While following a rising trend is usually the best way to make money in the stock market, chart reading can tell us where that trend is likely to run out of steam. And when we have a big stock like home improvement retailer Lowe’s (NYSE: LOW) soaring more than 20% in two and a half months, we really should see what the chart has to say about selling. Let’s start with the big picture. A weekly chart shows LOW tracing out a pattern that is rather similar to that of the S&P 500 — a big rally after the 2011… Read More

While following a rising trend is usually the best way to make money in the stock market, chart reading can tell us where that trend is likely to run out of steam. And when we have a big stock like home improvement retailer Lowe’s (NYSE: LOW) soaring more than 20% in two and a half months, we really should see what the chart has to say about selling. Let’s start with the big picture. A weekly chart shows LOW tracing out a pattern that is rather similar to that of the S&P 500 — a big rally after the 2011 correction followed by a wide, two-year trading range that is still in place. With trading ranges, I like to apply stochastics as a momentum indicator, and right now it says the stock is overbought. The near-term rally off the February lows was fast and furious, but now the stock looks tired. In fact, according to this indicator, it is more overbought now than it was at any other price peak since it first moved into the range in 2014 following a multimonth rally. Read More

The biotech sector scored a short-term breakout last week, and the bullishness spread to its larger, more established cousins, the big pharmaceutical stocks.  While most of these drugmakers have been strong of late, they have not broken out on their charts. However, one lagging stock in the group, GlaxoSmithKline (NYSE: GSK), has started to make its move. And given how much it lost over the past several months, its potential for gains is rather large. The sector only recently started to outperform, so it’s still early in the market’s possible rotation into this group. However, in absolute terms, the NYSE… Read More

The biotech sector scored a short-term breakout last week, and the bullishness spread to its larger, more established cousins, the big pharmaceutical stocks.  While most of these drugmakers have been strong of late, they have not broken out on their charts. However, one lagging stock in the group, GlaxoSmithKline (NYSE: GSK), has started to make its move. And given how much it lost over the past several months, its potential for gains is rather large. The sector only recently started to outperform, so it’s still early in the market’s possible rotation into this group. However, in absolute terms, the NYSE Arca Pharmaceutical Index, known by its option root DRG, is on the verge of a long-term breakout best seen on the weekly charts. Since peaking in August, the index lost more than 20% through its February low. In the process, it formed a nice declining trend channel, but on the chart shown, it also looks very much like a bullish flag. #-ad_banner-# DRG has traded at the upper border of this pattern for the past week, and any further strength will… Read More

Chipotle Mexican Grill (NYSE: CMG) was one of this decade’s hottest stocks — surging more than 700% from about $90 a share at the start of 2010 to a high above $750 in August of last year. Investors seemed as crazy about the stock as customers were about the casual Mexican chain’s burritos.  During that time, annual sales tripled and the number of stores across the country and the globe roughly doubled to about 2,000. But after several Chipotle locations were plagued with outbreaks of E. coli and other food-borne illnesses, customers and investors rushed for the exits. Read More

Chipotle Mexican Grill (NYSE: CMG) was one of this decade’s hottest stocks — surging more than 700% from about $90 a share at the start of 2010 to a high above $750 in August of last year. Investors seemed as crazy about the stock as customers were about the casual Mexican chain’s burritos.  During that time, annual sales tripled and the number of stores across the country and the globe roughly doubled to about 2,000. But after several Chipotle locations were plagued with outbreaks of E. coli and other food-borne illnesses, customers and investors rushed for the exits. For a company that bases its reputation on high-quality food offerings, or what Chipotle calls “food with integrity,” the negative media attention that followed was particularly damaging, and shares plummeted nearly 50% in five months. But in mid-January, as the stock dipped below $400 and its P/E ratio fell to a level not seen since 2010, bargain hunters stepped in. #-ad_banner-# Shares jumped 36% before another Norovirus outbreak in early March stopped them in their tracks. They now sit just 13% above their January lows. And no doubt some of you are wondering whether you’re getting a second… Read More

Sector work is a big part of the stock selection process. Right now, financial stocks from banks to specialty finance are lagging the major indices. However, property and casualty insurer and member of the blue-chip Dow 30, Travelers Companies (NYSE: TRV), has been bucking that trend… until now. After gaining almost 17% from its January low through this week’s high, the stock ran into stiff resistance set by last year’s highs. Now, TRV slightly overshot that level, but don’t let that fool you. The stock was never able to put any space between itself and the resistance line,… Read More

Sector work is a big part of the stock selection process. Right now, financial stocks from banks to specialty finance are lagging the major indices. However, property and casualty insurer and member of the blue-chip Dow 30, Travelers Companies (NYSE: TRV), has been bucking that trend… until now. After gaining almost 17% from its January low through this week’s high, the stock ran into stiff resistance set by last year’s highs. Now, TRV slightly overshot that level, but don’t let that fool you. The stock was never able to put any space between itself and the resistance line, and numerous technical indicators signal trouble. In short, it looks like it’s time for Travelers to succumb to the pressures dragging down its peers. #-ad_banner-# Aside from simple waning momentum, as indicated by a flat to lower trend in indicators such as the Relative Strength Index (RSI), there is now a fairly reliable “end-of-rally” signal appearing in the Bollinger Bands.  Bollinger Bands are modified versions of trading envelopes. The difference is that instead of the trader setting the width as a fixed percentage of price, the market sets it as a function of volatility. In this way, volatile… Read More

Pundits fall all over themselves trying to pick stocks that will beat the market. However, in the current market environment it seems traditional filters are not working the way we would normally expect. Success today requires thinking outside the box and a different type of strategy — one that does not correlate with the broader market. #-ad_banner-# I call it “swinging for the fences” because if I am right, I could hit a home run. However, striking out is a distinct possibility. While that means potentially losing money — and possibly quickly — we can manage that risk… Read More

Pundits fall all over themselves trying to pick stocks that will beat the market. However, in the current market environment it seems traditional filters are not working the way we would normally expect. Success today requires thinking outside the box and a different type of strategy — one that does not correlate with the broader market. #-ad_banner-# I call it “swinging for the fences” because if I am right, I could hit a home run. However, striking out is a distinct possibility. While that means potentially losing money — and possibly quickly — we can manage that risk with a stop-loss. Avon Products (NYSE: AVP) looks to have turned a corner from a technical point of view.  To be sure, the fundamentals still look lousy. The company has a history of earnings misses and slashed its dividend a few years ago. Even after that, the dividend yield still stands at a very rich 5.3%, a result of the bearish price activity. But the market often sniffs out a turnaround in a stock long before the fundamentals show any improvement. It is in this spirit that I think Avon would be a good speculative bet. Prior to the 2008… Read More

I constantly scour the market for stocks on the cusp of major bullish trend changes, but over the past few months, there has been little opportunity thanks to the market correction. When the headwinds blow that hard, few ships can sail. But with stocks rebounding sharply off their February lows and the broader market S&P 500 in the black for the first time this year, my Alpha Trader system is once again lighting up with fresh buy signals. #-ad_banner-# For those of you who aren’t familiar, I use a quantitative system to rank 6,000 publicly traded U.S. stocks… Read More

I constantly scour the market for stocks on the cusp of major bullish trend changes, but over the past few months, there has been little opportunity thanks to the market correction. When the headwinds blow that hard, few ships can sail. But with stocks rebounding sharply off their February lows and the broader market S&P 500 in the black for the first time this year, my Alpha Trader system is once again lighting up with fresh buy signals. #-ad_banner-# For those of you who aren’t familiar, I use a quantitative system to rank 6,000 publicly traded U.S. stocks based on a proprietary indicator known as the Alpha Score. This indicator combines an equity’s relative strength and a key fundamental metric favored by investment luminaries such as Don Yacktman, Warren Buffett and Charlie Munger. Every stock has an Alpha Score, and it can range from 0 (worst) to 200 (best). I only consider buying stocks in the top 30th percentile, but typically their scores put them in the top 15th, 10th, or even top 5th percentile. These are the stocks most likely to jump double or triple digits in less than a year’s… Read More

Sometimes all we really need is a trendline to identify what to do with a stock.  One look at the chart of digital telecommunications product maker Qualcomm (Nasdaq: QCOM) tells us that the company has had a rough go for quite some time. And since trends tend to persist, this suggests continuing problems ahead. Recent challenges include the still relatively strong U.S. dollar, issues with several licensees in China “improperly withholding” royalties on Qualcomm’s patents, and bribery charges brought by the SEC. But that has not discouraged fundamental analysts who point to the company’s supposedly healthy free cash… Read More

Sometimes all we really need is a trendline to identify what to do with a stock.  One look at the chart of digital telecommunications product maker Qualcomm (Nasdaq: QCOM) tells us that the company has had a rough go for quite some time. And since trends tend to persist, this suggests continuing problems ahead. Recent challenges include the still relatively strong U.S. dollar, issues with several licensees in China “improperly withholding” royalties on Qualcomm’s patents, and bribery charges brought by the SEC. But that has not discouraged fundamental analysts who point to the company’s supposedly healthy free cash flow and its track record of raising dividends, with the most recent hike — a 10% increase — coming earlier this month. #-ad_banner-# I might add that the company’s recent addition to a fledgling wearable technology index, WEARXT, is another good sign. But then why is the trend still so doggone negative?  In the battle between analyst and the market, I’ll take the market every time. Note: Right now, there are thousands of deposits being put down on QCOM by bullish speculators, hedge funds and even some average investors, all of whom are waiting for their orders to be filled. Read More

One of the most explosive formations in technical analysis is called the “flag.” The pattern consists of a nearly straight-up price advance followed by a consolidation, which usually takes the form of a pennant or small rectangle. #-ad_banner-#Technical analysis holds that a stock typically leaves a consolidation formation in the same direction as it enters. Since the flag begins with an explosive move higher, the odds of shares breaking out to the upside are high.  That’s particularly true when the underlying company has a robust fundamental outlook, like today’s trade, Domino’s Pizza (NYSE: DPZ).  In late February, Domino’s… Read More

One of the most explosive formations in technical analysis is called the “flag.” The pattern consists of a nearly straight-up price advance followed by a consolidation, which usually takes the form of a pennant or small rectangle. #-ad_banner-#Technical analysis holds that a stock typically leaves a consolidation formation in the same direction as it enters. Since the flag begins with an explosive move higher, the odds of shares breaking out to the upside are high.  That’s particularly true when the underlying company has a robust fundamental outlook, like today’s trade, Domino’s Pizza (NYSE: DPZ).  In late February, Domino’s reported stellar fourth-quarter results. Revenue increased 15% to $741.2 million, fueled by an 11% increase in domestic same-store sales. That translated to earnings of $1.15 per share, which beat Wall Street’s consensus by $0.05. Shares responded by jumping 13% in one day (the flagpole) and then consolidating in a narrow rectangle (the flag). We’ll dig deeper into the chart in a moment. But first, let’s explore three fundamental factors that support our bullish view of the stock. 1. An Innovative, Tech-Savvy Company Domino’s focus may be on making pizza, but it’s not sleeping on the tech front. The company is… Read More

From 2008 to 2013, organic and natural foods retailer Whole Foods Market (NYSE: WFM) was a superstar. But backlash over its high prices and a reduced outlook ended the rally and sent the stock into a death spiral.  WFM was one of 2014’s worst performers on the S&P 500. But after the decline culminated in a nearly 20% single-day loss in May 2014, the stock consolidated in a low range for six months — healing before finally waking up again. #-ad_banner-# Fast forward to today and WFM is again healing in a low range following a disastrous 2015. Read More

From 2008 to 2013, organic and natural foods retailer Whole Foods Market (NYSE: WFM) was a superstar. But backlash over its high prices and a reduced outlook ended the rally and sent the stock into a death spiral.  WFM was one of 2014’s worst performers on the S&P 500. But after the decline culminated in a nearly 20% single-day loss in May 2014, the stock consolidated in a low range for six months — healing before finally waking up again. #-ad_banner-# Fast forward to today and WFM is again healing in a low range following a disastrous 2015. But it’s also showing signs of life, so this could be deja vu all over again. Whole Foods Setting Up For A Strong 2016?  Whole Foods is in the consumer staples group, which is one of the only sectors showing strength year to date, although one could argue that organic quinoa and wild goji berries are not exactly items consumers can’t live without. However, we are seeing a strong trend toward natural and organic foods, with the global organic food market estimated to grow at a double-digit compound annual rate through 2020.  As we can see on the chart below, Whole… Read More

Today, I’m going to do something I don’t usually do… For those of you who don’t know me, I’m the chief investment strategist of Profitable Trading’s premium Alpha Trader service.  I am a Chartered Market Technician (CMT) with more than 20 years of trading experience and a profitable history of using trading systems to manage money for investors. The Alpha Trader system combines proven technical and fundamental indicators to find market-beating investments for 10 different portfolios. And today, I’m going to share one of the picks I just recommended to my subscribers. It comes from our Doublers Portfolio, which covers… Read More

Today, I’m going to do something I don’t usually do… For those of you who don’t know me, I’m the chief investment strategist of Profitable Trading’s premium Alpha Trader service.  I am a Chartered Market Technician (CMT) with more than 20 years of trading experience and a profitable history of using trading systems to manage money for investors. The Alpha Trader system combines proven technical and fundamental indicators to find market-beating investments for 10 different portfolios. And today, I’m going to share one of the picks I just recommended to my subscribers. It comes from our Doublers Portfolio, which covers top-rated small-cap stocks likely to double in the next 12 months. #-ad_banner-# If you’re not an Alpha Trader subscriber, I’d venture to say you’ve never heard of this company, but it’s hitting it out of the park with its nut business.  That’s right — nuts.  John B Sanfilippo & Son (Nasdaq: JBSS) processes, markets and distributes nuts like pecans, cashews, peanuts, walnuts and almonds in dry roast, oil roast, salted, unsalted, trail mix, chocolate and yogurt-covered varieties under the Fisher, Orchard Valley Harvest… Read More