I love earnings season. The tug-of-war between earnings beats and disappointments can set the stage for some serious profits on option trades.  I’ve used earnings announcements to make 40% in three weeks on Tesla Motors (Nasdaq: TSLA), 65% from Amazon (Nasdaq: AMZN) in 18 days and even 50% in Burlington Stores (NYSE: BURL) in just four days. Just this Wednesday, I told my readers about a limited-time opportunity in Southwest Airlines (NYSE: LUV). Most of you are probably familiar with Southwest, which has built a brand for itself as a low-cost airline. Today, it’s the largest domestic carrier in the… Read More

I love earnings season. The tug-of-war between earnings beats and disappointments can set the stage for some serious profits on option trades.  I’ve used earnings announcements to make 40% in three weeks on Tesla Motors (Nasdaq: TSLA), 65% from Amazon (Nasdaq: AMZN) in 18 days and even 50% in Burlington Stores (NYSE: BURL) in just four days. Just this Wednesday, I told my readers about a limited-time opportunity in Southwest Airlines (NYSE: LUV). Most of you are probably familiar with Southwest, which has built a brand for itself as a low-cost airline. Today, it’s the largest domestic carrier in the United States, based on number of passengers flown. The company was set to report earnings before the open last Thursday, but despite a strong track record of earnings beats, shares were down more than 3.5% for the month.  In fact, over the previous four quarters, the company had beaten expectations by an average of 10%. Better yet, in the week each of these earnings releases was announced, shares rose an average of 8%. We saw the biggest jump in January, with LUV rising 16% the week of fourth-quarter earnings on a surprise boost from lower fuel… Read More

Four years after it topped at $1,900 per ounce, gold has been languishing in a range closer to $1,200. With interest rates low and most measures registering no inflation, gold seemed to be a dead asset. Its role as a hedge was dismissed by almost everyone except for the gold sellers on TV. Sentiment naturally turned very bearish, and that is when contrarian ears perk up. #-ad_banner-# Monday and Tuesday were unusually bullish days for… Read More

Four years after it topped at $1,900 per ounce, gold has been languishing in a range closer to $1,200. With interest rates low and most measures registering no inflation, gold seemed to be a dead asset. Its role as a hedge was dismissed by almost everyone except for the gold sellers on TV. Sentiment naturally turned very bearish, and that is when contrarian ears perk up. #-ad_banner-# Monday and Tuesday were unusually bullish days for the metal. However, the patterns on gold charts remain choppy-but-flat trading ranges. When viewed with a long-term eye, the trend is officially still to the downside.  That is why it seems people have gotten blindsided by recent strength in select gold mining stocks, especially since it is not sector-wide. Only the largest by market capitalization are racking up big gains, far outstripping the performance of popular gold mining indices and exchange-traded funds.  My favorite right now is Barrick Gold (NYSE: ABX). This Toronto-based, international miner looks ready to break out from a double-bottom pattern that has been… Read More

In college, I had an eccentric statistics professor who was fond of a quote by the famous American poet Henry Wadsworth Longfellow: “Into each life some rain must fall.” My professor repeated this often, especially when passing out test scores. Were he alive today, he’d probably have the same thing to say about any number of once-amazing growth companies that finally hit a wall. One such example is the well-known fast-casual café and bakery chain Panera Bread Co. (Nasdaq: PNRA). Panera was virtually unstoppable for years, adding hundreds of locations, posting superior growth in comparable-store sales (“comps”) and delivering very… Read More

In college, I had an eccentric statistics professor who was fond of a quote by the famous American poet Henry Wadsworth Longfellow: “Into each life some rain must fall.” My professor repeated this often, especially when passing out test scores. Were he alive today, he’d probably have the same thing to say about any number of once-amazing growth companies that finally hit a wall. One such example is the well-known fast-casual café and bakery chain Panera Bread Co. (Nasdaq: PNRA). Panera was virtually unstoppable for years, adding hundreds of locations, posting superior growth in comparable-store sales (“comps”) and delivering very impressive profits. From the end of 2007 through May 2013, the firm’s stock shot up 429%. But it hasn’t been the same since. After topping out at about $193 a share, Panera encountered heavy turbulence. Two years and a couple gut-wrenching rollercoaster rides later, the stock sits about 4% short of its all-time high. So what happened? For one thing, top line growth has slowed. After rocketing 25% annually from 2007 through 2013, sales growth sharply decelerated to the current 6%-to-7% pace. Profits declined about 3% last year and further drops are a distinct possibility this year. A… Read More

Would you subscribe to an investment strategy that only works a couple of times every decade? That’s the question that short sellers need to ask themselves. These contrarian investors, who borrow shares with an intention to buy them back later at a cheaper price, rarely have the wind at their backs. (For a more extensive description of short selling, please read this.) The first few years after the dot-com boom ended, short sellers had a nice run. They racked up great gains in 2008 as well. That’s it… Two ideal windows of opportunity in… Read More

Would you subscribe to an investment strategy that only works a couple of times every decade? That’s the question that short sellers need to ask themselves. These contrarian investors, who borrow shares with an intention to buy them back later at a cheaper price, rarely have the wind at their backs. (For a more extensive description of short selling, please read this.) The first few years after the dot-com boom ended, short sellers had a nice run. They racked up great gains in 2008 as well. That’s it… Two ideal windows of opportunity in 15 years. And we’re not cherry-picking the data. In the 1980s, the S&P 500 lost value just once (1981). And in the 1990s, the index also had just one down year (1990).     Short selling is so tough simply because, over the long haul, stock markets inexorably rise in value. #-ad_banner-#But that doesn’t mean short selling has no role to play. Savvy investors will tell you that by adding selective short positions to an otherwise long-oriented portfolio, you can boost your risk-adjusted returns. The key is to take a “long/short”… Read More

All major U.S. indices closed higher last week following a loss the week earlier, as the market continued what has thus far been a choppy but relatively flat 2015. One exception has been the tech-heavy Nasdaq 100, which led last week, closing 4.3% higher, and is now up 7.1% for the year.  As I have been stating here for some time, the market is vulnerable to an overdue summer correction as the Federal Reserve gets closer to an inevitable interest rate hike. However, as long as perennial market leaders like the Nasdaq 100 and small-cap Russell… Read More

All major U.S. indices closed higher last week following a loss the week earlier, as the market continued what has thus far been a choppy but relatively flat 2015. One exception has been the tech-heavy Nasdaq 100, which led last week, closing 4.3% higher, and is now up 7.1% for the year.  As I have been stating here for some time, the market is vulnerable to an overdue summer correction as the Federal Reserve gets closer to an inevitable interest rate hike. However, as long as perennial market leaders like the Nasdaq 100 and small-cap Russell 2000 continue to outperform the broader market, this year’s modest overall advance can continue in the near term. #-ad_banner-# All sectors of the S&P 500 finished in positive territory last week, led by technology and consumer discretionary.  Although energy was the weakest sector, my own ETF-based metric shows it had the biggest inflow of sector bet-related investor assets over the past one-month and three-month periods. This suggests the likelihood of more outright strength and… Read More

I am a chartered market technician with 20 years of experience managing money. In that time, I’ve found that trend following is the basis for profit, no matter the investment system. When I became the chief investment strategist of Profitable Trading’s Alpha Trader service, I started employing my technical models to help determine which stocks were ripe for picking. #-ad_banner-#The main way I do this is by determining a stock’s Alpha Score. In a nutshell, every stock has one, and it… Read More

I am a chartered market technician with 20 years of experience managing money. In that time, I’ve found that trend following is the basis for profit, no matter the investment system. When I became the chief investment strategist of Profitable Trading’s Alpha Trader service, I started employing my technical models to help determine which stocks were ripe for picking. #-ad_banner-#The main way I do this is by determining a stock’s Alpha Score. In a nutshell, every stock has one, and it can range from 0 to 200 — the higher the score, the better. It is based on two proven indicators — one technical and one fundamental — and it provides a way to rank every stock in the market from best to worst. But finding the best Alpha Score stocks to recommend isn’t as easy as simply hitting a button and sending out a list of the three-to-five stocks at the top of the list. Each week, I start out with dozens of securities that meet the system’s criteria. From there,… Read More

Health care stocks rank among the biggest winners of the current bull market, and one subsector that has shown significant outperformance in the past six months is medical equipment makers. Since many of the stocks in this group have already made big runs, I am on the lookout for fresh chart pattern breakouts. Aesthetic and medical device maker Cynosure (NASDAQ: CYNO) fits that bill. The company makes devices to treat various skin and vascular conditions, including tattoo removal and cellulite treatments. On the charts, Cynosure has been trading in a very wide long-term trading range between $21… Read More

Health care stocks rank among the biggest winners of the current bull market, and one subsector that has shown significant outperformance in the past six months is medical equipment makers. Since many of the stocks in this group have already made big runs, I am on the lookout for fresh chart pattern breakouts. Aesthetic and medical device maker Cynosure (NASDAQ: CYNO) fits that bill. The company makes devices to treat various skin and vascular conditions, including tattoo removal and cellulite treatments. On the charts, Cynosure has been trading in a very wide long-term trading range between $21 and $31.50, in round numbers.  On the last short-term leg up within the pattern, shares stalled at the upper border, but unlike previous attempts, they only pulled back by a small margin. This behavior leans bullish as it shows the bears could not drive the stock back down as they had done before. #-ad_banner-#​Earlier this month, CYNO poked its head above the upper border of the range and spent a few more days rallying, but then once again pulled back. It found support at the old range top.  What was once considered to be expensive was… Read More

There are always themes underlying the stock market. Earlier in the year, it was biotechnology. Then oil services offered nice gains.  When we can combine two themes, we can often multiply their benefits, and right now that is what I see with consumer staples stocks and Latin America. At first glance, the consumer staples sector appears flat and is slightly lagging the broader market so far in 2015. But beneath the surface, the Consumer Staples Select Sector SPDR ETF (NYSE: XLP) is enjoying solid demand. #-ad_banner-#The on-balance volume study, which keeps a running tally of volume traded… Read More

There are always themes underlying the stock market. Earlier in the year, it was biotechnology. Then oil services offered nice gains.  When we can combine two themes, we can often multiply their benefits, and right now that is what I see with consumer staples stocks and Latin America. At first glance, the consumer staples sector appears flat and is slightly lagging the broader market so far in 2015. But beneath the surface, the Consumer Staples Select Sector SPDR ETF (NYSE: XLP) is enjoying solid demand. #-ad_banner-#The on-balance volume study, which keeps a running tally of volume traded on up days minus volume on down days, is rising. This is a proxy for money flow and is also an indication of supply and demand. When it is rising, we surmise bulls are more aggressive than bears and demand is beating supply. Latin American stocks, as represented by the iShares Latin America 40 (NYSE: ILF), are also enjoying rising on-balance volume. Many emerging markets struggled last year as commodities tumbled, led lower by the precipitous decline in crude oil. However, ILF stabilized in December and has been moving sideways in a range since then.  This month,… Read More

All major U.S. indices declined last week. This followed a strong showing the week before, as the market continued its year-long trend of lurching back and forth while remaining essentially unchanged.   Last week’s decline was led by the Nasdaq 100, which could prove problematic this week because of the market-leading index’s position just above a key support level that I have been discussing here for some time. Another potential problem is the economically sensitive Dow Jones Transportation Average, which as I mentioned in last week’s report, continues to negotiate… Read More

All major U.S. indices declined last week. This followed a strong showing the week before, as the market continued its year-long trend of lurching back and forth while remaining essentially unchanged.   Last week’s decline was led by the Nasdaq 100, which could prove problematic this week because of the market-leading index’s position just above a key support level that I have been discussing here for some time. Another potential problem is the economically sensitive Dow Jones Transportation Average, which as I mentioned in last week’s report, continues to negotiate major support at its 200-day moving average, now at 8,689, and may be failing there. #-ad_banner-# While industrials and consumer discretionary led the broader market lower last week, energy was the only sector of the S&P 500 to finish in positive territory, gaining 2.2%. In the previous report, I said that energy “continues to look like an emerging investment opportunity over the next one to two quarters.” Last week’s strong showing within an otherwise weak market suggests the move… Read More

By the end of 2015, it’s estimated that nearly 4.9 billion people worldwide will use mobile phones, up 5% from last year. By 2018, it’s projected there will be 5.5 billion users, a 12% increase in a three-year period. This growth provides a strong tailwind for select telecom stocks. I say “select” because mobile phone usage is not evenly divided across the world. In many countries, the market is already close to saturated. China, India and the United States, for example, have the highest mobile usage, in that order. In the United States, there are more mobile phones in use… Read More

By the end of 2015, it’s estimated that nearly 4.9 billion people worldwide will use mobile phones, up 5% from last year. By 2018, it’s projected there will be 5.5 billion users, a 12% increase in a three-year period. This growth provides a strong tailwind for select telecom stocks. I say “select” because mobile phone usage is not evenly divided across the world. In many countries, the market is already close to saturated. China, India and the United States, for example, have the highest mobile usage, in that order. In the United States, there are more mobile phones in use than there are people living in the country, as many people have more than one active phone. The U.S. market is also fragmented. There are five major wireless providers and dozens of smaller ones. #-ad_banner-#The picture is much different north of the border. In Canada, there is far less competition. In fact, there are only three main providers: BCE (NYSE: BCE), formerly known as Bell Canada Enterprises, Rogers Communications (NYSE: RCI) and Telus (NYSE: TU).  Although Canada’s population and market is smaller than that of the United States, several factors point to strong mobile phone growth ahead. Currently, only about… Read More