Tech stocks often lead the market down, and the current decline is no exception. Just two weeks into the new year, the S&P 500 is down 8%, which is substantial, but not as big as the tech-heavy Nasdaq Composite’s 10%-plus drop.   While tech weakness is widespread, one of the most vulnerable stocks is extreme action camera company GoPro (Nasdaq: GPRO). [Note: The weakness in tech has put solid companies on sale, including two major firms that made our list of the Top 10 Trades for 2016. You have until 11:59 p.m. on Thursday,… Read More

Tech stocks often lead the market down, and the current decline is no exception. Just two weeks into the new year, the S&P 500 is down 8%, which is substantial, but not as big as the tech-heavy Nasdaq Composite’s 10%-plus drop.   While tech weakness is widespread, one of the most vulnerable stocks is extreme action camera company GoPro (Nasdaq: GPRO). [Note: The weakness in tech has put solid companies on sale, including two major firms that made our list of the Top 10 Trades for 2016. You have until 11:59 p.m. on Thursday, Jan. 21 to access the report. Click here.] Shares of GoPro are down 36% in 2016 and now trade for less than half their $24 IPO price. The latest blow to the stock came when the company announced ugly preliminary results for the fourth quarter last week. #-ad_banner-# Management said they expect revenue to be just $435 million. That would represent a 31% year-over-year decline and is significantly below the $521 million expected by analysts and the $500 million to $550 million GoPro had itself projected.  In response, the company laid off 7% of… Read More

It can be difficult to wrap our heads around the reasons why a diverse market index is bullish or bearish. Often times, the index is nothing more than a mathematical derivation from a disparate set of inputs. Think about an industry group such as “specialty retail,” for example. It is more of a bin for the unclassifiable than anything else. That is the feeling I get in the real estate investment trust (REIT) sector. After all, there is not much similarity among hospitals, storage facilities and apartment buildings beyond the common denominator that real estate is… Read More

It can be difficult to wrap our heads around the reasons why a diverse market index is bullish or bearish. Often times, the index is nothing more than a mathematical derivation from a disparate set of inputs. Think about an industry group such as “specialty retail,” for example. It is more of a bin for the unclassifiable than anything else. That is the feeling I get in the real estate investment trust (REIT) sector. After all, there is not much similarity among hospitals, storage facilities and apartment buildings beyond the common denominator that real estate is involved. From a technical point of view, however, a bottom-up analysis suggests the sector as a whole is in trouble. Basically, if enough component REIT stocks look ready to fall then the index must follow suit. At first glance, the iShares US Real Estate (NYSE: IYR) looks as if it is clinging to a short-term trendline breakout. The problem is that no matter how the chart is presented, the long-term picture shows a trendline breakdown. It does not make a difference beyond nuance if we use a linearly or logarithmically… Read More

Health care was the leading sector for several years, but when the market stumbled this past summer it was not able to recover. Currently, many areas within the sector show long-term breakdowns on the charts and are on the verge of ending corrective bounces. Health care products maker Abbott Laboratories (NYSE: ABT) is a good example, and thanks to the market’s sell-off to open the year, it has already broken down again. We’ll start with the big picture by looking at the weekly chart, which shows a 25% drop from mid-July to late September. To call that… Read More

Health care was the leading sector for several years, but when the market stumbled this past summer it was not able to recover. Currently, many areas within the sector show long-term breakdowns on the charts and are on the verge of ending corrective bounces. Health care products maker Abbott Laboratories (NYSE: ABT) is a good example, and thanks to the market’s sell-off to open the year, it has already broken down again. We’ll start with the big picture by looking at the weekly chart, which shows a 25% drop from mid-July to late September. To call that a mere correction would be wrong; although calling it a bear market for reaching the 20% loss threshold would be just as wrong. To me, this was a serious break that ended a four-year bull market.  After such a move, we’d expect the stock to lick its wounds for a while, but Abbott had the good fortune of a broader market that came roaring out of its own decline. However, the S&P 500 was down “only” 12% over the same span, which is far more palatable in what at the time could still be considered a healthy… Read More

The warning given by any financial advisor is that past performance does not guarantee future success. However, performance can come in cycles where stocks that did the worst in one year rocket to the top of the charts in the next year. #-ad_banner-# In what could be one of those “worst to first” comeback stories, aluminum producer Alcoa (NYSE: AA) is poised for a nice recovery in 2016. After peaking at $17.75 in November 2014, the stock began a year-long slide to a low of $7.81 this November.  As an industrial metals stock, it was caught… Read More

The warning given by any financial advisor is that past performance does not guarantee future success. However, performance can come in cycles where stocks that did the worst in one year rocket to the top of the charts in the next year. #-ad_banner-# In what could be one of those “worst to first” comeback stories, aluminum producer Alcoa (NYSE: AA) is poised for a nice recovery in 2016. After peaking at $17.75 in November 2014, the stock began a year-long slide to a low of $7.81 this November.  As an industrial metals stock, it was caught in a sector-wide bear market. Indeed, most commodities declined significantly over that span as some pundits declared the world to be in a deflationary spiral. But Alcoa has done this before and recovered. In 2011, shares peaked at roughly the same high and slid to roughly the same low, although they stayed down for two years. The result was a giant trading range, which suggests the next move will attempt to follow previous rallies.  Several technical indicators already point to a tradable recovery on the horizon.  In trading ranges, my favorite momentum indicator is stochastics. The monthly version… Read More

A few weeks ago, a man named Joe Campbell thought he had it made. He found a “sure thing” that would make him rich. His mark: A drug development company by the name of KaloBios Pharmaceuticals… a penny stock. The company recently announced it would wind down its operations and restructure in order to liquidate its assets. Because of this, shares were in a tailspin. At prices ranging between $1 and $2 a share, the company had a market value of just $5-to-$10 million. So Campbell did what… Read More

A few weeks ago, a man named Joe Campbell thought he had it made. He found a “sure thing” that would make him rich. His mark: A drug development company by the name of KaloBios Pharmaceuticals… a penny stock. The company recently announced it would wind down its operations and restructure in order to liquidate its assets. Because of this, shares were in a tailspin. At prices ranging between $1 and $2 a share, the company had a market value of just $5-to-$10 million. So Campbell did what any self-described “fairly new trader” might be tempted to do — he bet against the stock — shorting $18,000 worth of shares. What happened next? At the very last moment, when it seemed all but certain that the company would go belly-up and Campbell would make a fortune, everything changed. An investor group headed by Martin Shkreli swooped in and acquired 50% of outstanding shares and announced it was forming a plan that would allow the company to continue operations. (It should be noted that Shkreli made headlines… Read More

Stronger-than-expected earnings sent shares of Microsoft (Nasdaq: MSFT) soaring in October, scoring a very significant upside breakout on the charts. Since the August lows, when the market as a whole tumbled, this stock is up nearly 40%, putting it in an elite group of large caps that enjoyed big runs in 2015. Sentiment was rather hot, especially after the October jump, but the blue-chip stock has only added about 3 points to its total since then. Indeed, most of the big-cap leaders have not done much since that time. Most sectors are now in decline, leaving leaders without… Read More

Stronger-than-expected earnings sent shares of Microsoft (Nasdaq: MSFT) soaring in October, scoring a very significant upside breakout on the charts. Since the August lows, when the market as a whole tumbled, this stock is up nearly 40%, putting it in an elite group of large caps that enjoyed big runs in 2015. Sentiment was rather hot, especially after the October jump, but the blue-chip stock has only added about 3 points to its total since then. Indeed, most of the big-cap leaders have not done much since that time. Most sectors are now in decline, leaving leaders without any followers — a condition that cannot last forever. As a result, I am watching for signs that the leaders are starting to roll over — and I see those signs in Microsoft. #-ad_banner-# I will say this is quite a contrary point of view as sentiment is still positive, though not extremely so. Pundits are still calling Microsoft a good buy, and even trader consensus on social media is very much in its camp. To understand my bearish case, let’s start with the big picture. The weekly chart shows current levels are only about 8% away from… Read More

One of the most exciting technical events is when a prolonged downtrend line is broken to the upside.  First, this technical behavior signals a reversal in trader expectations from negative to positive. In other words, bulls are now swimming with the tide instead of against it. Second, if you buy the stock close to the trendline break, you are usually getting in on the cheap. The appreciation potential can be huge as the stock recovers and challenges previous resistance levels. While you may need to be patient as this resistance is encountered, the risk of trading the downtrend… Read More

One of the most exciting technical events is when a prolonged downtrend line is broken to the upside.  First, this technical behavior signals a reversal in trader expectations from negative to positive. In other words, bulls are now swimming with the tide instead of against it. Second, if you buy the stock close to the trendline break, you are usually getting in on the cheap. The appreciation potential can be huge as the stock recovers and challenges previous resistance levels. While you may need to be patient as this resistance is encountered, the risk of trading the downtrend line break is limited… and the reward can be significant. That is what we’re seeing with small-cap iRobot (Nasdaq: IRBT), which just broke an almost two-year-long downtrend.  iRobot was founded in 1990 by three MIT roboticists and went public in late 2005. It operates in two divisions: home products and defense and security. #-ad_banner-# The company’s most popular product is Roomba, a vacuum cleaner robot. Roomba has sensors that allow it to map and adapt to your home while proprietary technology allows it is keep track of where it has already cleaned. Roomba is already in millions of homes and… Read More

Like position sizing, “sell” rules are one of the most underrated, ignored and overlooked areas of investing. You can find nearly anyone giving their opinion on whether to buy this stock or that stock. But when it comes to actually selling a position, you’ll often hear nothing but… Read More

Last month, the world mourned terrorist attacks in Paris that left 130 dead. In the wake of the attacks, the State Department issued a global travel alert for U.S. citizens — an action that was both warranted and fear-mongering. Travel-related stocks, for instance, were punished following both events.  The travel alert is in place through Feb. 24, but we expect strong travel stocks to begin recovering before then, making now a good time to pick up shares on sale. With an aggressively expanding portfolio of companies, strong fundamentals and a bullish chart, our favorite stock in the $1.3… Read More

Last month, the world mourned terrorist attacks in Paris that left 130 dead. In the wake of the attacks, the State Department issued a global travel alert for U.S. citizens — an action that was both warranted and fear-mongering. Travel-related stocks, for instance, were punished following both events.  The travel alert is in place through Feb. 24, but we expect strong travel stocks to begin recovering before then, making now a good time to pick up shares on sale. With an aggressively expanding portfolio of companies, strong fundamentals and a bullish chart, our favorite stock in the $1.3 trillion global travel market is Expedia (Nasdaq: EXPE). Expedia established itself as the largest online travel company by bookings after acquiring discount travel site Orbitz in September. Earlier in 2015, it also acquired online travel agency Travelocity. #-ad_banner-# As a way of gaining competitive advantage over its chief rival, Priceline (Nasdaq: PCLN), Expedia plans to further expand its online presence by acquiring other players. To that end, the company just announced plans to dole out $3.9 billion to acquire do-it-yourself home rental agency HomeAway (Nasdaq: AWAY).  This strategic move will give Expedia further access to the… Read More

With several weeks of rally under the market’s belt, it was susceptible to the disappointment doled out this week by central banks.  To take advantage of the decline, I’m looking for sectors that lagged on the way up, as they tend to lead on the way down as well. While the S&P 500 rallied from its September lows nearly all the way back up to its 52-week highs, the chemicals group only recovered about two-thirds of its summertime losses. And it now looks ready to roll over. Within that group, PPG Industries (NYSE: PPG), a maker of protective… Read More

With several weeks of rally under the market’s belt, it was susceptible to the disappointment doled out this week by central banks.  To take advantage of the decline, I’m looking for sectors that lagged on the way up, as they tend to lead on the way down as well. While the S&P 500 rallied from its September lows nearly all the way back up to its 52-week highs, the chemicals group only recovered about two-thirds of its summertime losses. And it now looks ready to roll over. Within that group, PPG Industries (NYSE: PPG), a maker of protective and decorative coatings and glass products, sports a rather clear chart with all the hallmarks of a stock ready to break down.  First, there was declining volume and, therefore, declining investor interest on the price rally.  Second, the chart shows a bearish divergence in the Relative Strength Index (RSI). Even though price made a higher high in November versus October, this momentum indicator made a lower high. This suggests waning momentum, and such divergences are usually resolved in the direction of the indicator — down in this case.  But there is more. Cumulative or on-balance volume also… Read More