A recent breakout sets shares up for a rally to last year’s highs and possibly beyond. As the broader market moves sideways in a fairly tight range, we must dig a little deeper for opportunities. After all, quiet markets let the underlying conditions develop away from prying eyes. #-ad_banner-#And as the market awaits Friday’s speech by Federal Reserve Chief Janet Yellen — where everyone hopes to get a clue as to when interest rates will finally be raised — the auto sector is showing some quiet strength. We are seeing short-term rallies in automakers, parts suppliers and tire makers.  Today’s… Read More

A recent breakout sets shares up for a rally to last year’s highs and possibly beyond. As the broader market moves sideways in a fairly tight range, we must dig a little deeper for opportunities. After all, quiet markets let the underlying conditions develop away from prying eyes. #-ad_banner-#And as the market awaits Friday’s speech by Federal Reserve Chief Janet Yellen — where everyone hopes to get a clue as to when interest rates will finally be raised — the auto sector is showing some quiet strength. We are seeing short-term rallies in automakers, parts suppliers and tire makers.  Today’s trade, Lear Corp. (NYSE: LEA), a manufacturer of automotive seat systems and electronic modules, has been trading mostly sideways but with a rather dramatic inflow of money for the past two months.   The majority of fundamental analysts following Lear rate it a buy or strong buy, with none rating it a sell. And even a chart watcher can appreciate a forward price-to-earnings (P/E) ratio below 9. However, it is the chart itself that offers the most compelling reason to buy LEA. In June, the stock took a big hit along with many of its peers, dropping 15% in two… Read More

Ah, the unmistakable growl of a Harley… Here in Wisconsin, it’s Harley country. We’ve even got a museum that lauds the Milwaukee-based company. #-ad_banner-#But on August 18, 2016, Harley had a little less defiance in its growl. Harley-Davidson (NYSE: HOG) agreed to pay a $12 million fine for selling after-market parts designed to increase performance and power, but had the unlucky effect of emitting more emissions than was allowable under EPA rules. It’s a tricky rule… Harley believed it was following the law by stating that the “super tuner” part was only to be used for competition. The EPA investigation… Read More

Ah, the unmistakable growl of a Harley… Here in Wisconsin, it’s Harley country. We’ve even got a museum that lauds the Milwaukee-based company. #-ad_banner-#But on August 18, 2016, Harley had a little less defiance in its growl. Harley-Davidson (NYSE: HOG) agreed to pay a $12 million fine for selling after-market parts designed to increase performance and power, but had the unlucky effect of emitting more emissions than was allowable under EPA rules. It’s a tricky rule… Harley believed it was following the law by stating that the “super tuner” part was only to be used for competition. The EPA investigation found that most of them were being used on public roads. The company sold some 340,000 of them. In the settlement with the EPA, the company did not admit to wrongdoing, but did agree to stop selling the super tuners in its dealerships, buy back and destroy the dealerships’ stocks of super tuners and deny customers’ warranty claims if they are in use of the part. There has been no official word on how much that will cost Harley, though I don’t think it’ll be as big a blow to the company as the emissions scandal was for Volkswagon (OTC:… Read More

The commodities frenzy in 2007-2008 drove energy and mining stocks up to astronomical heights before the ensuing bear market erased all of those gains. While energy stocks and precious metals miners were able to rally back, miners of industrial metals stalled. The Dow Jones U.S. Industrial Metals & Mining Index still trades more than 65% below its 2008 peak even after nearly doubling from its worst levels this year. In short, industrial miners have been portfolio killers for years, and sentiment is predictably rather dour. However, the short-term condition is much improved and the index is on the verge of… Read More

The commodities frenzy in 2007-2008 drove energy and mining stocks up to astronomical heights before the ensuing bear market erased all of those gains. While energy stocks and precious metals miners were able to rally back, miners of industrial metals stalled. The Dow Jones U.S. Industrial Metals & Mining Index still trades more than 65% below its 2008 peak even after nearly doubling from its worst levels this year. In short, industrial miners have been portfolio killers for years, and sentiment is predictably rather dour. However, the short-term condition is much improved and the index is on the verge of a long-term breakout. One of its larger component stocks, Australia-based Rio Tinto (NYSE: RIO), echoes these improvements and is also on the verge of a major breakout. At first glance, it is easy to see that the stock now trades above its key 50-day and 200-day moving averages, and the 50-day recently crossed above the 200-day in what some might label a “golden cross.” While this signal is really meant to apply to the broader market, it still tells us that the major trend has likely changed to the upside. Read More

The search for income takes investors to diverse places, and tobacco stocks have been a favorite for many months. However, all trends eventually come to an end, and that seems to be the case for the rally in Reynolds American (NYSE: RAI). #-ad_banner-# Since its early July peak, the stock is down about 7%. This includes a rather sharp sell-off on July 26 following the cigarette maker’s disappointing second-quarter earnings report. The company missed both revenue and earnings estimates, and the post-earnings sell-off… Read More

The search for income takes investors to diverse places, and tobacco stocks have been a favorite for many months. However, all trends eventually come to an end, and that seems to be the case for the rally in Reynolds American (NYSE: RAI). #-ad_banner-# Since its early July peak, the stock is down about 7%. This includes a rather sharp sell-off on July 26 following the cigarette maker’s disappointing second-quarter earnings report. The company missed both revenue and earnings estimates, and the post-earnings sell-off resulted in a technical breakdown through a rather important trendline. This week, Cowen and Company reaffirmed its “outperform” rating on the stock, saying that weak guidance was already priced in, but the market is saying otherwise.  RAI has been lagging the broader market since February and shows no signs on the charts that this condition will change. There are plenty of other technical warnings in place, including the non-confirmation of the July high by momentum and volume indicators, but let’s focus on the pure and simple trend break.   Reynolds started its long-term bull market in 2009 when… Read More

When it comes to what people say versus what the market says, I think it is wisest to listen to the market. Just look at mining machinery maker Caterpillar (NYSE: CAT), which fell almost 1% in premarket trading on Tuesday after the company beat second-quarter earnings estimates but reported declines in profit and revenue. To top things off, the company offered one of the gloomiest year-end outlooks of the earnings season. Tell that to the market, though. That very day, after a weak premarket, the stock closed higher to the tune of 5%. Not only that, it scored a technical… Read More

When it comes to what people say versus what the market says, I think it is wisest to listen to the market. Just look at mining machinery maker Caterpillar (NYSE: CAT), which fell almost 1% in premarket trading on Tuesday after the company beat second-quarter earnings estimates but reported declines in profit and revenue. To top things off, the company offered one of the gloomiest year-end outlooks of the earnings season. Tell that to the market, though. That very day, after a weak premarket, the stock closed higher to the tune of 5%. Not only that, it scored a technical breakout, which we will get to momentarily. The company stated that global uncertainty, including the Brexit and the turmoil in Turkey, have increased risks. I’m not a fundamental analyst, but it seems to me that sort of news would boost the mining of precious metals, and indirectly, the use of Caterpillar’s equipment. Indeed, the gold market has been on the rise all year. But let’s stick to the charts. As we can see, Caterpillar broke out last week to the upside. Volume was rather heavy, too, validating the change in tone for the stock. And it is likely no coincidence… Read More

Netflix (Nasdaq: NFLX) lost a staggering $6 billion of its market cap in one day as shares plunged 14% on July 19. The company’s second-quarter earnings report was a shocking disappointment as subscriber numbers came in well below expectations. Analysts were quick to cut earnings estimates and question target prices following the news, but this kind of post-earnings mayhem is nothing new for the world’s largest streaming subscription service. In fact, data over the past 10 quarters shows double-digit price swings are the norm after the company’s earnings announcements. #-ad_banner-#… Read More

Netflix (Nasdaq: NFLX) lost a staggering $6 billion of its market cap in one day as shares plunged 14% on July 19. The company’s second-quarter earnings report was a shocking disappointment as subscriber numbers came in well below expectations. Analysts were quick to cut earnings estimates and question target prices following the news, but this kind of post-earnings mayhem is nothing new for the world’s largest streaming subscription service. In fact, data over the past 10 quarters shows double-digit price swings are the norm after the company’s earnings announcements. #-ad_banner-# And historical data uncovers another interesting post-earnings trend that traders can take advantage of. Bad News Can’t Keep Netflix Down Few stocks are as volatile as Netflix after it reports earnings. Looking at the past 10 earnings announcements, shares have fallen an average of 11% on disappointing reports and have gained an average of 13% when the company reports good news. But a funny thing happens following the big post-earnings moves… the shares tend to move higher regardless of whether the company reports good news or bad. Shares of NFLX moved an average of 6% higher in the month following… Read More

After a record-setting rally in bonds, the better-than-expected June jobs report gave bond traders an excuse to bank some fat profits. However, a look under the hood shows that, structurally, nothing has really changed. The bull market in bonds and trend toward lower interest rates remain intact. And that is why I’m now looking for a good place to buy the dip… in the utilities sector. #-ad_banner-# Despite this week’s pause in bond prices, the yield curve — the yield on the 10-year Treasury note minus the yield on the… Read More

After a record-setting rally in bonds, the better-than-expected June jobs report gave bond traders an excuse to bank some fat profits. However, a look under the hood shows that, structurally, nothing has really changed. The bull market in bonds and trend toward lower interest rates remain intact. And that is why I’m now looking for a good place to buy the dip… in the utilities sector. #-ad_banner-# Despite this week’s pause in bond prices, the yield curve — the yield on the 10-year Treasury note minus the yield on the two-year note — is still in a flattening trend and narrower than it has been in years. The flatter it gets, the more likely the economy will see problems. Banks in particular find it more difficult to profit when their cost of money, borrowed at the short-term rate, is close to or even greater than revenue received at the long-term loan or mortgage rate. The trend around the world is for government bonds to offer negative interest rates. Given the choice between German or Swiss bonds at negative yields and the 10-year U.S. Treasury note at 1.5%, it’s pretty obvious… Read More

The banking sector is down so much it almost seems risky to sell it further. However, to paraphrase the song, that’s what trends are for. #-ad_banner-# While the S&P 500 has nearly recovered all of its losses from the Brexit panic, Capital One Financial (NYSE: COF) is down over 6% from its pre-Brexit close. Looked at another way, while the broader market index is not far off its 52-week highs, COF is much closer to its 52-week lows. The question is, how long can banks stay low as the broader… Read More

The banking sector is down so much it almost seems risky to sell it further. However, to paraphrase the song, that’s what trends are for. #-ad_banner-# While the S&P 500 has nearly recovered all of its losses from the Brexit panic, Capital One Financial (NYSE: COF) is down over 6% from its pre-Brexit close. Looked at another way, while the broader market index is not far off its 52-week highs, COF is much closer to its 52-week lows. The question is, how long can banks stay low as the broader market holds firm? If you believe in trends — as you should — then that is a question for the market to answer. The trend in Capital One is down since its April rally high and down from its July 2015 all-time high. In the absence of strong evidence to the contrary, there is no reason to suspect COF’s bear market is over. And that means selling bounces can be a lucrative strategy. Let’s start with the big picture. As we can see in the chart, the bull market from 2009 ended in 2015 with a trendline breakdown and test… Read More

I started working in financial services full time when I was 23. Since then, I’ve seen plenty of volatility in the market. For example, there was the time the Nasdaq stock bubble deflated more than 60% from March 2000 to September 2002, the September 11 terrorist attack that closed the U.S. stock markets for a week (when the S&P 500 opened a week later it fell 11.9% in 11 days), and the housing bubble of 2006 that led to the financial crisis of 2008 (when the S&P 500 fell more than 50% in six months). Read More

I started working in financial services full time when I was 23. Since then, I’ve seen plenty of volatility in the market. For example, there was the time the Nasdaq stock bubble deflated more than 60% from March 2000 to September 2002, the September 11 terrorist attack that closed the U.S. stock markets for a week (when the S&P 500 opened a week later it fell 11.9% in 11 days), and the housing bubble of 2006 that led to the financial crisis of 2008 (when the S&P 500 fell more than 50% in six months). #-ad_banner-#In the short run, all of those events made investors, including me, nervous. It’s scary to think about the global economy falling apart, accompanied by big losses in stocks and bonds. However, in the long run, history has proven that corrections are a normal part of a healthy market and are usually short lived. According to a study from mutual fund company American Funds, from 1900 to December of 2014, a pullback of 10% or more happened about once every year. Bear markets (more than a 20% decline) are rare,… Read More

With the Brexit dominating the news and fraying traders’ nerves, it seems crazy to think a footwear maker would be poised to rally by double digits. However, the chart of Crocs (Nasdaq: CROX), the maker of some rather odd shoes, is beautifully set up to do so. Crocs is a love-to-hate brand. Its “ugly” shoes are revered by fans for their comfort and functionality much to the horror of anyone with a fashion sense. Fortunately, we don’t need to concern ourselves with the company’s reputation. The only thing that matters is gains, and that is what the stock is poised… Read More

With the Brexit dominating the news and fraying traders’ nerves, it seems crazy to think a footwear maker would be poised to rally by double digits. However, the chart of Crocs (Nasdaq: CROX), the maker of some rather odd shoes, is beautifully set up to do so. Crocs is a love-to-hate brand. Its “ugly” shoes are revered by fans for their comfort and functionality much to the horror of anyone with a fashion sense. Fortunately, we don’t need to concern ourselves with the company’s reputation. The only thing that matters is gains, and that is what the stock is poised to deliver. After being in a downtrend since 2011, which accelerated in 2015, Crocs stabilized in a range this year. Following an analyst downgrade in April, the stock fell sharply and even dipped below support to a new multiyear low. But within days, better-than-expected earnings caused shares to soar. The post-earnings rally left several seriously bullish markers on the chart. First, it negated the breakdown. Failed bearish signals are often new bullish signals, and within one day, CROX returned to the top of its range. The rally also left a bullish key outside-day reversal on the weekly charts. Read More