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.

Subscribe to the free Finance Trends Newsletter - you'll get actionable trading ideas and valuable market insights sent to your inbox. You can follow our real-time updates on Twitter.   

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


Subscribe to the free Finance Trends Newsletter - you'll get actionable trading ideas and valuable market insights sent to your inbox. You can follow our real-time updates on Twitter.  

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.

Subscribe to the free Finance Trends Newsletter. You can follow our real-time updates on Twitter.  

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! 

Subscribe to the free Finance Trends Newsletter. You can follow our real-time updates on Twitter. 

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. 

Wednesday, December 14, 2016

William O'Neil Interview: How to Buy Winning Stocks

William O'Neil trading quote stocks stock market paradox

Investor's Business Daily founder and veteran stock trader, William O'Neil shared his trading methods and insights on buying winning stocks in this in-depth IBD radio interview.

Here are some highlights from O'Neil's talk with IBD:

William O'Neil's interest in the stock market began when he started working as a young adult. 

"I say many times that I didn't get that much out of college. I didn't have much interest in the stock market until I graduated from college. When I got married, I had to look out into the future and get more serious. The investment world had some appeal and that's when I started studying it. I became a stock broker after I got out of the Air Force."  

He moved to Los Angeles and started work in a stock broker's office with twenty other guys. When their phone leads from ads didn't pan out, O'Neil would take the leads and drive down to visit the prospective customers in person.

"I'd get in the car and drive down... it might be to San Clemente. Well what else did I have to do at the very beginning? I'd say, 'I'm so and so with such and such' and I saw that you requested this information. Well, I happened to be in the area and thought I'd stop by. They'd so 'oh, fine' and invite me in... that's how I got started."

Bill name checks legendary speculators Gerald Loeb and Jesse Livermore as his greatest influences.

"Gerald Loeb had written the Battle For Investment Survival. He made several million dollars trading and pyramiding stocks as a young man in San Francisco. I actually met him in New York and he came down to L.A. one time and we met [here]. I always tried to meet with the ones I was impressed with.
The person who had an enormous reputation over the years, though it took some time for everybody to understand that, was Jesse Livermore. He was a really unique trader made and lost millions and his stories are great..."

"The one thing I learned is that there are only about 5 or 6 great [trading] books worth reading. Every professor in the country has written a book... and a bunch of other people. You want to find a book from someone that you know has really done well in the market, and read them!"

On the common threads between great traders and Jack Dreyfus.

"I think there's a certain amount of humility with top traders. You have to make enough mistakes and learn to overcome them. They [top traders] are market oriented and not steeped in theory. " 

"I noticed Jack Dreyfus [due to] the performance of the Dreyfus Fund. They were performing better than any of the other funds. I tried to figure out, "what is this guy doing that makes him outperform everyone?". I went back to New York and visited their office. He was a chartist. He was solely market oriented."

"That's when I realized charts are important. It started by knowing that Dreyfus was performing better and I wanted to find out how. I got 2 or 3 of his quarterly reports and I plotted out charts on all these things he owned. They all had chart patterns and he only bought things going to new high ground."

Obviously, O'Neil's study of Dreyfus' methods greatly influenced his trading and the creation of the CANSLIM system, especially as it came to finding stocks building technical bases and moving to new highs

William O'Neil IBD 1960s Stocks
William O'Neil and Co. in the 1960s via Investors.com

Another key feature of William O'Neil's method is finding the winning stocks that are really growing their earnings and introducing innovative new products. How does he zero in on the very best stocks?

"Your objective is to find the strongest stock that could potentially triple in price. Charts are an easy way to look through hundreds of stocks. When I see a chart pattern that shows the stock is under accumulation, I look for big earnings and sales growth. I want to buy something where the earnings are up 40-50 per cent or 100 per cent..."

"It's not charts that make the stock go up. It's the big earnings and the new product."

What O'Neil looks for in winning stocks

"I want a base pattern, and it's not just the chart. I want the earnings and sales to be up. I want to understand the product. You've got all that to start with..." 

Now the market will tell you. This stock goes up 5 per cent while that one goes up 10 per cent. Well, the one that went up 10 per cent is the bigger leader. The market tells you this is the best stock."

How do you sit tight on the stocks that have the potential to be truly big winners?

"This is an important question. Go back on the last 5 or 10 years and see where you made the most money in stocks. I do not hold a lot of stocks for a long time. I've always like retail stocks and drug stocks, because I could understand them."

"The stocks that I'm sitting with are the ones I know and understand. You can go in any retail store and see if they have something unique and if there are a lot of cars in the parking lot [gives examples of Pic N' Save, Price Club, Home Depot]. And if it's working, they can expand in all these new cities."

What makes a trader successful? O'Neil answers from his experience with portfolio managers and traders he has known or worked with.

"I think you have to love the area that you're in and you have to be fascinated with the stock market. You're going to read all the books and devour all the info on the market and do your studying and get it down."

"If you've been in the market for a year or two, you begin to realize that you have to be a realist. It isn't what you think or feel or what you believe. When you make a mistake, fix it as soon as you can. The average loss should be 3 - 7 per cent. Then you go on to the next thing."

"It's not their opinion or their brilliance. You could take the brightest lawyer in town and he could lose his shirt in the stock market. You have to learn the elements of trading and execute them. If you've been in the stock market for any time, you will acquire some humility!"

On the importance of post-analysis in trading and learning from your mistakes.

"You've got to study what you did that worked and what didn't. I remember when I first devised my method and bought a bunch of stocks that went up. It never dawned on me that there was something missing. Well, I found out the hard way that you not only have to have buy rules, you also need to have sell rules."

"Everything is going to top at some point, so you have to [learn when] it's topping and get out. So I had to start all over again and figure out the sell rules. Trial and error is how I learned." 

"The biggest profit I made, back when I started and had nothing, was in Syntex. It went up four-fold in six months. It had The Pill, which was a very interesting, game changing new product. The three stocks I bought before, I had lost money on. If I had gotten discouraged and said, oh my gosh maybe I better slow down and not do this, I would have never had Syntex."

"You've got to keep on. You're gonna make mistakes, you're gonna have problems, but never quit."

If you'd like to check out more from William O'Neil, try his condensed book, The Successful Investor or his widely read (and more comprehensive) book, How to Make Money in Stocks (4th edition). 

Check out our related posts below on the trading methods of Jesse Livermore (cited by O'Neil as a prime influence). You'll also find some trading wisdom from growth stock trader and Market Wizard, Mark Minervini. Plus, a few thoughts on the importance of persistence in trading and in life.

Related posts:

1. Jesse Livermore: How to Trade in Stocks (ebook).

2. Babe Ruth on Persistence: Keep Swinging Your Bat.

3. Mark Minervini Interview: Why Traders Fail
 
Subscribe to the free Finance Trends Newsletter.
You can follow our real-time updates on Twitter. 

Wednesday, October 19, 2016

Tesla Motors is Exciting... But Its Stock is Stagnant

The internet and tech fans worldwide are buzzing about Tesla Motors' newest product announcement. Will the news send Tesla's stock (TSLA) higher?

The upcoming "reveal" will probably be linked to Tesla's Model 3 car and its internal design, plus some much-anticipated autopilot advancements.

Elon Musk dropped some hints on Twitter today about the nature of tonight's Tesla media event, scheduled for 5pm PST.
Elon Musk Tesla Model 3 event tweets
There is no doubt that Tesla Motors is an incredibly innovative and exciting company, and the Model 3 in question is a major product.

When the Model 3 is released to buyers in late 2017 and 2018, it will mark the full realization of Tesla's mission: to build and deliver an affordable electric car that will help kickstart mass adoption of electric vehicles (EVs). 

 
Tesla Model 3 roadside profile shot car
Tesla Model 3 via Tesla.com


So will this latest product event help Tesla (TSLA) get its stock back in gear? 

After a huge run up in 2013 and 2014, Tesla's stock peaked above $290 and has drifted lower since. The chart below shows TSLA meandering through a rather wide 2-year trading range. TSLA has drifted between $180 (an area of price support) and $280 (price ceiling or resistance) for most of 2014-2016.  


Tesla Motors (TSLA) stock chart trading range
Tesla Motors (TSLA) stock has been fluctuating in a wide 2-year trading range.


Pretty boring right? Well, safe is usually boring, and that's what we have here. 

Once Tesla made good on its early promises, the doubtful traders, fund managers, and industry watchers all climbed aboard. Only they, or many of them, missed out on the powerful advance that occurred in 2013, when TSLA was confounding its doubters and breaking out to new all-time highs

Tesla (TSLA) stock chart: 2013 breakout
Rewind to 2013: Tesla's (TSLA) initial breakout and move to new highs.


Now that is the start of a powerful move (and note to self: get aboard next time you see it taking shape in a new growth leader). 

Sidenote: When you see TSLA or any new growth stock breaking out to new highs, especially on strong volume (note the ramp up in green volume bars confirming strong buyer demand), that is a huge signal that something big is taking shape in the market. 

Take a small position ("don't risk thy whole wad"), set a stop loss order to manage your risk, and see what happens. Believe me, it's better than standing on the sidelines shaking your head in a mixture of awe and regret. Back to the launch, and to the current outlook for Tesla's stock. 

Tonight's product event may help TSLA climb a bit tomorrow, but it would have to be one heck of a humdinger to bring about a powerful, sustained advance in the stock price. 

In order for TSLA to break out of its long trading range, the stock would first need to reclaim the $250 level it last touched in April 2016. It would then need to climb back to the $285-$290 level and break out above that price ceiling to make a new all-time high.  

Tesla Motors (TSLA) stock price: $30 billion market cap TSLA
TSLA current $30 billion market cap, via Yahoo Finance


With a market cap of $30 billion, Tesla (TSLA) is now more of a mature, large-cap growth stock than the young tyro rocketing out of its post-IPO base. 

But don't count Elon Musk & Co. out yet on future stock price appreciation. 

While it may take quite a while for TSLA to regain strong momentum to the upside, especially as R&D spending and recent shareholder dilutions sink profits, the innovations that Tesla will spur in clean energy and EVs are bound to bring more excitement from investors and consumers. That excitement will lead to added demand, for Tesla products and its shares. 

Besides, do you really want to bet against a CEO whose companies can build desirable electric cars (Tesla), land reusable rockets on sea platforms (SpaceX), and redesign your rooftop with new integrated solar panels (SolarCity)? 

Elon Musk offers an exciting vision for Tesla Motors (TSLA), which includes his plans to merge with SolarCity, create a seamless clean energy solution for its customers, and eventually overtake Apple (AAPL) to become the first trillion dollar company. 

If he can get the company 1/10th of the way there, to a $100 billion market cap, it will provide a major long-term boost for Tesla's currently flagging share price. 

Related posts:

1. Tesla Shares Slide to 18-month low: TSLA Chart Review.

2. Tesla Hits New All-Time High: Do Androids Dream of Electric Cars?

Subscribe to the free Finance Trends Newsletter. You can follow our real-time updates on Twitter.