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Saturday, May 27, 2017

Step Out of Your Investing Comfort Zone: Buying High-Priced Stocks

The latest edition of the Finance Trends Newsletter was sent out to subscribers on Thursday. If you would like to join our free email list and receive new updates, please subscribe via the title link.

 Finance Trends Newsletter

Our latest email report, "Going Outside Your Investing Comfort Zone" provides a brief update to this week's Amazon (AMZN) and Google (GOOGL) post. Namely, the question of how to step up to the plate and buy such high-priced stocks as they cross the $100, $200, or even the rarefied $1,000 per share mark.

Here is an excerpt from our latest email update: 

"...Now, I am slowly retraining myself to act on my analysis, even when it comes to buying very "high-priced" shares such as AMZN, PCLN, etc. As I remind myself lately, you don't need to take on a very large position, just buy a few shares and participate in the uptrend..." 

"...While writing today's update, I had a chance to look back on a prior AMZN post and a big missed opportunity in the stock.

What could I do to remedy this lack of follow-through in the future?

Confronting my past inhibitions, I decided to take action and buy another "high-priced" stock. One that has popped up in my chart scans and is trading well north of $100 per share..."

You can read the full story and learn how I've started to move outside of my "investing comfort zone". You may be inspired to take action and redefine your own investing boundaries!

Thursday, May 25, 2017

Amazon (AMZN) and Google (GOOGL) near the $1,000 mark

Amazon (AMZN) and Google (GOOGL) are set to join the $1000 per share club. 

Amazon AMZN GOOGL $1000 stock price chart

Google stock chart GOOGL $1000


We last spoke of AMZN and GOOGL in our late April roundup of leading tech stocks making new highs

You can also check our 2013 post, "Amazon: Long-Term AMZN Charts and Thoughts", and revisit a time earlier in this bull market when the stock was trading near $350 a share. 

One of my great errors of omission (failure to act) was in not purchasing AMZN shares after writing this post. The share price continued to climb steadily (in fact, it has since tripled), confirming all the basic factors (retail dominance, AWS growth) laid out at that time. 

Now, I am slowly retraining myself to act on my analysis, even when it comes to buying very "high-priced" shares such as AMZN, PCLN, etc. As I remind myself lately, you don't need to take on a very large position, just buy a few shares and participate in the uptrend.

Tuesday, April 25, 2017

Nasdaq 6,000: Tech Leaders (GOOG, FB, NFLX, AMZN) at New All-Time Highs

The Nasdaq Composite (COMPQX, IXIC) topped 6,000 today, a record high for the tech-heavy index. 

Here is an updated monthly chart (click below) of the Nasdaq from 1999 - 2017. You'll note that the prior dot com bubble peak of 5,132 in March 2000 was not topped until mid-2015. With this latest surge, the Nasdaq jumped over the 6k mark for the first time ever.

Nasdaq Composite Nasdaq 6000 6k stocks tech chart


Joining the Nasdaq at new all-time highs are many of the most actively traded US tech stocks. 

Leading tech names such as Amazon (AMZN), Apple (APPL), Facebook (FB), Netflix (NFLX), Microsoft (MSFT), and Google (GOOG, GOOGL) are trading at, or very near, their all-time highs. See the Finviz charts below.



Also joining the new highs parade are Tesla (TSLA), a tech company in the guise of a car manufacturer, payments processor Square (SQ), Pepsi (PEP), and omnipresent burger joint, McDonald's (MCD). 

So we are seeing a bullish resumption of the upward trend in US stocks. The new highs in leading tech stocks and even some big cap consumer names, like McDonald's and Pepsi, are supportive of a healthy, broader uptrend in the stock market. 

While many stocks are still languishing well below their highs or are busy playing catch up, these latest moves higher in tech and chip stocks are a positive sign for the market going forward.

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Thursday, April 06, 2017

NVIDIA (NVDA) Topping? Stock Chart Review

NVIDIA (NVDA) shares have struggled to regain their former highs above $120. Has this new tech leader topped out or is the stock merely catching its breath and consolidating? 

NVDA is currently trading around $100 after falling back below its 50 day moving average. The stock is currently down -6% YTD.

NVIDIA stock NVDA price chart technical analysis


As you'll note from the chart annotations (click chart to enlarge), this is the second time the stock has dipped below the 50 day MA since topping out in early February. 

The stock made a short-term top at the end of 2016, with a bearish engulfing bar (the long red bar/candle on December 28, 2016). This down day marked the start of a brief decline, after which NVDA climbed back to challenge its former high. The stock failed to hold above the $120 level and quickly dropped back below its key moving averages.

I should note that NVDA pulled back sharply below its 20 and 50 day MAs back in early 2016. The stock soon bounced back and went on to make multi-year highs as it ran from $33 to $120, a nearly four-fold gain in one year.

The question is, do we see signs of a renewed uptrend coming on the heels of the advance we've just witnessed? With NVDA currently sporting a $59 billion market cap and fellow chip leaders like AMD and QCOM struggling lately, I will tread lightly here.  

Until I see renewed buying strength and a resumption of the upward trend, I will avoid buying the stock outright. NVDA is either in the process of consolidating or entering a decline. Until I get more information, I will focus on stocks with higher potential for upside.

While I don't own NVDA as an individual stock, I do own the shares indirectly via the semiconductor ETF, SMH. So while I'm realistic and cautious about a potential decline in NVDA, I'll be happy to see the stock firm up and move higher in the coming weeks. If the trend moves against me, I have a predetermined sell order (stop loss) in place for SMH.

Related posts

Chip Stock Rally Broadens: NVDA, AMD, BRKS, SMH Charts.

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Friday, February 10, 2017

S&P 500 Trading at New All-Time Highs: SPY Weekly Chart

S&P 500 ETF, SPY trading at new highs (weekly chart below). Remember what the pundits said 3 months ago ("Trump crash!")... Markets shrug opinions.

SPY weekly chart ETF new highs S&P 500


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Thursday, February 02, 2017

Chip Stock Rally Broadens: NVDA, AMD, BRKS, KLIC, SMH Charts

Semiconductor stocks have been one of the strongest groups in the stock market since mid-2016, when the S&P 500 recovered and started its march to new all-time highs. 

You can see this clear uptrend taking shape in the annotated weekly chart (below) of Semiconductor ETF, SMH.

SMH chart chip stocks semiconductors Intel Nvidia AMD


The chip stock rally is now broadening out. While big name stocks like Advanced Micro Devices (AMD) and Nvidia (NVDA) led the charge higher in 2016, lesser-known stocks like Brooks Automation (BRKS) and Kulicke and Soffa (KLIC) are now coming on strong and moving to multi-year highs. Let's view their charts.

NVDA has been a powerful leader to the upside since 2015. After climbing through resistance and making a 5-year high in late 2015, NVDA had a throwback correction down to $25 level. The stock resumed its advance in early 2016, setting a new all-time high above $40 in May of that year. Since then, it has climbed over $100 and become one of the most widely watched and traded tech stocks in the market.

NVDA Nvidia stock chart tech leader price semiconductor

AMD has been on the comeback trail for almost a year now. The stock popped to the $4 level in the spring of 2016, exiting a multi-year downtrend, and has continued higher since. Despite some corrections and shakeouts along the way, AMD is now trading above $12.

AMD stock chart daily 1-year semiconductor uptrend


Although I traded AMD in 2016 and was slightly profitable overall on my shorter-term trades, it was also one of my great trading disappointments of 2016. As an experienced trading buddy reminded me, I might have captured a bigger portion of the trend in this stock and made far more money if I had given the stock more room to breathe (wider stops, and a longer trade timeframe) and just sat on my hands as it slowly worked its way higher. Lessons for future trades.

Now, here are the price charts of some lesser-known lights in the chip industry. We're seeing some strong moves to the upside on above average volume here in stocks like BRKS, KLIC, STM, and UTEK. Some of these chip stocks have run up quite a bit in recent weeks, so be sure to find a good buy point which makes sense for you (don't just blindly chase them up here).

BRKS daily chart. As of today's move higher, the stock is now trading at a 10-year high.

BRKS price chart stock chip semiconductor tech


UTEK advancing on good volume today. The stock is nearing a 2-year high.

UTEK stock chart semiconductor price tech chip


SLAB now over $70 and trading at a 16-year high (monthly chart).


SLAB monthly price chart semi stock tech 16-year high


KLIC moving higher on strong volume, recent breakout to 15-year high (monthly chart). 


KLIC chip tech semiconductor stock price chart


STM has had a strong climb out of a long multi-year downtrend. The stock is up over 100% from its 2016 lows and is trading at an 8-year high.

STM price chart semiconductor tech chip stocks


NVMI climbed past its prior highs in the $12-$13 range and is now at a 16-year high.


NVMI chart chip stock tech semiconductor stocks


So while the uptrend in chip stocks is not entirely new, we do see a recent broadening out of the rally with more stocks participating to the upside. I think there is room for further upside in the coming months in SMH, as well as some of the individual names shared here. Keep this group on your radar and in your watch lists.

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Friday, January 27, 2017

Retail Stocks Won't Join the 2017 Rally

Stocks have rallied since the Trump election and the Dow (DJIA) just passed 20,000 for the 1st time ever, but there is one sector of the stock market that just won't join the party.

Dow Jones Industrial Average 20,000 DJIA Stocks Chart
Dow Jones at 20,000.


Retail stocks continue to lag the overall market, a theme highlighted in our retail stock report from December 2016. While the post-election period saw a boost for many industry groups and the leading stock indices, the consumer retail sector is showing further signs of deterioration. 

Here's a technical snapshot of some of the leading mainstream retailers and retail brands. Included are charts of Nike (NKE), Under Armour, (UAA), Ralph Lauren (RL), Macy's (M), Wal-Mart (WMT), Target (TGT), Kohl's (KSS), and Dollar Tree (DLTR).


Retail Stocks Charts Nike Under Armour Macy Wal-Mart Target
Retail stocks continue to under perform the overall market.


While the market has been offering up many opportunities in stronger groups such as financial services, banks, steel, construction, chemical stocks, semiconductors, tech, and cannabis, these widely-owned retail stocks (with the exception of NKE) have continued to slide. 

Strategy notes: Finding Winners, Cutting Losers

Avoiding these stocks, and other market laggards, has been a key part of my "defensive strategy" for the new year. While many investors prefer to diversify away their risk by holding a multitude of stocks in many industries, I choose to avoid these weak stocks and weak industry groups altogether. 

This gives me the mental, and financial, breathing space to search for potential winning stocks in strong industry groups.

As I wrote in our last report on the weak retail stocks

"...As a position trader focused on larger multi-week and multi-month moves, I want to find stocks that are set to trend higher. At present, neither of these [UAA and NKE] stocks fit that bill; they are fighting against the tide (downtrends).  

We want to buy stocks that are entering new uptrends or stocks that still have some gas in the tank to move higher. This puts the wind at our back, so to speak.

While many stocks and industries have benefited from the recent "Trump rally", retail shares have been quick to give back much (or all) of their gains. This is a red flag for the industry and for many of the individual retail stocks..."

The temptation to hold declining stocks is strong for most retail traders and investors. If you start cutting your losing investments earlier, you will find more financial and emotional breathing room to focus on your winning investments and trades. 

The US stock market is trading at new all-time highs (see: DIA, QQQ, SPY). Focus on buying stocks that are participating to the upside. You don't to spend another leg of the bull market holding laggards and marginal trades... you want to buy and hold winners. This is something I have to remind myself of from time to time! 

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Thursday, December 22, 2016

Nike and Under Armour Caught in Retail Stock Slide

Nike (NKE) and Under Armour (UAA) are two big-name stocks caught up in this month's retail stock slide. We'll examine their charts in detail, but first an overview of the recent price declines in this sector.

As noted on Twitter earlier today, we are seeing major price deterioration in a number of retail stocks this week and in the month of December. 


No doubt, a part of that weakness may be tied to fears of taxes on imports from China and Mexico, given President-elect Donald Trump's decision to name economist Peter Navarro as head of a new White House National Trade Council. More on this from Reuters: 


"...U.S. President-elect Donald Trump named Peter Navarro, an economist who has urged a hard line on trade with China, to head a newly formed White House National Trade Council, the transition team said on Wednesday.

Navarro is an academic and one-time investment adviser who has authored a number of popular books and made a film describing China's threat to the U.S. economy as well as Beijing's desire to become the dominant economic and military power in Asia.

Trump's team praised Navarro in a statement as a "visionary" economist who would "develop trade policies that shrink our trade deficit, expand our growth, and help stop the exodus of jobs from our shores."

Trump, a Republican, made trade a centerpiece of his presidential campaign and railed against what he said were bad deals the United States had made with other countries. He has threatened to hit Mexico and China with high tariffs once he takes office on Jan. 20.
..."

The mood is hitting the share prices of retail giants Ralph Lauren (RL), Bed Bath and Beyond (BBBY), Macy's (M), Dollar Tree (DLTR), and Target (TGT). That same weakness is starting to show up in the price action of major retail ETFs RTH and XLY.

Nike (NKE) and its rival Under Armour (UAA) are two leaders in the sport apparel industry. These heavily-owned retail shares are trading on a similar path, as their charts will reveal.

Under Armour (UAA) shares peaked at $52.94 in September 2015, following a 5-year run from $3.25 a share in 2010, a 16-fold move. The monthly chart below shows the full extent of this move, and the recent decline, in arithmetic scale.

Under Armour stock price chart monthly


Having peaked in late 2015, UAA has since trended lower, making a series of lower highs and lower lows. The most recent decline took the stock to a 2-year low. Certainly not a bullish development, as noted on the weekly chart below.

Under Armour (UAA) weekly stock price chart


Nike (NKE) has also moved lower off its late 2015 highs above $67. The stock has steadily trended lower for over a year, with a current share price of $52.14. NKE enjoyed a very solid 4-fold run from $16 a share in 2010 to over $67 a share in 2015.   

Nike (NKE) weekly stock chart


With both stocks trending lower off their highs and setting new lows, rather than new highs, I'm inclined to take a bearish stance and avoid the pair. Of course, things can change for the better at any time, for either stock. In the shorter term, "bargain" hunters may step in to snap up some of the beaten-down retail names in hopes of selling for a profit on a bounce higher.

However, before I decide to buy UAA or NKE, I would expect to see some type of bottom formation or price basing action. I would then like to see the stock work higher off its lows and establish a new pattern of higher highs. This would be a signal that the stock is turning up out of its doldrums. Strong volume on any new advance would help confirm a positive change in trend. 

As a position trader focused on larger multi-week and multi-month moves, I want to find stocks that are set to trend higher. At present, neither of these sport apparel stocks fit that bill; they are fighting against the tide (downtrends). We want to buy stocks that are entering new uptrends or stocks that still have some gas in the tank to move higher. This puts the wind at our back, so to speak.

While many stocks and industries have benefited from the recent "Trump rally", retail shares have been quick to give back much (or all) of their gains. This is a red flag for the industry and for many of the individual retail stocks. For now, I will avoid the group and monitor for any potential standouts showing superior relative strength.

Disclosure: I have no current position in UAA, NKE, or any of the retail stocks and ETFs mentioned in this post. 

Related posts:

1. How to Buy Winning Stocks: William O'Neil Interview.

2.  Valeant (VRX): How to Avoid Disastrous Stock Declines.

3. Amazon Dominates as Retail Rivals Plunge.