I am a big fan of looking at charts one degree of time further out than I plan to trade. It is the market-ification of the old saying about seeing the forest for the trees. For instance, the short-term chart of programmable circuit and semiconductor maker Xilinx (NASDAQ: XLNX) is a mess. But when we pull back to the weekly chart we can clearly see a breakout with supporting technicals. Considering that the semiconductor sector remains in a long-term uptrend, this is good news for the stock. When a sector is strong, lagging stocks within it can see big gains… Read More

I am a big fan of looking at charts one degree of time further out than I plan to trade. It is the market-ification of the old saying about seeing the forest for the trees. For instance, the short-term chart of programmable circuit and semiconductor maker Xilinx (NASDAQ: XLNX) is a mess. But when we pull back to the weekly chart we can clearly see a breakout with supporting technicals. Considering that the semiconductor sector remains in a long-term uptrend, this is good news for the stock. When a sector is strong, lagging stocks within it can see big gains as they catch up with their peers. The trick is that they have to exhibit technical strength before we can safely buy them.  XLNX now shows that strength. Last week, powered by buyout talk in rival Altera (NASDAQ: ALTR), Xilinx jumped higher from a four-week trading range.  In the short term, the ensuing rally ran into resistance from the December high after becoming technically overbought. By itself, an overbought condition is not enough to shun a stock. Overbought stocks can become more overbought before the trend ends. The daily chart seems to be all over the place with… Read More

Even great companies can see their stock prices sink on short-term factors and negative headlines. If you want to outperform the market, then you have to be ready to avoid these near-term catalysts, take profits and wait to take advantage of lower prices down the road. I warned investors in late 2013 that one such company could be hit by the outcry for higher wages despite a strong business model and an excellent brand. Within a month of the article, shares were 20% lower. Since then, however, the share price has jumped 45% in about 18 months. Now that very… Read More

Even great companies can see their stock prices sink on short-term factors and negative headlines. If you want to outperform the market, then you have to be ready to avoid these near-term catalysts, take profits and wait to take advantage of lower prices down the road. I warned investors in late 2013 that one such company could be hit by the outcry for higher wages despite a strong business model and an excellent brand. Within a month of the article, shares were 20% lower. Since then, however, the share price has jumped 45% in about 18 months. Now that very same stock could be facing near-term catalysts to the downside. Another plunge in the shares could offer another great buying opportunity or it could wipe out all of your returns if you don’t take profits beforehand. This Company Is Juiced For Profits Jamba, Inc. (Nasdaq: JMBA), based in California, is the top retailer of the growing freshly-squeezed juice and smoothie market, with 100 million annual visitors to its 862 Jamba Juice stores. The company rolled out four grocery products to 300 stores in California through the last quarter of 2014 and plans on a national… Read More

Despite the chorus of analysts and investors calling for the long-awaited correction, the market is showing some constructive bullish signs.  First, deterioration in the U.S. dollar has buoyed large-cap stocks, which are once again outperforming small caps. This removes a large headwind for the capitalization-weighted major stock indices as a stronger dollar negatively impacts foreign profits. Second, sentiment has soured greatly despite the fact that the market remains near its all-time highs. Below is a chart of SPDR S&P 500 ETF (NYSE: SPY) with data from the American Association of Individual Investors (AAII) sentiment survey. We can see a major… Read More

Despite the chorus of analysts and investors calling for the long-awaited correction, the market is showing some constructive bullish signs.  First, deterioration in the U.S. dollar has buoyed large-cap stocks, which are once again outperforming small caps. This removes a large headwind for the capitalization-weighted major stock indices as a stronger dollar negatively impacts foreign profits. Second, sentiment has soured greatly despite the fact that the market remains near its all-time highs. Below is a chart of SPDR S&P 500 ETF (NYSE: SPY) with data from the American Association of Individual Investors (AAII) sentiment survey. We can see a major decline in bullish sentiment and increase in bearish sentiment. And the ratio of bulls to bears, shown in the bottom panel, is now at levels where previous rallies have started.  The AAII sentiment survey is a contrarian indicator — i.e., high bullish readings are bearish and high bearish readings are bullish. Therefore, the souring sentiment is a positive for the market.  Finally, the market trend is up. You can see the trend channel clearly in the chart above. #-ad_banner-#… Read More

THESE RETURNS ARE ALMOST TOO GOOD TO BE TRUE Before we get to the Market Outlook… Since Profitable Trading launched Profit Amplifier with Jared Levy three months ago, he has already closed trades with annualized returns of 220.9%, 508.6% and 2,201.6%. He truly is living up to his reputation as an options prodigy.  You can learn more about him and get his next eight trades without making any long-term commitment by clicking here. Sincerely,  Frank Bermea Publisher, Profitable Trading… Read More

THESE RETURNS ARE ALMOST TOO GOOD TO BE TRUE Before we get to the Market Outlook… Since Profitable Trading launched Profit Amplifier with Jared Levy three months ago, he has already closed trades with annualized returns of 220.9%, 508.6% and 2,201.6%. He truly is living up to his reputation as an options prodigy.  You can learn more about him and get his next eight trades without making any long-term commitment by clicking here. Sincerely,  Frank Bermea Publisher, Profitable Trading All major U.S. indices closed in positive territory for the second consecutive week. This broke the recent pattern of alternating positive and negative weekly closes, which has been the norm this quarter. Last week’s gains were led by the Nasdaq 100, up 0.8%, and Russell 2000, up 0.7%. I view this as a good sign heading into this week as technology and small-cap issues typically lead the broader market both higher and lower. It is disappointing that three of last week’s four strongest market sectors were defensive ones: consumer staples gained 1.2%, health care was up 1.1%,… Read More

SodaStream International Ltd. (Nasdaq: SODA) is a classic case of a widely anticipated initial public offering that didn’t pan out.  Since bursting onto the scene in a late-2010 IPO, the carbonated soda machine maker received considerable investor buzz before eventually succumbing to unrealistic growth expectations.  On many occasions, the firm’s stock rallied on turnaround hopes or buyout rumors. Yet as the chart below shows, SodaStream never evolved into a profitable long-term investment. But more than just an unfortunate tale, SodaStream provides a crucial lesson on how to avoid repeating history by being alert for other stocks… Read More

SodaStream International Ltd. (Nasdaq: SODA) is a classic case of a widely anticipated initial public offering that didn’t pan out.  Since bursting onto the scene in a late-2010 IPO, the carbonated soda machine maker received considerable investor buzz before eventually succumbing to unrealistic growth expectations.  On many occasions, the firm’s stock rallied on turnaround hopes or buyout rumors. Yet as the chart below shows, SodaStream never evolved into a profitable long-term investment. But more than just an unfortunate tale, SodaStream provides a crucial lesson on how to avoid repeating history by being alert for other stocks headed down a similar path — such as The Container Store Group, Inc. (NYSE: TCS). Like SodaStream, the Container Store is a once-hot IPO that has become a perilous value trap. After much pre-IPO hype, The Container Store saw its shares double in its trading debut in 2013. The stock tacked on further gains in ensuing months, but has since fallen more than 60% from the January 2014 high.  As a business, The Container Store bears no resemblance to SodaStream, offering a range of household storage containers and organization systems. But it has the same problem. Read More

A turnaround specialist can help to deliver huge returns for investors. By cutting costs or re-orienting a company into more appealing markets, a money loser can steadily morph into a money-maker. That’s been the hope for Lourenco Goncalves, who became CEO of beleaguered miner Cliffs Natural Resources, Inc. (NYSE: CLF) last summer. #-ad_banner-#Under his watch, the company’s per ton mining costs have fallen, he’s slashed general overhead (with corporate headcount falling from a peak of 338 to a recent 139), and Goncalves reduced the company’s exposure to global markets. The re-focused business is directed more squarely on North America, which… Read More

A turnaround specialist can help to deliver huge returns for investors. By cutting costs or re-orienting a company into more appealing markets, a money loser can steadily morph into a money-maker. That’s been the hope for Lourenco Goncalves, who became CEO of beleaguered miner Cliffs Natural Resources, Inc. (NYSE: CLF) last summer. #-ad_banner-#Under his watch, the company’s per ton mining costs have fallen, he’s slashed general overhead (with corporate headcount falling from a peak of 338 to a recent 139), and Goncalves reduced the company’s exposure to global markets. The re-focused business is directed more squarely on North America, which has better pricing dynamics. Moreover, a series of asset sales has enabled Cliff’s to pare debt by more than $1 billion in recent years. All of these factors have bought the company ample breathing room to sustain an eventual potential turnaround. Had this company not taken such bold action, Cliff’s might have already declared bankruptcy by now. Trouble is, those moves won’t help the stark reality of an industry that has too much supply and not enough demand. And shares of this miner, despite a recent mini-rebound (in an otherwise extended slump), may fall to just $1. That represents more… Read More

There’s a dangerous idea in the world of finance that’s been floating around for years. The man who coined this idea won a Nobel Prize for his work, but even he has stated that there are “threats” to his theory. #-ad_banner-#Today, I’m going to tell you about one of those “threats,” and why it’s time to put this dangerous idea to bed for good. Because if you buy into it, you could miss out on some of the greatest opportunities the market has to offer. To frame our discussion, I’d like you to… Read More

There’s a dangerous idea in the world of finance that’s been floating around for years. The man who coined this idea won a Nobel Prize for his work, but even he has stated that there are “threats” to his theory. #-ad_banner-#Today, I’m going to tell you about one of those “threats,” and why it’s time to put this dangerous idea to bed for good. Because if you buy into it, you could miss out on some of the greatest opportunities the market has to offer. To frame our discussion, I’d like you to consider one thing: When an investor buys shares of a stock hoping that its value will rise, the person is often betting against the market — that other investors are wrong (about the stock’s value) and that his valuation is correct. It’s with this idea that theory called the “efficient market hypothesis” becomes important. The man behind the theory — economist Dr. Eugene Fama — is hailed as one of the fathers of modern finance. At its most basic, his hypothesis says that because the public has access to every bit… Read More

The Minnesota Real Estate Journal brought a striking fact to my attention: There are three times as many self-storage facilities in the United States as there are McDonald’s (NYSE: MCD).  It may seem like there is practically a Golden Arches on every street corner, with the fast food chain operating 14,350 restaurants in the country in 2014. But the number of storage facilities dwarfed that at 48,500. Currently, about 10% of Americans rent a storage facility. And about 50% have used one at some point in their lives. These numbers will grow as storage demand increases. According… Read More

The Minnesota Real Estate Journal brought a striking fact to my attention: There are three times as many self-storage facilities in the United States as there are McDonald’s (NYSE: MCD).  It may seem like there is practically a Golden Arches on every street corner, with the fast food chain operating 14,350 restaurants in the country in 2014. But the number of storage facilities dwarfed that at 48,500. Currently, about 10% of Americans rent a storage facility. And about 50% have used one at some point in their lives. These numbers will grow as storage demand increases. According to the Self Storage Association, over the past 40 years, this has been one of the fastest growing segments of the commercial real estate sector. #-ad_banner-#​Stephen Mutty, senior vice president of real estate service company Colliers International, said the industry is growing because people “simply can’t throw stuff away.” So, consumers pay to buy it, and then they pay to store it. The U.S. self-storage industry generates more than $24 billion in annual revenue, and market research firm IBISWorld estimates that figure will grow to $31 billion in 2019. The sector has been described by analysts as “recession… Read More

A headline on Yahoo Finance one Friday morning caught my eye: “Could This Be the Beginning of the End of the Social Media Mania?” The article was penned by Scott Fearon, the founder and president of Crown Capital Management hedge fund, and it started like this: “I’m kicking myself for not following my instincts and shorting Yelp (NYSE: YELP) before it announced utterly rancid earnings on Thursday morning.” Shares of YELP plummeted 23% on April 30 after the company missed earnings estimates and showed a slowdown in user growth. For the first quarter, Yelp reported a loss of… Read More

A headline on Yahoo Finance one Friday morning caught my eye: “Could This Be the Beginning of the End of the Social Media Mania?” The article was penned by Scott Fearon, the founder and president of Crown Capital Management hedge fund, and it started like this: “I’m kicking myself for not following my instincts and shorting Yelp (NYSE: YELP) before it announced utterly rancid earnings on Thursday morning.” Shares of YELP plummeted 23% on April 30 after the company missed earnings estimates and showed a slowdown in user growth. For the first quarter, Yelp reported a loss of $0.02 per share, double what analysts had expected. Revenue also fell short. And while the number of monthly active users during the first quarter was up 8% year over year to 143 million, this paled in comparison to the 30% growth seen in the first quarter of 2014. The final nail in the coffin was a lower-than-anticipated revenue forecast for the current quarter. Investors quickly abandoned ship, and traders who did short the shares prior to the announcement made a nice sum for a day’s work. Despite Fearon’s concerns (to put it mildly) about Yelp and other social media companies’… Read More

Everyone makes money investing by following a trend.  Whether your time horizon is minutes or months, a financial instrument must move in your favor to be profitable. It is that simple.  So finding an indicator to measure trend is critical to your success. There’s a simple, quantitative indicator I use to determine the power of a trend that find stocks with the propensity for big moves. It’s called relative strength (RS). #-ad_banner-#​Relative strength investing is pretty straightforward. It involves buying the best-performing stocks relative to all other stocks and holding… Read More

Everyone makes money investing by following a trend.  Whether your time horizon is minutes or months, a financial instrument must move in your favor to be profitable. It is that simple.  So finding an indicator to measure trend is critical to your success. There’s a simple, quantitative indicator I use to determine the power of a trend that find stocks with the propensity for big moves. It’s called relative strength (RS). #-ad_banner-#​Relative strength investing is pretty straightforward. It involves buying the best-performing stocks relative to all other stocks and holding them until their momentum changes course. To most investors, especially those considered value investors, this strategy probably feels counterintuitive. After all, one of the first things you learn as an investor is to “buy low, sell high.” But what we feel and what we can prove are two very different things. And there are decades of research that prove the predictive power of this indicator. In the 1950s, George Chestnutt created one of the first newsletters using RS to rank stocks and industry groups. He also used RS to manage the successful American Investors Fund, which showed a… Read More