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

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

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

There are as many ways to analyze the stock market as there are analysts. However, one method that has been proven in theory — and, more importantly, in real life — is relative strength investing. The idea is that stocks, sectors and markets all have inertia, not unlike an aircraft carrier powering across the ocean. The more inertia an asset has, whether it is from a bull market, a powerful sector or simple demand for shares, the more likely it will continue moving forward. Conversely, the more it will take to reverse its course. #-ad_banner-#In the stock market, we’ve all… Read More

There are as many ways to analyze the stock market as there are analysts. However, one method that has been proven in theory — and, more importantly, in real life — is relative strength investing. The idea is that stocks, sectors and markets all have inertia, not unlike an aircraft carrier powering across the ocean. The more inertia an asset has, whether it is from a bull market, a powerful sector or simple demand for shares, the more likely it will continue moving forward. Conversely, the more it will take to reverse its course. #-ad_banner-#In the stock market, we’ve all heard gurus profess that they buy the strongest stocks in the strongest sectors. This is the basis of relative strength investing. It is also the essence of top down investing where we look for the market-leading sectors and then drill down for individual stocks at the top of their sector “class.” It is no secret that biotech has been one of the strongest groups in the market. In the past two years, the iShares Nasdaq Biotechnology (NASDAQ: IBB) is up 113% compared with 33% for the S&P 500. Biotech has actually been outperforming the broader market since… Read More

There has been an unprecedented rally going on in an often-ignored corner of the market. And its enormous move has important ramifications for U.S. equities.  Starting in June, the U.S. dollar index, a measure of the value of the dollar relative to a basket of international currencies heavily weighted to the euro, has rallied 25%. The current rally is even greater in both speed and magnitude than the one we saw during the 2008 financial crash. This is a historically significant move. The index just made a key upside break above three decades’ worth of resistance,… Read More

There has been an unprecedented rally going on in an often-ignored corner of the market. And its enormous move has important ramifications for U.S. equities.  Starting in June, the U.S. dollar index, a measure of the value of the dollar relative to a basket of international currencies heavily weighted to the euro, has rallied 25%. The current rally is even greater in both speed and magnitude than the one we saw during the 2008 financial crash. This is a historically significant move. The index just made a key upside break above three decades’ worth of resistance, shown on the monthly chart below. Before we get into what this means for your portfolio going forward, let’s start with a quick primer on currency.  Currency is always valued relative to other currencies. For example, we can value the U.S. dollar based on how many Japanese yen one dollar can purchase. The dollar is often valued against the euro or a basket of currencies, which is what the dollar index above measures. Currencies have two main factors that drive their trends. The primary factor is the interest rate differentials between two countries. The country with the higher… Read More

The search for yield in a world where the benchmark 10-year U.S. Treasury note offers less than 2% is a tough task. Fortunately, there are stocks that still offer attractive income and the potential for trading gains.  By nature, stocks are risker than bonds, especially default-risk-free Treasuries, but with that risk comes the potential for greater reward. #-ad_banner-#Not all stocks offering high dividend yields are good investments. Yields rise as share prices fall. If a company is in trouble, it is unlikely it will be able to sustain its dividend payout. One way to predict whether… Read More

The search for yield in a world where the benchmark 10-year U.S. Treasury note offers less than 2% is a tough task. Fortunately, there are stocks that still offer attractive income and the potential for trading gains.  By nature, stocks are risker than bonds, especially default-risk-free Treasuries, but with that risk comes the potential for greater reward. #-ad_banner-#Not all stocks offering high dividend yields are good investments. Yields rise as share prices fall. If a company is in trouble, it is unlikely it will be able to sustain its dividend payout. One way to predict whether a stock’s high yield is a potential sign that the dividend may be cut is to look at the chart. A falling price trend is a red flag, as the market often seems to know what lies ahead before analysts figure it out. But if a stock with a big yield has a positive chart, it could wind up rewarding investors with both high income and capital gains. One of my favorite dividend stocks right now that is showing a turnaround on its chart is Kimberly-Clark (NYSE: KMB).  Shares of the personal products maker have had… Read More

While biotech has been the clear market leader recently, there is another leading sector that is flying under the radar. Defense stocks have quietly outperformed the market since summer, and corrective pauses for many appear ready to resolve to the upside. When we talk about defense, the first thing most investors think of is aerospace and high-tech communications. However, there is a member of the group that serves the military in a different capacity. Huntington Ingalls Industries (NYSE: HII) builds and maintains nuclear and non-nuclear ships for the U.S. Navy and Coast Guard. The stock has been a… Read More

While biotech has been the clear market leader recently, there is another leading sector that is flying under the radar. Defense stocks have quietly outperformed the market since summer, and corrective pauses for many appear ready to resolve to the upside. When we talk about defense, the first thing most investors think of is aerospace and high-tech communications. However, there is a member of the group that serves the military in a different capacity. Huntington Ingalls Industries (NYSE: HII) builds and maintains nuclear and non-nuclear ships for the U.S. Navy and Coast Guard. The stock has been a top performer with a 60%-plus gain since August and a nearly 30% gain year to date. Compare that with the S&P 500’s 2.6% gain in 2015. Normally, I am less enthusiastic about chasing top performers after they have already had big gains. For example, many biotech stocks are soaring at ever increasing speeds. The sector is overbought, which is not necessarily bad, but no stock moves straight up forever, and corrections could be severe. So when I find a strong stock in a strong sector that is already in the midst of an orderly correction, my interest is… Read More

When a member of the blue-chip Dow Jones Industrial Average becomes a chronic underperformer, it often is at risk for removal from the index. Bank stocks after the financial crisis were prime examples. However, one laggard that should not worry about banishment right now is retail giant Wal-Mart (NYSE: WMT).  The world’s largest publicly traded employer has been lagging the domestic market since mid-2012 with a bout of strength seen in the fourth quarter of last year. Since notching its all-time highest close on Jan. 8 at $90.47, shares slid rather steadily to their March 11 closing low of $80.69. Read More

When a member of the blue-chip Dow Jones Industrial Average becomes a chronic underperformer, it often is at risk for removal from the index. Bank stocks after the financial crisis were prime examples. However, one laggard that should not worry about banishment right now is retail giant Wal-Mart (NYSE: WMT).  The world’s largest publicly traded employer has been lagging the domestic market since mid-2012 with a bout of strength seen in the fourth quarter of last year. Since notching its all-time highest close on Jan. 8 at $90.47, shares slid rather steadily to their March 11 closing low of $80.69. That was an 11% decline in eight weeks while the Dow was down just 1.5%.  With WMT sitting on top of a rather firm price floor, it may now be a great bargain. But it is more than just support on the chart that piques my interest.  The decline in shares this year seemed rather sedate — the steady erosion of a forgotten stock. And throughout the fall, on-balance volume did not budge, which is a bullish sign. #-ad_banner-# On-balance volume… Read More

Some chart patterns are pauses that will eventually resolve in the direction of the preceding trend. Some are pauses that signal a change in trend. The trick is to wait for the market to tell us which it is before we act. To be sure, most patterns can go either way. That makes waiting for the breakout/breakdown a critical step, because even a pattern with a bullish name, such as an ascending triangle, can lose to the bears.  Right now, consumer products giant and member of the blue-chip Dow 30, Procter & Gamble (NYSE: PG), offers such a… Read More

Some chart patterns are pauses that will eventually resolve in the direction of the preceding trend. Some are pauses that signal a change in trend. The trick is to wait for the market to tell us which it is before we act. To be sure, most patterns can go either way. That makes waiting for the breakout/breakdown a critical step, because even a pattern with a bullish name, such as an ascending triangle, can lose to the bears.  Right now, consumer products giant and member of the blue-chip Dow 30, Procter & Gamble (NYSE: PG), offers such a setup.  Not only does it sport a very clear symmetrical triangle pattern, but it is now trading between trendline and moving average support and resistance levels. Indeed, it is at a crossroads with both long- and short-term implications (although today’s trade will be limited to the short term). As we can see in the chart, PG recently broke down sharply below the short-term rising trendline from July. However, it is also sitting just above a long-term trendline from the June 2012 bottom, which coincides with horizontal chart support from late last year. #-ad_banner-#In other words, the… Read More

As a technical analyst, I am more concerned with a stock’s reaction to news than I am with the news itself. And with a stock such as that of chicken producer Tyson Farms (NYSE: TSN), the chart is showing positive reactions following all sorts of news. #-ad_banner-#For example, the day China banned the import of American chicken and eggs due to a bird flu scare, many stocks in the sector tumbled. Tyson was off 3.1% on Jan. 12, but just two days later it began a rally that would go on unabated for eight trading days and gain… Read More

As a technical analyst, I am more concerned with a stock’s reaction to news than I am with the news itself. And with a stock such as that of chicken producer Tyson Farms (NYSE: TSN), the chart is showing positive reactions following all sorts of news. #-ad_banner-#For example, the day China banned the import of American chicken and eggs due to a bird flu scare, many stocks in the sector tumbled. Tyson was off 3.1% on Jan. 12, but just two days later it began a rally that would go on unabated for eight trading days and gain back more than was lost. That is what I would call “shrugging it off,” and it is a positive sign for the stock. However, since the major trend was still sideways, sellers once again got active and prices eased. Then, on Jan. 30, the company topped analysts’ earnings estimates on surging sales. The bullish reaction to the news was to be expected, as TSN jumped more than 3% at the open.  But then something strange happened. Investors got cold feet and turned on the stock, sending prices tumbling to close the day off nearly 3% and 7% below the day’s… Read More