the trader(s) steadily accumulating long-term calls were doing so despite the downtrend. In a way, the extended record of this buying could have outweighed the very short-term signal of the panic rush to grab puts expiring in a month. This represents a very mixed lesson and knowing who was the “smart” trader/investor is only clear with hindsight. Options trading is always difficult to interpret; doing so is much more an art than a science!
In my case, I had invested in WIN based on the dividend. At the time, I was on the lookout for high-yielding plays, especially in telco/communications, that offered discounts from sell-offs. WIN obliged back in May, 2012 and I was in. (I know, I know. The irony of a habitual contrarian giving a lecture on trend-following!) I felt brilliant at the time because the stock soon bottomed and rallied over the next month. My decision to hold since then was mostly based on using the high dividend as a buffer. I WISH I could say that I used the interesting technical and sentiment analysis above. It would have greatly informed my thinking on the stock! At least I held through the uptrend despite constant nagging in my head to sell. Instead, I decided to let the trend run its course…hoping that I would get a “good enough” signal whenever the trend came to an end.
Regardless, it was a no-brainer for me to sell into today’s surge and lock in profits; combined with the juicy dividend, this turned into a great longer-term trade/investment. No need to be a pig here. I still find WIN interesting and will definitely consider re-entering if the stock suffers another severe setback as its history suggests is bound to happen. However next time, I will conduct a more thorough (and more typical) battery of technical tests.
Be careful out there!
Full disclosure: no positions
Forum on trading, automated trading systems and testing trading strategies
Press review
mazennafee, 2014.07.30 15:32
Is The Luxury Goods Business In Deep Trouble?
Kanye West—the hip hop artist whose number-one hit “Gold Digger” epitomized the blingy excesses of the mid-2000s—made news earlier this month by going on an anti-luxury-good tirade:
“It’s like [luxury brands and retailers] want to steal you from you, and sell you back to you after they stole it… They want to make you feel like you less than who you really are.”
If Kanye West is really turning his back on conspicuous consumption, it is a sign of one (or all) of three things:
While the first two explanations are definitely plausible, I’m going to focus on the third. It’s been rough for luxury retailers of late. Coach (NYSE:COH) has seen its U.S. domestic sales virtually collapse as upstartMichael Kors (NYSE:KORS) has crowded its turf. But even Kors has hit something of a brick wall of late, and its share price has heading lower since late May on valuation concerns and lower margins.
Going higher upmarket, you see a slightly different dynamic. Luxury leather goods and drinks conglomerate LVMH Moet Hennessy Louis Vuitton(PARIS:LVMH), high-end watchmaker Swatch Group I (SIX:UHR) and Remy Cointreau (PARIS:RCOP) has also seen uneven growth over the past two years, though the primary driver here was a crackdown by the Chinese government on bribery and excessive gift giving.
Returning stateside, the simplest explanation for Big Luxury’s woes are simple supply and demand. There are more luxury brands than ever competing for a customer pool that has been forced to scale back its buying due to years of high unemployment and sluggish economic growth.
But might the winds of fashion be changing as well? And could demographic trends be at play?
Let’s break down America by its major demographic groups. Though U.S. stocks have long since blown past their pre-crisis highs, and home prices have recovered substantially in most markets, the 2008 meltdown and Great Recession that followed were devastating to the retirement plans of many Baby Boomers. The Boomers are more focused than at any point in their lives on securing their nest eggs for retirement. Bling spending is simply not a priority for all but the highest-income Boomers.
And my generation—Generation X? Gen Xers are now in the primes of their careers, earning more than they ever have. Unemployment among Gen Xers is the lowest of all major demographic groups. But Gen Xers also got hit the hardest during the housing bust, as they were the most likely to be recent buyers with large mortgages, and Gen Xers are at the stage of life in which most disposable income gets spent on their kids. And let’s not forget, the Gen Xers are a significantly smaller generation than the Boomers they followed.
That leaves the Millennials. Millennials are, as a general rule, known for being a little flashier and more brand conscious than Gen X, but this is also the generation that has most embraced the bearded hipster movement.
Hipsters are an odd lot. They eschew branded goods yet will pay a large premium for hybrid automobiles, organic groceries and even organic cotton clothes. (Seriously guys, last I checked you weren’t supposed toeat your t-shirts. Not sure I understand the appeal here.)
Somehow, hipsters have turned antibranding into a brand that they are willing to pay a premium to own. And their tastes are gradually going mainstream.
What is means is that “luxury goods” are not dying, but the notion of what constitutes a luxury good is. Americans are still willing to pay a premium for things that they value. It just happens that they are increasingly valuing different things.
Earlier this year, I wrote about the business of organic groceries, though I stopped short of recommending the stocks of Whole Foods (NASDAQ:WFM) due to valuation concerns and the reality that groceries are a rotten business. But I do believe that “upscale” fast food restaurants likeChipotle Mexican Grill (NYSE:CMG) are attractive stocks to buy on dips. Chipotle has seen mild margin compression due to rising food costs but remains wildly profitable and continues to add new locations.
Where does this leave the traditional luxury goods makers? Clearly, not all young Americans with higher-than-average incomes are bearded, brand-eschewing hipsters. I expect to see the industry return to more consistent growth as the economy continues to heal and as unemployment drops.
But China remains the real wildcard. As goes China, as goes the luxury industry. If China can avoid a true hard landing—and if the bling crackdown proves to be a short-term blip, like previous crackdowns—then the luxury goods makers should enjoy a solid finish to 2014 and a strong 2015. I don’t consider LVMUY, SWGAY or REMYF to be screaming buys at current prices, but I would consider all three to be good stocks to consider on any substantial pullbacks.
Disclosure: Charles Lewis Sizemore, CFA, is the editor of Macro Trend Investor and chief investment officer of the investment firm Sizemore Capital Management. Click here to receive his FREE weekly e-letter covering top market insights, trends, and the best stocks and ETFs to profit from today’s best global value plays.
Forum on trading, automated trading systems and testing trading strategies
Press review
mazennafee, 2014.07.30 15:38
Why Yelp Might Be Ripe For A Takeover After Earnings
Yelp Inc. (NYSE:YELP) is set to report FQ2 2014 earnings after the market closes on Wednesday, July 30th. Yelp is a restaurant and business reviews platform which offers outstanding search functionality and a great mobile experience. Formidable revenue growth from Google Inc (NASDAQ:GOOGL) and Facebook Inc (NASDAQ:FB) has demonstrated there is vigorous demand in the market for mobile advertisements. The question this week is, can any other social media companies keep up with the breakneck pace that Facebook has set?
This quarter 37 contributing analysts on Estimize.com have come to a consensus earnings expectation of -1c EPS and $87.04M in revenue compared to a consensus of -3c EPS and $86.43M from Wall Street. Over the previous 6 quarters the Estimize community has been more accurate than Wall Street in forecasting Yelp’s revenue every quarter and has been more accurate on earnings per share once.
Yelp has struggled with profitability since first revealing its financial information when it became a publicly traded company. Although Yelp has became the de-facto leader in restaurant ratings, reviews, and search, the company has not posted a single break-even quarter since its IPO. Through its checkered and brief history Yelp has missed the Estimize earnings consensus 4 times, and only topped it once. Consistent revenue growth and persistent takeover speculation have kept Yelp in focus as one of the most talked about stocks on the market.
On crowdsourced mergers and acquisitions platform, Mergerize.com, Yelp is the single most predicted takeover target with 22 predictions made. We have already seen plenty of merger and acquisition activity this year, especially in the biopharmaceuticals.
It’s believed that many of the food-tech platforms may be ripe for consolidation. There are tremendous economies of scale within the industry and the individual platforms tout millions of users each. As companies such as Yelp, GrubHub, and OpenTable onboard a critical infrastructure of restaurants and users, they become valuable strategic assets to other online advertisers. OpenTable was the first domino to fall back in June when the company was acquired by Priceline.com for a deal valued a $2.6 billion, a 46% premium to OpenTable’s stock price at the time.
The most common prediction about Yelp on Mergerize is that Yahoo may set its sights on the restaurant ratings and reviews website as soon as Alibaba (BABA) has its IPO sometime after Labor Day. The average price predicted for Yahoo to acquire Yelp on Mergerize is $8.67 billion, a 57% premium on Yelp’s current $4.93 billion market capitalization.
When Alibaba finally does go public, Yahoo! Inc (NASDAQ:YHOO) will be forced to sell a significant portion of its stake in the Chinese e-commerce behemoth. Yahoo CEO Marissa Mayer has promised to return half the proceeds of the Alibaba stake to shareholders, the other half will remain as a bankroll for Yahoo to go shopping.
Since joining Yahoo 2 years ago, Marissa Mayer has been pounding the table about her strategy of capturing daily user engagement on mobile devices. The shocking and terrific results from Facebook’s mobile advertising business suggest that she might have the right idea. Yelp would be a tailored fit to Yahoo’s portfolio of mobile brands and services that also aligns nicely with Mayer’s strategy of daily mobile engagement. Yahoo already has an established mobile advertising business, and Yelp could provide Yahoo with a much needed opportunity for revenue growth.
Estimize.com ranks and allows the sorting of analysts by accuracy. The analyst with the lowest error rate on Yelp is a consumer discretionary sector professional who goes by the username sana5000. Over 2 previously scored estimates on Yelp sana5000 has averaged an error rate of 10.6%. Estimize is completely open and free for anyone to contribute, and the base of contributing analysts on the platform includes hedge fund analysts, asset managers, independent research shops, non professional investors, and students.
The Estimize consensus was more accurate than the Wall Street consensus 65% of the time last quarter on the coverage of nearly 1000 stocks. A combination of algorithms ensures that the data is not only clean and free from people attempting to game the system, but also weighs past performance and many other factors to gauge future accuracy.
Contributing analysts on the Estimize.com platform are forecasting that on Wednesday Yelp will lose 2c per share fewer than Wall Street is predicting and beat the Street’s revenue consensus by a gap of less than $1 million. The Estimize community is expecting Yelp to post year over year revenue growth of 58% while the 1c loss per share remains unchanged compared to the same period of last year.
If Yelp’s earnings remain in a perpetual holding pattern and the stock price fails to push higher, the company may be looked at as a strategic acquisition sometime later this year.
Forum on trading, automated trading systems and testing trading strategies
Press review
mazennafee, 2014.07.30 15:40
UPS Slides Below 200-Day Moving Average
This morning, the leading package delivery company United Parcel Service, Inc. (NYSE:UPS)) is declining lower by $3.53 to $99.21 a share. Earlier today, the company reported earnings that were lower than the estimates, Q2 profit fell by 58.0 percent. United Parcel Service, Inc. lowered its full-year outlook for adjusted earnings to $4.90 to $5 a share from $5.05 a share. Traders and investors should now note that the current stock price is now trading below the important 50, and 200-day moving averages. These moving averages are watched closely by many institutional and retail stock traders. Often, when a stock declines below these moving averages it is viewed as a weak technical chart position for the stock. Traders and investors should now watch the $94.00 level as the next important near term support area. This support level on the chart was a prior pivot in February 2014. It should be noted that prior chart pivots will usually be defended by the institutional money when retested.
Forum on trading, automated trading systems and testing trading strategies
Press review
mazennafee, 2014.07.30 15:44
Daily Market Commentary: Bears Return
he day started well (for bulls) with some early follow through upside, but it wasn't long until bears were trying their hand again.
The S&P may have registered a channel breakdown. There was a close below channel support, although the day's low did not violate the low from yesterday. There was a marked rise in volume, confirming distribution.
There was also a distribution day for the NASDAQ Composite, but there was no support violation. The index continues to edge a relative advantage over the S&P, and maintains support of its 50-day MA. Bulls still have the edge here.
The Russell 2000 edged a higher close, but the retracement of early gains suggests the retest of the 1,131 swing low isn't done yet. However, it's near enough to the 200-day MA to suggest there is still support available, and buyers may still get a low risk bargain - although one solid sell off day would probably be enough to kill the long play.
The odd index out was the Nasdaq 100: minor losses on low volume, with room to nearest support at the 20-day MA. Nothing bearish here.
Bulls may still be able to hold their nose and buy here, but you wouldn't want to hold for long if sellers were to push markets down at least 1%, particularly for the S&P as it would confirm the channel breakdown.
Forum on trading, automated trading systems and testing trading strategies
Press review
mazennafee, 2014.07.30 17:54
Today's Trading Plan: News Driven Market
Pre-market update:
Economic reports due out (all times are eastern): MBA Purchase Applications (7), ADP Employment Report (8:15), GDP (8:30), EIA Petroleum Status Report (10:30), FOMC Meeting Announcement (2)
Technical Outlook (SPX):
My Trades:
Chart for SPX:
Forum on trading, automated trading systems and testing trading strategies
Press review
mazennafee, 2014.07.30 17:55
Delta Might Be Great Pick
One stock that might be an intriguing choice for investors right now is Delta Air Lines Inc. (NYSE:DAL). This is because this security in the Transportation-Airline space is seeing solid earnings estimate revision activity, and is in great company from a Zacks Industry Rank perspective.This is important because, often times, a rising tide will lift all boats in an industry, as there can be broad trends taking place in a segment that are boosting securities across the board. This is arguably taking place in the Transportation-Airline space as it currently has a Zacks Industry Rank of 19 out of more than 250 industries, suggesting it is well-positioned from this perspective, especially when compared to other segments out there.
Meanwhile, Delta is actually looking pretty good on its own too. The firm has seen solid earnings estimate revision activity over the past month, suggesting analysts are becoming a bit more bullish on the firm’s prospects in both the short and long term.
In fact, over the past month, current quarter estimates have risen from $1.13 per share to $1.21 per share, while current year estimates have risen from $3.10 per share to $3.24 per share. This has helped DAL to earn a Zacks Rank #1 (Strong Buy), further underscoring the company’s solid position.
So, if you are looking for a decent pick in a strong industry, consider Delta. Not only is its industry currently in the top third, but it is seeing solid estimate revisions as of late, suggesting it could be a very interesting choice for investors seeking a name in this great industry segment.
Forum on trading, automated trading systems and testing trading strategies
Press review
mazennafee, 2014.07.30 17:57
Should You Buy Exxon Ahead Of Earnings?
Investors are always looking for stocks that are poised to beat at earnings season and Exxon Mobil Corporation (NYSE:XOM) may be one such company. The firm has earnings coming up pretty soon, and events are shaping up quite nicely for their report.
That is because Exxon Mobil is seeing favorable earnings estimate revision activity as of late, which is generally a precursor to an earnings beat. After all, analysts raising estimates right before earnings—with the most up-to-date information possible—is a pretty good indicator of some favorable trends underneath the surface for XOM in this report.
In fact, the Most Accurate Estimate for the current quarter is currently at $1.92 per share for XOM, compared to a broader Zacks Consensus Estimate of $1.91 per share. This suggests that analysts have very recently bumped up their estimates for XOM, giving the stock a Zacks Earnings ESP of 0.52% heading into earnings season.
Why is this Important?
A positive reading for the Zacks Earnings ESP has proven to be very powerful in producing both positive surprises, and outperforming the market. Our recent 10-year backtest shows that stocks that have a positive Earnings ESP and a Zacks Rank #3 (Hold) or better show a positive surprise nearly 70% of the time, and have returned over 28% on average in annual returns.
Given that XOM has a Zacks Rank #2 (Buy) and an ESP in positive territory, investors might want to consider this stock ahead of earnings. Clearly, recent earnings estimate revisions suggest that good things are ahead for Exxon Mobil, and that a beat might be in the cards for the upcoming report.
Forum on trading, automated trading systems and testing trading strategies
Press review
mazennafee, 2014.07.30 17:58
Xerox Soars To 52-Week High — Revised
Information technology services provider Xerox Corporation (NYSE:XRX) recently hit a new 52-week high of $13.29 on Jul 25, 2014, before closing the trading session a notch lower at $13.15. This translates to a healthy one-year return of 36.3%.
Xerox’s share price has been on a steady uptrend since Feb 2014. Despite its strong price appreciation, this Zacks Rank #2 (Buy) stock still has enough fundamentals that may further drive its price upward. The stock is currently trading at a forward P/E of 11.9x and has a long-term earnings growth expectation of 7.3%.
Growth Drivers
Xerox reported adjusted earnings (from continuing operations) of $322 million or 27 cents per share in the second quarter of 2014 compared with $345 million or 27 cents per share in the year-earlier quarter. Adjusted earnings for the reported quarter marginally exceeded the Zacks Consensus Estimate by a penny.
Revenues from the Services segment, which include Document Outsourcing (DO), Business Process Outsourcing (BPO) and Information Technology Outsourcing (ITO), increased 2% year over year to $2,992 million in the reported quarter (57% of total revenues). While revenues from DO, ITO and BPO increased due to growth in commercial healthcare and commercial European BPO businesses, improvement in Europe and strength in healthcare offerings further bolstered the segment’s top-line growth.
Xerox expects the Services segment to fetch 66% of its total revenues by 2017, up from 55% in 2013. To achieve this objective, Xerox is focusing more on vertical markets like healthcare. Xerox recently secured an estimated $500 million worth contract to replace New York's Medicaid management system, according to a Bloomberg report.
New York’s Medicaid program, which includes $52 billion of annual billings by health care providers, is the biggest in the nation. Xerox’s selection as the vendor for the state may open doors to more lucrative opportunities for the document imaging giant, once the other states follow New York’s footsteps and revamp their Medicaid payment systems.
The company has already begun to reap huge benefits from the Medicaid Management Information System (MMIS) through its successful implementation and CMS (Centers for Medicare and Medicaid Services) Certification programs. Also, Xerox is looking forward to expand its offerings through inorganic measures to add more clients to its portfolio.
Other Stocks to Consider
Xerox currently has a Zacks Rank #2 (Buy). Other stocks that look promising in the industry include Canon Inc. (NYSE:CAJ), which carries a Zacks Rank #1 (Strong Buy) and AMTEK Inc. (NYSE:AME) and Ricoh Co., Ltd. (TOKYO:7752), both carrying a Zacks Rank #2 (Buy).
(We are reissuing this article to correct a mistake. The original article, issued on July 28, 2014, should no longer be relied upon.)
Forum on trading, automated trading systems and testing trading strategies
Press review
mazennafee, 2014.07.30 17:59
Zillow’s Offer For Trulia Is A Hail Mary
Zillow (NASDAQ:Z) agreed on Monday to acquire fellow real estate listing site Trulia (NYSE:TRLA) for $3.5 billion in an all stock deal. TRLA shareholders will receive 0.444 shares of Z for each share they hold, which should increase Z’s outstanding shares by about 41%.
The market has reacted enthusiastically to this deal. Z is up roughly 20% since the news of the potential acquisition first broke. TRLA is up 55%, and has a further 10% to go to meet the stated acquisition price.
Most analysts have hailed the deal as one that will give the combined company massive pricing power and make it the dominant player in online real estate listing. However, analysts have overstated the positives and significantly understated the risks from this acquisition.
Burning Cash
Both Z and TRLA have had consistently negative free cash flow, which they finance by further diluting their shareholders. Between 2011 and 2013, Z increased its total shares outstanding by ~38%. TRLA increased its shares by 34%. Both companies are aggressively diluting shareholders to fund their operating losses.
Z’s acquisition of TRLA is an acceleration of this trend. This acquisition will dilute the stock by a further 40%, and the combined company should, at least at first, burn even more cash. Both companies are already operating at a loss, and acquisition costs in the first year will use up additional cash. Z appears far from done with losing money and diluting investors.
Why Investors Are Excited
A combined Z and TRLA would have a dominant market share in the online real estate market, up to 71% according to some sources. Already some are predicting that Zillow could become “the Facebook of homes”, a place where every home’s information has to be if it wants to sell.
Investors are also predicting an earlier path to profitability if the companies combine. Management has projected $100 million in cost savings once the acquisition is complete, and increased pricing power is also expected.
Why This Deal is A Hail Mary
Even if this deal works out as analysts hoped, the profit growth expectations implied by Z’s valuation are already tremendous. In order to justify its valuation of $150/share, Z must earn pre-tax margins of 20%, equivalent to what it earned in 2011, its most profitable year, and grow revenue by 44% compounded annually for 10 years.
Like many fast-growing internet companies, Z has forgone profits recently in order to achieve revenue growth. In 2013, it spent almost $160 million on the discretionary items “Sales and Marketing” and “Technology and Development”. These two items comprised 80% of revenue.
Compare this to 2011, when Z spent only 60% of revenue on those two items and managed to earn a 20% pre-tax margin. Essentially, Z’s valuation implies that it will be able to absorb TRLA, scale back spending on marketing and development by 25%, and still grow revenues at a rapid clip.
Additionally, there’s good reason to believe that Z won’t be nearly as powerful or profitable after the acquisition as analysts are projecting. The companies have acknowledged that combined they still only account for 4% of U.S. real estate marketing spending, and Citron Research has raised some interesting questions as to whether the combined company would actually gain pricing power.
It’s entirely possible that Z could complete this acquisition, become a dominant force in real estate, and make shareholders lots of money. Just like it’s possible for a quarterback to run around for 15 seconds, launch a 70-yard bomb into the end zone, and win the game. Sometimes it happens. More often, though, something goes wrong. The odds are against Z shareholders on this one.
Sam McBride contributed to this report.
Disclosure: David Trainer and Sam McBride receive no compensation to write about any specific stock, sector, or theme.