#-ad_banner-#Over the past few months, the S&P 500 has traded in a narrow 80-point range, and a familiar refrain is again making the rounds: “Sell in May and go away.” That axiom highlights the seasonal underperformance that the summer months often bring. The market’s detractors are pointing to the weakest earnings expectations since the recession and calling for a correction or even a full-blown bear market.  The force of the herd may send stocks down marginally over the next few months, but several stronger forces are lining up to make this another positive year for investors.  I’ve found… Read More

#-ad_banner-#Over the past few months, the S&P 500 has traded in a narrow 80-point range, and a familiar refrain is again making the rounds: “Sell in May and go away.” That axiom highlights the seasonal underperformance that the summer months often bring. The market’s detractors are pointing to the weakest earnings expectations since the recession and calling for a correction or even a full-blown bear market.  The force of the herd may send stocks down marginally over the next few months, but several stronger forces are lining up to make this another positive year for investors.  I’ve found one way to hedge against a market correction, while still benefiting from higher prices through the end of the year. Here Come The Perma-Bears A surging dollar and plummeting oil prices are setting the market up for one of the worst earnings seasons since the recession. Earnings for companies in the S&P 500 are expected to drop by 4.6% in the first quarter compared to the same period last year. Expectations for earnings have fallen by more than 8% since the end of the fourth quarter, the largest decline in estimates since the first quarter of 2009.  The glum… Read More

Two of the most important lessons I’ve learned in more than 20 years of professional analysis and trading are:  1. The market nearly always overreacts, and  2. Investors are blind to the writing on the wall when fundamentals turn.  And I’m glad this is the case, because betting against market overreactions is one of the best ways to make money in the market. It’s how I plan to make 67% with today’s trade and how we recently closed a 69% winner in Profitable Trading’s Trade of the Week.  Less than a… Read More

Two of the most important lessons I’ve learned in more than 20 years of professional analysis and trading are:  1. The market nearly always overreacts, and  2. Investors are blind to the writing on the wall when fundamentals turn.  And I’m glad this is the case, because betting against market overreactions is one of the best ways to make money in the market. It’s how I plan to make 67% with today’s trade and how we recently closed a 69% winner in Profitable Trading’s Trade of the Week.  Less than a month ago, I told readers about an opportunity in Valero Energy (NYSE: VLO). Shares were trading at dirt-cheap valuations thanks in part to oil’s sell-off. The market was clearly overreacting by punishing all stocks in the sector, even if they didn’t deserve it.  “The real opportunity lies in the fact that Valero is now buying oil 50% cheaper than last year, but has only had to reduce its selling price by 35%. Incredibly, shares are actually lower than where they were last year, despite the cheaper costs, increased consumption and improved margin.” Shares started moving higher almost immediately after… Read More

The great thing about the stock market is that it provides many ways for traders to express their opinions. And for all traders believing, as I do, that energy stocks are in the midst of a rebound, there are ways to participate that suit everyone’s convictions and risk tolerance. For those looking for total return — capital gains and dividends — a more stable big-cap name would be the right choice. #-ad_banner-#And for those who are a bit more contrarian and able to handle higher levels of risk, what could be better than a smaller stock in an extremely out-of-favor… Read More

The great thing about the stock market is that it provides many ways for traders to express their opinions. And for all traders believing, as I do, that energy stocks are in the midst of a rebound, there are ways to participate that suit everyone’s convictions and risk tolerance. For those looking for total return — capital gains and dividends — a more stable big-cap name would be the right choice. #-ad_banner-#And for those who are a bit more contrarian and able to handle higher levels of risk, what could be better than a smaller stock in an extremely out-of-favor subsector? Let’s dig in. The first stock is integrated international oil giant BP (NYSE: BP). The former British Petroleum is still feeling the stain on its reputation from the 2010 Deepwater Horizon disaster in the Gulf of Mexico, and its stock price reflects it. In fact, it trades well below where it was before the accident.  But there is good news in that the technicals now point to a short-term rally. I am not suggesting BP will head back to pre-incident highs, but it is poised to make up some ground relative to its sector and the market as… Read More

As a rational investor, I understand that sentiment and irrational expectations can impact the market over extended periods of time. When this happens, I focus on the longer-term picture in order to retain conviction in my positions. But sometimes the market gets so disconnected from reality that I can’t help but wonder whether a significant change in asset prices is imminent. In these instances, which I believe is happening now, I take short-term, contrarian positions. #-ad_banner-#Even if I am early to the party and lose money on the position over a few months, I am positioned to win big when… Read More

As a rational investor, I understand that sentiment and irrational expectations can impact the market over extended periods of time. When this happens, I focus on the longer-term picture in order to retain conviction in my positions. But sometimes the market gets so disconnected from reality that I can’t help but wonder whether a significant change in asset prices is imminent. In these instances, which I believe is happening now, I take short-term, contrarian positions. #-ad_banner-#Even if I am early to the party and lose money on the position over a few months, I am positioned to win big when the bubble bursts. Unlike past bubbles in the stock and real estate markets, a new bubble is emerging in the fixed-income markets.   Take My Money, Please Switzerland recently became the first country to sell 10-year Treasuries at a negative yield. In effect, investors are paying the Swiss government to hold their money for ten years and asking nothing in return. Do investors really expect rates to go nowhere for the next decade? If that were not enough to signal something terribly wrong in the world of fixed-income, then consider this. The 10-year U.S. Treasury bond yields… Read More

Dear Readers, Before we get to the Market Outlook, I want to share a short but important document with you. It contains the track record of a trading prodigy who averaged 56.8% returns with an average holding period of just 27 days. It may sound too good to be true, but it’s not. This fact sheet, which takes no more than a few minutes to read, will tell you everything you need to know about his unique strategy — and how you can get his next eight trades without making any long-term commitment. … Read More

Dear Readers, Before we get to the Market Outlook, I want to share a short but important document with you. It contains the track record of a trading prodigy who averaged 56.8% returns with an average holding period of just 27 days. It may sound too good to be true, but it’s not. This fact sheet, which takes no more than a few minutes to read, will tell you everything you need to know about his unique strategy — and how you can get his next eight trades without making any long-term commitment. Get the facts here. Sincerely, Frank Bermea Publisher, Profitable Trading   One recurring theme within what has otherwise been a lackluster 2015 thus far for the U.S. stock market is its ability to quickly recover from the brink of a corrective decline. We saw this phenomenon again last week as all major indices finished in the black. They were led by the tech-heavy Nasdaq 100, which edged below key underlying support levels a week earlier. On the sector front, last week’s advance was led by… Read More

While most cigarette stocks had a successful 2014 on the charts, the sector behemoth by market capitalization — Philip Morris International (NYSE: PM), weighing in at $120 billion — headed mostly south. Through its April 1 low, it shed 18% from its June 2014 peak above $91.  The good news is that PM reached long-term support from its 2013 low and, arguably, the bottom of a giant trading range originating in early 2012. The question for traders is whether this support will hold, and there are many reasons why I think it will.  For… Read More

While most cigarette stocks had a successful 2014 on the charts, the sector behemoth by market capitalization — Philip Morris International (NYSE: PM), weighing in at $120 billion — headed mostly south. Through its April 1 low, it shed 18% from its June 2014 peak above $91.  The good news is that PM reached long-term support from its 2013 low and, arguably, the bottom of a giant trading range originating in early 2012. The question for traders is whether this support will hold, and there are many reasons why I think it will.  For starters, there is a positive condition in short-term momentum indicators such as the Relative Strength Index (RSI). While price set a lower low in April than it did in March, RSI set a higher low. This divergence between the two suggests that the price decline is weakening.  Along that same argument, price action also set what I call a divergence within Bollinger Bands. The bands are based on volatility rather than a set percentage and offer an interesting way to look for pending trend changes.  #-ad_banner-#​When prices moved below the lower band in a downtrend, it told us… Read More

I didn’t expect to win the award. I was really looking for feedback from other financial professionals regarding my trading ideas. But a group of market experts critically reviewed my work and determined that the strategy I present my readers each week is an example of one of the best ideas in technical analysis. My research paper is the foundation of my current streak of 86-for-86 winning closed trades. Recently, I had the honor of attending the 2015 Market Technicians Association’s Gala Awards Dinner in New York City. There I was presented with the Charles H. Dow Award, which is… Read More

I didn’t expect to win the award. I was really looking for feedback from other financial professionals regarding my trading ideas. But a group of market experts critically reviewed my work and determined that the strategy I present my readers each week is an example of one of the best ideas in technical analysis. My research paper is the foundation of my current streak of 86-for-86 winning closed trades. Recently, I had the honor of attending the 2015 Market Technicians Association’s Gala Awards Dinner in New York City. There I was presented with the Charles H. Dow Award, which is an award that highlights outstanding research in technical analysis. And today I wanted to give you a glimpse of my award winning research. #-ad_banner-#I spend a great deal of time studying and building on the works of successful investors. One of the most influential on my investing career has been Larry Williams, a well-known trader and author of 2003 book, “The Right Stock at the Right Time.” But it was actually an article he wrote in 2007 that has been one of the keys to my success. Many traders follow the Volatility S&P 500 Index (VIX) — a measure of… Read More

Despite the negative sentiment still surrounding crude oil and energy stocks, the evidence points to a much brighter future. Every day my screens turn up more and more energy stocks forming bottoms and actually breaking out to the upside. #-ad_banner-#It started with explorers and producers and spread to drillers. Now I see other oil services stocks making some bullish noise, including deep-water engineering services provider Oceaneering International (NYSE: OII). Any company involved with offshore drilling for oil and gas suffered last year as crude prices plummeted. Rigs were shut down, global stores… Read More

Despite the negative sentiment still surrounding crude oil and energy stocks, the evidence points to a much brighter future. Every day my screens turn up more and more energy stocks forming bottoms and actually breaking out to the upside. #-ad_banner-#It started with explorers and producers and spread to drillers. Now I see other oil services stocks making some bullish noise, including deep-water engineering services provider Oceaneering International (NYSE: OII). Any company involved with offshore drilling for oil and gas suffered last year as crude prices plummeted. Rigs were shut down, global stores seemed to be overflowing and business slowed to a crawl. But as we see time and time again, the charts firm up and start to rise long before the fundamentals seems to change. The market, being the sum of the actions of all investors, commercial operators and speculators, looks out into the future to anticipate what might happen roughly nine months down the road. Right now, it suspects that oil demand will pick up by year end and all that reduced capacity will create bottlenecks.  Getting back to my mandate, the charts of many oil services stocks are starting to… Read More

The decimation of oil prices has been a dominant theme for the past eight months. However, while weaker earnings out of the energy complex are weighing on overall market earnings, the collapse in oil prices has yet to really hit earnings outside the sector.  But that could be about to change. While companies like airlines and shipping providers may benefit from lower fuel prices, companies that provide ancillary services to the energy sector may soon surprise the market with lower sales.  One particularly expensive-looking company already warned investors, but no one seemed to notice. Cintas (NASDAQ:… Read More

The decimation of oil prices has been a dominant theme for the past eight months. However, while weaker earnings out of the energy complex are weighing on overall market earnings, the collapse in oil prices has yet to really hit earnings outside the sector.  But that could be about to change. While companies like airlines and shipping providers may benefit from lower fuel prices, companies that provide ancillary services to the energy sector may soon surprise the market with lower sales.  One particularly expensive-looking company already warned investors, but no one seemed to notice. Cintas (NASDAQ: CTAS) is the largest U.S.-based uniform rental provider with more than 7,700 delivery routes and 1 million business clients. Beyond a commanding domestic presence, the company has operations in Asia, Latin America and Europe. #-ad_banner-#​Revenue from the core rental business accounts for 75% of sales and 80% of profitability. While Cintas has been able to carve out a name for itself in the mature market of rental uniforms, it has struggled in its other segments — direct uniform sales and first aid, safety and fire protection services.  The attempt to diversify sales into these… Read More

Contrarian investing means going against the crowd, and nowhere in the market today is there a crowd bigger than the oil and energy stock naysayers. With West Texas Intermediate (WTI) crude oil trading around $50 per barrel, there are headlines almost daily forecasting prices moving into the $30s and even $20s. With oil prices down more than 50% from their highs last summer, energy stocks severely lagged the broader market for the better part of the past year. It seems no one is interested in them anymore, but this is the time when contrarian ears perk up. #-ad_banner-#In the early… Read More

Contrarian investing means going against the crowd, and nowhere in the market today is there a crowd bigger than the oil and energy stock naysayers. With West Texas Intermediate (WTI) crude oil trading around $50 per barrel, there are headlines almost daily forecasting prices moving into the $30s and even $20s. With oil prices down more than 50% from their highs last summer, energy stocks severely lagged the broader market for the better part of the past year. It seems no one is interested in them anymore, but this is the time when contrarian ears perk up. #-ad_banner-#In the early stages of a recovery from a bear market, not every group, even within a single sector, looks healthy enough to rally. However, oil services stocks have shown resilience over the past few weeks and some are even starting to move above resistance levels. Despite the daily news of a global supply gut, the shutting down of oil rigs as crude prices tumbled seems to be a recipe for a big bottleneck in supply one day. And even though global economies are still sputtering, they are improving, and with them, demand for energy. We are currently seeing what may be an… Read More