Despite the chorus of analysts and investors calling for the long-awaited correction, the market is showing some constructive bullish signs.  First, deterioration in the U.S. dollar has buoyed large-cap stocks, which are once again outperforming small caps. This removes a large headwind for the capitalization-weighted major stock indices as a stronger dollar negatively impacts foreign profits. Second, sentiment has soured greatly despite the fact that the market remains near its all-time highs. Below is a chart of SPDR S&P 500 ETF (NYSE: SPY) with data from the American Association of Individual Investors (AAII) sentiment survey. We can see a major… Read More

Despite the chorus of analysts and investors calling for the long-awaited correction, the market is showing some constructive bullish signs.  First, deterioration in the U.S. dollar has buoyed large-cap stocks, which are once again outperforming small caps. This removes a large headwind for the capitalization-weighted major stock indices as a stronger dollar negatively impacts foreign profits. Second, sentiment has soured greatly despite the fact that the market remains near its all-time highs. Below is a chart of SPDR S&P 500 ETF (NYSE: SPY) with data from the American Association of Individual Investors (AAII) sentiment survey. We can see a major decline in bullish sentiment and increase in bearish sentiment. And the ratio of bulls to bears, shown in the bottom panel, is now at levels where previous rallies have started.  The AAII sentiment survey is a contrarian indicator — i.e., high bullish readings are bearish and high bearish readings are bullish. Therefore, the souring sentiment is a positive for the market.  Finally, the market trend is up. You can see the trend channel clearly in the chart above. #-ad_banner-#… Read More

Everyone makes money investing by following a trend.  Whether your time horizon is minutes or months, a financial instrument must move in your favor to be profitable. It is that simple.  So finding an indicator to measure trend is critical to your success. There’s a simple, quantitative indicator I use to determine the power of a trend that find stocks with the propensity for big moves. It’s called relative strength (RS). #-ad_banner-#​Relative strength investing is pretty straightforward. It involves buying the best-performing stocks relative to all other stocks and holding… Read More

Everyone makes money investing by following a trend.  Whether your time horizon is minutes or months, a financial instrument must move in your favor to be profitable. It is that simple.  So finding an indicator to measure trend is critical to your success. There’s a simple, quantitative indicator I use to determine the power of a trend that find stocks with the propensity for big moves. It’s called relative strength (RS). #-ad_banner-#​Relative strength investing is pretty straightforward. It involves buying the best-performing stocks relative to all other stocks and holding them until their momentum changes course. To most investors, especially those considered value investors, this strategy probably feels counterintuitive. After all, one of the first things you learn as an investor is to “buy low, sell high.” But what we feel and what we can prove are two very different things. And there are decades of research that prove the predictive power of this indicator. In the 1950s, George Chestnutt created one of the first newsletters using RS to rank stocks and industry groups. He also used RS to manage the successful American Investors Fund, which showed a… Read More

Four times a year, companies report their financial results and investors score their performance in real time with real money. Those that impress can see shares soar, while those that disappoint may suffer losses and even gap down through investors’ protective sell stops. Bottom line: Earnings season is the most volatile scheduled time of the year for stocks — and traders’ portfolios. As the chief investment strategist for Profitable Trading’s Alpha Trader, it’s my job to steer the ship for my subscribers. Today, I’m going to discuss my objectives for earnings… Read More

Four times a year, companies report their financial results and investors score their performance in real time with real money. Those that impress can see shares soar, while those that disappoint may suffer losses and even gap down through investors’ protective sell stops. Bottom line: Earnings season is the most volatile scheduled time of the year for stocks — and traders’ portfolios. As the chief investment strategist for Profitable Trading’s Alpha Trader, it’s my job to steer the ship for my subscribers. Today, I’m going to discuss my objectives for earnings season and how I manage entry risk for my readers, because many of these are ideas you can apply to your personal portfolio as well. #-ad_banner-# My primary objective is to conservatively manage the downside volatility or risk of new entries during earnings season. Paul Tudor Jones, one of the greatest hedge fund managers of all time, once said, “Risk control is the most important thing in trading.” He has also said, “Don’t focus on making money, focus on… Read More

I am a chartered market technician with 20 years of experience managing money. In that time, I’ve found that trend following is the basis for profit, no matter the investment system. When I became the chief investment strategist of Profitable Trading’s Alpha Trader service, I started employing my technical models to help determine which stocks were ripe for picking. #-ad_banner-#The main way I do this is by determining a stock’s Alpha Score. In a nutshell, every stock has one, and it… Read More

I am a chartered market technician with 20 years of experience managing money. In that time, I’ve found that trend following is the basis for profit, no matter the investment system. When I became the chief investment strategist of Profitable Trading’s Alpha Trader service, I started employing my technical models to help determine which stocks were ripe for picking. #-ad_banner-#The main way I do this is by determining a stock’s Alpha Score. In a nutshell, every stock has one, and it can range from 0 to 200 — the higher the score, the better. It is based on two proven indicators — one technical and one fundamental — and it provides a way to rank every stock in the market from best to worst. But finding the best Alpha Score stocks to recommend isn’t as easy as simply hitting a button and sending out a list of the three-to-five stocks at the top of the list. Each week, I start out with dozens of securities that meet the system’s criteria. From there,… Read More

We’re only a quarter of the way through 2015 and our Alpha Trader picks have been delivering incredible gains for our readers. Today, I want to show you eight stocks that have broken out since the beginning of the year. Some of these winners are long-term positions that are making big runs, while others are fresh entries that have soared since we purchased them. Many are still buys today with plenty of upside left, but either way they prove a point — Alpha Trader can help you crush the market. Take a look at the chart below. It shows the… Read More

We’re only a quarter of the way through 2015 and our Alpha Trader picks have been delivering incredible gains for our readers. Today, I want to show you eight stocks that have broken out since the beginning of the year. Some of these winners are long-term positions that are making big runs, while others are fresh entries that have soared since we purchased them. Many are still buys today with plenty of upside left, but either way they prove a point — Alpha Trader can help you crush the market. Take a look at the chart below. It shows the total returns several of our top picks have generated thus far in 2015. As you can see, these eight stocks are crushing it in 2015. Their average year-to-date return is a whopping 31%, compared to the S&P 500’s 1% return. That’s a difference of 30 percentage points in just a few months. These gains are not only impressive, but they show the Alpha Trader system is doing exactly what it is designed to do: find the strongest stocks in the market with less risk than buy-and-hold investing. See, by using a proprietary combination of two of the market’s most effective… Read More

Bottom fishing in beaten-down equities is a popular strategy. The lower a stock goes, the greater its value may seem. A big decline can be especially appealing when it occurs in well-known, brand-name stocks.  I caution you on this approach, though. Relative strength (RS) studies have shown that underperforming stocks tend to remain underperformers. A stock’s RS can range from 0 to 100, and the lower the number, the worse its performance relative to its peers over the past six months. I have warned of the dangers of investing in stocks with low RS in the past. Trends tend to… Read More

Bottom fishing in beaten-down equities is a popular strategy. The lower a stock goes, the greater its value may seem. A big decline can be especially appealing when it occurs in well-known, brand-name stocks.  I caution you on this approach, though. Relative strength (RS) studies have shown that underperforming stocks tend to remain underperformers. A stock’s RS can range from 0 to 100, and the lower the number, the worse its performance relative to its peers over the past six months. I have warned of the dangers of investing in stocks with low RS in the past. Trends tend to persist, and trying to guess when and where a downtrend will stop can wind up being very costly. No doubt you’ve all heard the phrase, “Never try to catch a falling knife.” #-ad_banner-#But I understand the temptation, especially when we’re talking about big-name stocks that everyone knows and are often covered by the media. Personally, I like to keep emotion out of my investing decisions. That is why I rely on a stock-ranking system that combines an equity’s relative strength and a key fundamental metric to give it a score ranging from 0 to 200. I call it… Read More

Emotion is the bane of traders. It causes us to act rashly instead of rationally, and typically at times when it’s most costly.  It has been shown that investors are most bullish at or near tops and most bearish at or near capitulation bottoms. Just look at the mania right before the dot-com bubble burst or the despair during early 2009 following the credit crisis meltdown. In both instances, the trend was turning as emotions peaked. #-ad_banner-#There’s only one way I know of to remove emotions from investing: following a rules-based… Read More

Emotion is the bane of traders. It causes us to act rashly instead of rationally, and typically at times when it’s most costly.  It has been shown that investors are most bullish at or near tops and most bearish at or near capitulation bottoms. Just look at the mania right before the dot-com bubble burst or the despair during early 2009 following the credit crisis meltdown. In both instances, the trend was turning as emotions peaked. #-ad_banner-#There’s only one way I know of to remove emotions from investing: following a rules-based system built on a measurable, repeatable process. And the system I follow in my premium newsletter, Alpha Trader, has worked very well for me and my readers. We’ve detailed numerous times how our proprietary indicator, the Alpha Score, goes about selecting stocks poised to make huge runs based on a relative strength (RS) score above 70 and a fundamental trigger. (For more on how the Alpha Score works, you can read this recent article.) But today, I want to talk about how our rules-based system… Read More

When NXP Semiconductors (NASDAQ: NXPI) announced the takeover of Freescale Semiconductor (NYSE: FSL) at the beginning of the month, investors seemed more than a little pleased. Shares of FSL jumped 11.8%, while NXPI blasted 17.3% higher on news.  This was just the latest run in NXPI’s powerful advance that has seen shares more than double since my system signaled it was a “buy” in December 2013. The combined company will be the No. 1 automotive semiconductor supplier, and the merger also allows NXPI to diversify across other markets. Moreover, the $40 billion, nearly all-cash deal speaks to management’s… Read More

When NXP Semiconductors (NASDAQ: NXPI) announced the takeover of Freescale Semiconductor (NYSE: FSL) at the beginning of the month, investors seemed more than a little pleased. Shares of FSL jumped 11.8%, while NXPI blasted 17.3% higher on news.  This was just the latest run in NXPI’s powerful advance that has seen shares more than double since my system signaled it was a “buy” in December 2013. The combined company will be the No. 1 automotive semiconductor supplier, and the merger also allows NXPI to diversify across other markets. Moreover, the $40 billion, nearly all-cash deal speaks to management’s confidence in the health of its company and the industry. #-ad_banner-#​In this extremely low interest rate environment, cash-rich companies have been forced to find alternative methods to grow their money, which has helped spur M&A activity. From corporations to individuals, everyone is searching for better yields. Most investors focus on dividend yields, but there is another yield that is even more important that most investors overlook. I call it the “hidden yield,” and if you are ignoring it, you’re missing roughly half of the cash companies distribute to investors. NXPI doesn’t pay a dividend, yet it has a… Read More

For the past two years, biotech has been one of the best places to put your money in this bull market. During that time, while the S&P 500 rose roughly 40%, the iShares Nasdaq Biotechnology (NASDAQ: IBB) trounced that impressive gain with a return of more than 125%. #-ad_banner-#But given the boom-or-bust nature of companies in this industry, where so much is dependent on science, trial results, FDA approvals and acquisitions, pinpointing the next breakout star can be tricky. A few weeks ago, I was alerted to a buy in biotechnology firm Pharmacyclics (NASDAQ: PCYC). In addition to showing huge… Read More

For the past two years, biotech has been one of the best places to put your money in this bull market. During that time, while the S&P 500 rose roughly 40%, the iShares Nasdaq Biotechnology (NASDAQ: IBB) trounced that impressive gain with a return of more than 125%. #-ad_banner-#But given the boom-or-bust nature of companies in this industry, where so much is dependent on science, trial results, FDA approvals and acquisitions, pinpointing the next breakout star can be tricky. A few weeks ago, I was alerted to a buy in biotechnology firm Pharmacyclics (NASDAQ: PCYC). In addition to showing huge revenue and earnings growth, the stock scored an amazing 184 out of a possible 200 on one of the most reliable indicators I’ve ever encountered in my portfolio management career. Pharmacyclics is dedicated to developing breakthrough treatments to cure serious life-threatening illnesses while improving quality and duration of life. Its primary product, Imbruvica, treats cancer by disrupting biochemical pathways in cancer cells, and is FDA approved to fight chronic lymphocytic leukemia and mantle cell lymphoma, a rare form of non-Hodgkin’s lymphoma. On Jan. 29, the FDA approved Imbruvica for treating a rare form of blood cancer with no… Read More

These are five of the most widely owned stocks in the market. You have, without a doubt, heard of them, and it’s very possible you even own a few. #-ad_banner-#Despite being featured prominently in the media and being held by some of the world’s top investment gurus, I wouldn’t touch any of them with a 10-foot pole. One of these stocks is owned by hedge fund titan Steve Mandel of Lone Pine Capital, who holds 2.8 million shares of this casino and resort operator. But it has collapsed 25% over the past six months. I’m also recommending you… Read More

These are five of the most widely owned stocks in the market. You have, without a doubt, heard of them, and it’s very possible you even own a few. #-ad_banner-#Despite being featured prominently in the media and being held by some of the world’s top investment gurus, I wouldn’t touch any of them with a 10-foot pole. One of these stocks is owned by hedge fund titan Steve Mandel of Lone Pine Capital, who holds 2.8 million shares of this casino and resort operator. But it has collapsed 25% over the past six months. I’m also recommending you stay away from a blue-chip heavy equipment manufacturer that has shed 18% in the past 26 weeks, a much-touted alternative energy stock that is down 31%, and a huge oil services firm that lost a whopping 36% during that same time.  Plus, there’s a popular chipmaker that is down 15% in the past six months and has basically been dead money for the past two years. Although these companies are very different, they all have two things in common. First, each of these stocks has low relative strength (RS). Relative strength compares the price performance of a stock against every… Read More