When interest rates bottomed last month, bonds and several interest rate sensitive sectors of the stock market started to fall.  #-ad_banner-#​I was looking for a substantial correction in the utilities sector, and it appears to be well on its way to completing one. But some stocks in the group fell harder than others and may already be ripe for the picking.  My favorite right now is Atlanta-based Southern Company (NYSE: SO). This utility company generates electricity through coal, nuclear, oil and gas, and hydro resources and distributes it in the states of… Read More

When interest rates bottomed last month, bonds and several interest rate sensitive sectors of the stock market started to fall.  #-ad_banner-#​I was looking for a substantial correction in the utilities sector, and it appears to be well on its way to completing one. But some stocks in the group fell harder than others and may already be ripe for the picking.  My favorite right now is Atlanta-based Southern Company (NYSE: SO). This utility company generates electricity through coal, nuclear, oil and gas, and hydro resources and distributes it in the states of Alabama, Georgia, Florida and Mississippi. Since peaking at $53.16 in late January as investors sought the relative safety of utilities, the stock has fallen 14% in less than three weeks’ time. That is a very large move for a member of a normally staid sector, but it is good news for investors looking to buy now.  I have been waiting for the utility sector as a whole to retrace 50% of its rather sharp rally that began in August.  SO has already completed a 61.8% Fibonacci retracement… Read More

One of my favorite strategies is to buy stocks that remain below prior highs but are in sectors that are already showing strength. As long as the stock is technically sound, it is ripe to play catch-up. #-ad_banner-#Most technical analysts will agree that a good deal of any stock’s potential for gains depends on the overall strength of its sector. Fundamentally, it makes sense that if there is enough business to go around in the industry then any individual company can take advantage of the demand. Again, the company has to be sound and also prove that it can rally,… Read More

One of my favorite strategies is to buy stocks that remain below prior highs but are in sectors that are already showing strength. As long as the stock is technically sound, it is ripe to play catch-up. #-ad_banner-#Most technical analysts will agree that a good deal of any stock’s potential for gains depends on the overall strength of its sector. Fundamentally, it makes sense that if there is enough business to go around in the industry then any individual company can take advantage of the demand. Again, the company has to be sound and also prove that it can rally, because stocks with terrible charts can easily get left behind. Just take a look at RadioShack (OTC: RSHCQ) in a soaring consumer electronics group.  The hotel sector has generally outperformed the S&P 500 since the entire market corrected in 2011. It stalled in December but now looks to be getting its mojo back on the heels of strong earnings reports from several of the larger-cap member stocks.  Many stocks in the group show positive technical signs, including rising on-balance volume and up gaps. The former suggests continued demand for shares. The latter proves that demand with a rush… Read More

There are two technical directives battling for the fortunes of Caterpillar (NYSE: CAT) right now. The first says to never try to catch a falling knife. The other, which traces back to 18th-century banker Baron Rothschild, says to buy when there’s blood in the streets. #-ad_banner-#But when we toss a few more conditions into the mix, namely major support, terrible sentiment and a beefy dividend yield, the battle goes to the Baron.  This blue-chip stock has likely seen the worst of its bear market and will pay us to hold it while we wait for better times that should be… Read More

There are two technical directives battling for the fortunes of Caterpillar (NYSE: CAT) right now. The first says to never try to catch a falling knife. The other, which traces back to 18th-century banker Baron Rothschild, says to buy when there’s blood in the streets. #-ad_banner-#But when we toss a few more conditions into the mix, namely major support, terrible sentiment and a beefy dividend yield, the battle goes to the Baron.  This blue-chip stock has likely seen the worst of its bear market and will pay us to hold it while we wait for better times that should be coming. Shares of the heavy equipment maker certainly fell hard over the past six months from a perch above $111 to their current price just above $79. That nearly 30% decline qualifies as a full-fledged bear market.   And just when it looked as if some bottom fishers were coming in, the company released worse-than-expected fourth-quarter earnings and a weak outlook for the coming year. The stock plunged more than 7% on Jan. 27. While that sounds like bad news, it may actually be good news for the stock.  After a six-month decline, the huge single-day drop on gigantic volume… Read More

Wall Street wisdom tells us not to try to catch a falling knife. Stocks in strong downtrends are more likely to keep falling than suddenly turn around. However, unless a stock is heading to zero, it will eventually find its footing.  #-ad_banner-#That time seems to be at hand for international oil giant BP plc (NYSE: BP). There is no doubt that my fascination with this stock stems from everyone’s natural tendency to want to jump on an apparent bargain. After trading above $53 in the middle of last year, BP dipped below $35 in December before bouncing a bit. That’s… Read More

Wall Street wisdom tells us not to try to catch a falling knife. Stocks in strong downtrends are more likely to keep falling than suddenly turn around. However, unless a stock is heading to zero, it will eventually find its footing.  #-ad_banner-#That time seems to be at hand for international oil giant BP plc (NYSE: BP). There is no doubt that my fascination with this stock stems from everyone’s natural tendency to want to jump on an apparent bargain. After trading above $53 in the middle of last year, BP dipped below $35 in December before bouncing a bit. That’s a 35% decline in less than six months.  The next thing that piques my interest is its beefy dividend yield of 6.4%. In a market where 10 years of waiting gets you a whopping 1.8% in Treasury notes, the hunt for income is a popular pastime.  But again, just because a stock is low in price does not mean it cannot go even lower, and that would eat up the dividend rather quickly. However, in BP’s case, the technicals suggest a relatively low risk-to-reward setup is now in place.   For starters, downside momentum is waning. While the… Read More

The current low interest rate environment is driving investors to seek income in the stock market and possibly take unnecessary risks. But there are pockets of conservative dividend payers still trading at attractive levels with potential for capital gains for many months to come.  #-ad_banner-#It is no secret that utility stocks are in that group. While they are no longer the “widow-and-orphan” stocks they were a few decades ago, many still pay generous dividends. And many have diversified their businesses to offer the growth potential a simple electric utility cannot.   Otter Tail (NASDAQ: OTTR) is a Minnesota-based electric utility,… Read More

The current low interest rate environment is driving investors to seek income in the stock market and possibly take unnecessary risks. But there are pockets of conservative dividend payers still trading at attractive levels with potential for capital gains for many months to come.  #-ad_banner-#It is no secret that utility stocks are in that group. While they are no longer the “widow-and-orphan” stocks they were a few decades ago, many still pay generous dividends. And many have diversified their businesses to offer the growth potential a simple electric utility cannot.   Otter Tail (NASDAQ: OTTR) is a Minnesota-based electric utility, named for the Otter Tail River from which it generated its first kilowatt, that has diversified into manufacturing, plastics and construction.  The stock has a modest trailing price/earnings (P/E) ratio of 19, which is below the average P/E for the Dow Jones Utility Average of 24. And the company pays a generous quarterly dividend of $0.3025 for a current yield of 3.9%.  Over the past few months, OTTR has traded in a similar fashion as its more traditional utility peers, but when we look at the big picture we see a stock itching to break out to the upside, if… Read More

Market action over the past week has been volatile, and at times, downright scary. With the major indices threatening short-term breakdowns, I like to look for stocks that have yet to make a downside move but sport chart patterns that show they’re on the edge.  I also like to stick to slower-moving, large-cap stocks that offer a bit more predictability, albeit with smaller profit potential. I’ll take that trade-off in a risky market. Consumer products giant Procter & Gamble (NYSE: PG) is one such stock.  On this blue chip’s chart we see a variation of a head-and-shoulders top. Read More

Market action over the past week has been volatile, and at times, downright scary. With the major indices threatening short-term breakdowns, I like to look for stocks that have yet to make a downside move but sport chart patterns that show they’re on the edge.  I also like to stick to slower-moving, large-cap stocks that offer a bit more predictability, albeit with smaller profit potential. I’ll take that trade-off in a risky market. Consumer products giant Procter & Gamble (NYSE: PG) is one such stock.  On this blue chip’s chart we see a variation of a head-and-shoulders top. This pattern is marked by a central peak flanked by two smaller peaks, and the lows between the peaks are roughly equal.  This tells us the stock pulled back harder the last time than it did the time before, and then the ensuing rally failed to set a higher high to drive home the point that the trend was in danger. #-ad_banner-# The sell signal happens when the support line connecting the lows, called the neckline, is broken to the downside.  PG is… Read More

Picking a bottom in any market is tricky, but trading is not about being right 100% of the time. It is about finding trades with good reward/risk profiles and exploiting them. As the lottery ad says, “You gotta be in it to win it.” Thankfully, technical analysis means we have immensely better odds of profiting than anyone playing the lotto. The gold market has been a widow maker for the past few years, as legions of bottom fishers have tried and failed to catch a falling knife. But now, gold mining stocks seem to be quite resilient and… Read More

Picking a bottom in any market is tricky, but trading is not about being right 100% of the time. It is about finding trades with good reward/risk profiles and exploiting them. As the lottery ad says, “You gotta be in it to win it.” Thankfully, technical analysis means we have immensely better odds of profiting than anyone playing the lotto. The gold market has been a widow maker for the past few years, as legions of bottom fishers have tried and failed to catch a falling knife. But now, gold mining stocks seem to be quite resilient and some are even bucking the trend in the U.S. dollar.  Gold and most commodities are priced in dollars, and that means a strong buck is not good for those real assets. Gold and the stocks of companies that mine it should be falling as the U.S. dollar index reaches nine-year highs in a rocket ship trajectory.  Yet, while most gold mining stocks and funds are still in declining trends, some, including the Market Vectors Junior Gold Miners ETF (NYSE: GDXJ), appear to be transitioning to a more bullish posture.  Focusing on the most recent leg down, from July to… Read More

The early December market swoon created a lot of opportunities for short-term traders and value investors alike to pick up some nice bargains. While major market indices have already fully recovered and trade in all-time high territory, Santa has yet to visit every stock.  Casino stocks were hit particularly hard this month and still have a lot of room to go to recover their losses.  Wynn Resorts (NASDAQ: WYNN) is a good representative of the entire sector. On Dec. 17, it gapped down on the open and continued to slide, hitting yet another new low for the year. But midday,… Read More

The early December market swoon created a lot of opportunities for short-term traders and value investors alike to pick up some nice bargains. While major market indices have already fully recovered and trade in all-time high territory, Santa has yet to visit every stock.  Casino stocks were hit particularly hard this month and still have a lot of room to go to recover their losses.  Wynn Resorts (NASDAQ: WYNN) is a good representative of the entire sector. On Dec. 17, it gapped down on the open and continued to slide, hitting yet another new low for the year. But midday, the bulls suddenly woke up. The stock closed near its high for the day, and that left a bullish hammer candle. In Japanese charting lore, the market is said to be “hammering out a bottom.” Basically, something happened in the middle of the day to change the tide. What was an undesirable stock became desirable, and from a charting point of view, it does not matter what that something was. #-ad_banner-# The next day, WYNN jumped up at the open leaving… Read More

One of the surprises, at least on the surface, of the market’s recent swoon was the outperformance of consumer discretionary stocks. This group usually leads to the downside, not the upside, when the market is weak. Consumer staples stocks, on the other hand, usually do relatively well in times of turbulence. So when both of these groups outperform, there has to be something else in play. Although I am not an economist, it appears that consumers are going to be beneficiaries of prolonged lower energy prices. On the charts, one stock with solid potential is retailer Bed, Bath… Read More

One of the surprises, at least on the surface, of the market’s recent swoon was the outperformance of consumer discretionary stocks. This group usually leads to the downside, not the upside, when the market is weak. Consumer staples stocks, on the other hand, usually do relatively well in times of turbulence. So when both of these groups outperform, there has to be something else in play. Although I am not an economist, it appears that consumers are going to be beneficiaries of prolonged lower energy prices. On the charts, one stock with solid potential is retailer Bed, Bath & Beyond (NASDAQ: BBBY).  It began this year on a very sour note, but managed to turn itself around in June. From there, the trend has been quite bullish, and there is still more room to run. As we can see on the chart, BBBY gapped down in January. After a failed recovery attempt in February and March, it gapped down again.   #-ad_banner-#On June 26, it experienced the final washout as it gapped down for a third time on exceptionally heavy volume, only to close near that day’s high. On a… Read More

Basic materials stocks got a bad rap this fall as the global economy stumbled. It didn’t help that the sector news was dominated by plunging gold prices.  But a look at charts in the sector shows things are not as bad as the headlines might suggest. Plus, China’s stock market has been soaring. China consumes a massive amount of basic materials, such as steel and coal, and most related industries can hop on those coattails for a ride higher. Consider container and packaging companies to be one such group. And a stock trading near its 52-week lows… Read More

Basic materials stocks got a bad rap this fall as the global economy stumbled. It didn’t help that the sector news was dominated by plunging gold prices.  But a look at charts in the sector shows things are not as bad as the headlines might suggest. Plus, China’s stock market has been soaring. China consumes a massive amount of basic materials, such as steel and coal, and most related industries can hop on those coattails for a ride higher. Consider container and packaging companies to be one such group. And a stock trading near its 52-week lows but just emerging from a base looks attractive right now.  Greif (NYSE: GEF) makes containers and packaging materials sold globally.  On the chart, we can see GEF had a rough summer, as analysts slashed their earnings outlooks. Shares fell 25% from their July high to October low. The stock now sits 18% off those highs, while its peers are setting new 52-week highs.  So, why am I bullish on GEF? In October, at about the same time the broad market began its strong rebound, shares finally offered the first sign the bear run was over. It was not… Read More