ChartWatchers Newsletter

BioTechs Are In The Starters Blocks. Will The Run Start Soon?

The Biotech arena has been a "House Of Pain" for investors while the companies continue to deliver all sorts of pain remedies to people worldwide.

But the pattern shaping up on the Biotech ETF's suggests they are one to watch closely. Even the recent tough talking banter couldn't push the Biotechs down. This is the SPDR Biotech ETF (XBI).

Continue reading "BioTechs Are In The Starters Blocks. Will The Run Start Soon?" »

No Chasing Allowed

At EarningsBeats we are steadfast in avoiding being involved in stocks into a company's earning's report because one can never tell how the market will respond to a company's numbers. Case in point is Amazon who reported their numbers last week.

Just look at the chart below and you will see that the stock was poised to break out the day earnings were reported which was February 2. However when the market opened for business the next day the stock fell sharply.

On the other end of the spectrum Apple reported blowout earnings and was rewarded handsomely as you can see below. But if you weren't in the stock prior to the earnings release you missed out on the nice move higher.

You might be cursing yourself for not having faith that AAPL would come through with great numbers and missing out on the strong move higher. On the other hand, how would you have liked to be holding AMZN into its report, only to see it fall $35 when you woke up the next day? See? A crap shoot at best.

This brings up the question; how can I take advantage of Apple's strong showing if I wasn't holding it into its earnings report?

Instead of worrying about missing the move higher on AAPL try to set a strategy to get involved on a pullback. You need to be careful and not premature because there was a great deal of excitement about its numbers; just look at the volume bar which was three to four times greater on the good news. At a minimum you would want to wait to see if the stock pulled back to the bottom of the gap on February 1 which was right around $127. However an even better place to enter would be closer to the 20 day moving average near $122. And that could easily take place and the stock would still be in good technical shape.

At EarningsBeats we track stocks that beat both top and bottom line expectations and we then present these to our members in our Candidate Tracker. This includes date reported, earnings per share (actual vs estimate) and revenues (actual vs estimate.) Some of these stocks become trading alerts that includes entry price, price target and stop loss. If you would like to see a sample of the Candidate Tracker just click here.

Everyone would like to ride a stock higher on strong earnings but no one likes to ride a stock lower when they miss expectations. This is why it makes sense to let a company report its numbers, watch market reaction and then set a strategy to get involved once all the hype settles down.

At your service,

John Hopkins

10-Year Treasury Yield Is Bouncing Off It's 50-Day Average, As is The Dollar

The pullback in Treasury yields (coinciding with an oversold bounce in Treasury prices) may have run its course. Chart 1 shows the 10-Year Treasury Yield ($TNX) bouncing sharply off its 50-day moving average. The two momentum indicators above Chart 1 are also supportive. The 14-day RSI (green) line is back above the 50 level. The more sensitive 14-day Slow Stochastics oscillator (top box) is rebounding from oversold territory below 20. My Saturday message also showed potential support at its November 2015 peak ranging from 2.34% to 2.30%. That may also be providing a floor beneath the TNX. [Pullbacks should find support near previous peaks as resistance turns into support]. Keep in mind also that longer-range weekly and monthly charts support a new uptrend in Treasury yields. Higher yields are pushing Treasury bond prices lower. They may also start to weigh on rate-sensitive stock groups like staples, utilities, and REITS. All three of those groups have rebounded along with bond prices over the past month, but are starting to struggle with resistance at their respective 200-day averages. They could start to weaken along with bond prices. Rising yields should also support financial stocks. Money moving out of bonds may also find its way back into stocks. That's a lot riding on a two-day bounce. But we'll be watching closely over the next week to see if the rebound in yields continue.

THE DOLLAR IS ALSO BOUNCING... Not surprisingly, the U.S. dollar is bouncing with bond yields. That's not surprising since both rose together after the November election, and have pulled back together over the past month. And it too is bouncing off chart support. Chart 2 shows the PowerShares Dollar Fund (UUP) climbing back over its 50-day average. It's also bouncing off a rising trendline drawn under its September/November lows. [Although not shown here, the Dollar Index is also bouncing off a previous peak formed in November 2015]. The dollar hit a 14-year high last month, which means that its long-term trend is higher. Part of the reason for today's dollar buying is tied to weakness in the Euro. The ECB decision to stand pat on monetary policy in the face of rising eurozone inflation stands to widen the interest rate gap between the U.S. (which plans to raise rates) and the eurozone (which doesn't). Rising Treasury yields are also supportive to the dollar.

This Weak Industry Group Approaching Very Bullish Historical Period

There haven't been too many areas of the market that have performed worse than retail stocks over the past month.  While the NASDAQ 100 ($NDX) has jumped to record highs over the past month, weak retail stocks in that index like Dollar Tree (DLTR), Walgreens (WBA), O'Reilly Automotive (ORLY), Tractor Supply (TSCO) and Ross Stores (ROST) are littered among the worst performing NDX stocks.

Continue reading "This Weak Industry Group Approaching Very Bullish Historical Period" »

5 Boring Uptrends in 5 Exciting Stocks

One would normally not consider Facebook, Alphabet, Apple, Amazon and Microsoft boring. Well, maybe Microsoft. All joking aside, these tech titans are the biggest stocks in the Nasdaq 100 ETF (QQQ) and they account for around 40% of the ETF. This means traders or investors in QQQ best follow these five charts closely. These titans also account for around 13% of the S&P 500 SPDR, which is yet another reason to make these charts part of your routine. 

Continue reading "5 Boring Uptrends in 5 Exciting Stocks" »

Cruise Ships Are Continuing To Make New Customer Highs

Cruise ships seem to be getting more elaborate every year. From water slides high up over the ocean, to real grass top decks and stunning restaurants throughout, the industry is growing in diversity and customer experiences. 

Recently, the trends have started to change on some of the cruise line companies charts. Carnival Cruise Lines (CCL) and Royal Carribbean Cruise Lines (RCL) are moving higher and Norwegian Cruise Lines (NCLH) is the weakest of the three but still climbing.  

Norwegian Cruise Lines (NCLH) pushed to new 8-month highs this week. The SCTR has been steadily improving but still sits under 70. Notice the November low was higher than the September low which is different than a lot of the market charts. That is a good bullish signal, but the stock is still behind its peers.

Continue reading "Cruise Ships Are Continuing To Make New Customer Highs" »

A Sure Recipe for Success - or Not!

Earnings Season is now in high gear with thousands of companies getting ready to report their numbers over the next several weeks. Whenever earnings season comes around there are clear winners and clear losers with the sole evidence of success or failure being the performance of a stock. For example, Netflix reported its numbers last week and you can see the positive response below:

You can see the nice bump on strong volume that occurred on January 19 that in fact took the stock to an all time high. On the other hand, take a look at the GE chart below which shows a different picture of a company that disappointed the market:

This is what it always comes down to; does a company meet or beat expectations or disappoint, and how will the market respond?

Over the next few weeks we're going to get a very good look at the overall strength of the market. This will become apparent through the totality of the overall response to thousands of earnings reports. At EarningsBeats we will be tracking the earnings to see which companies beat both their top and bottom line projections. Those that make the cut will be added to our Candidate Tracker for our members to review, many of them potentially high reward to risk trading candidates. If you would like to see a sample of the Candidate Tracker just click here.

There are many things that can affect the market from economic reports to world events. But when everything is said and done it's always the bottom line that traders care about the most.

At your service,

John Hopkins

Dow Flirts With 20K, While NASDAQ Closes At Record High

Let's get this out of the way first. If you've been watching business TV, all they've been talking about is the Dow nearing the 20,000 level. Much to their dismay, it came close on Friday but couldn't make it. The Dow touched 19999.63 before backing off. Historically, big round numbers have acted as magnets during market advances. At the same time, traders are often programmed to take some profits as that big number is approached. The hourly bars in Chart 1 shows how close the Dow Industrials came to the 20K level a couple of times over the last month. Technically, the Dow is still in an over-extended condition which explains why it's been moving sideways for the past three weeks. That's not unusual with a market working off a short-term overbought condition. Odds still favor resumption of its uptrend. The bigger market story this week, however, was the stronger action in the Nasdaq market. The Nasdaq closed in record territory on Friday. A rebound in biotechs helped. But most of the buying came from technology stocks, especially those tied to the Internet. It looks like FANG stocks are back in favor.

One of the factors keeping the rally going is that when a leading group stalls (like financials), new money moves into lagging groups like technology (and, to a lesser extent, healthcare). The daily bars in Chart 2 show the Nasdaq Composite Index closing at a new record on Friday. The Nasdaq was the strongest market index for the day and for the week. The Nasdaq has several things working in its favor. First, it's the only major stock index that hasn't reached overbought territory. The 14-day RSI line (top of chart) has remained below the overbought threshold of 70 throughout the recent rally (unlike the Dow and S&P 500 which exceeded that level). Secondly, the Nasdaq has been a market laggard. The solid line in Chart 2 shows the Nasdaq/S&P 500 ratio just starting to turn up after dropping during November. You may recall the post-election rotation out of growth stocks (mainly technology) and into value stocks (like financials) as the market jumped. It now looks like like money is starting to flow back into cheaper technology stocks.


Guess What? "Official" Earnings Season is About to Begin

No one can argue with the fact that the market has been fascinating to watch since the election with all of the major indexes substantially higher since the most recent bottom on November 4. There's been a few minor pullbacks along the way, but not many as traders seem to be eager to jump in on any moves lower. And now traders will have another reason to get excited; earnings season is about to begin!

For a long time now the market has recognized Alcoa's earnings report as the "official" start to earnings season. And AA will report its numbers after the bell on Monday. Then you will see thousands of companies reporting their numbers over the next several weeks.

I have found over the years that many things can move the market, from economic reports to Fed statements to world events. But when everything is said and done the one thing traders care about more than anything else is earnings. This includes earnings for the most immediate quarter as well as guidance for the future. 

I have also found that the market can react in very unpredictable ways to numbers. For example, you might see a company beat earnings expectations but go lower. Or, you could see a company miss its earnings expectations and go higher. But in most cases if a company beats earnings expectations and guides higher there is a decent chance it will receive a positive response from the market.

At EarningsBeats we always remind our members to know when any stock they are holding is reporting earnings so they are not surprised once results are released. In fact we have always believed it makes sense to avoid being involved - long or short - in a stock on the day it reports earnings because it's simply too risky. Instead we like to see a company report its numbers, watch the market reaction and then get involved in a trade when there is strong reward to risk potential.

For example, you can see in the chart below that Donaldson (DCI) reported its numbers and gapped up sharply on December 1. But it peaked just above $46 before pulling back recently to its 20 day moving average which potentially presents a much better buying opportunity than it did during the post earnings euphoria. So chasing a stock that explodes higher as a results of earnings is not necessarily the best strategy.

At EarningsBeats we keep track of all companies that report and beat earnings expectations. We then consolidate them into our "Candidate Tracker" for our members to review as potential trading candidates. We also use the Candidate Tracker to issue alerts to our members on those stocks we think are strong reward to risk trading candidates. If you would like to see a sample of the Candidate Tracker just click here.

There are many things to consider when trading but none more important than earnings. This is why you need to make sure you know when companies that are part of your portfolio are reporting their numbers so you can avoid unnecessary risks while looking for profitable opportunities.

At your service,

John Hopkins